EXHIBIT 2.3(A)
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MERGER AGREEMENT
DATED AS OF JULY 9, 1998
BY AND AMONG
INNOVATIVE VALVE TECHNOLOGIES, INC.,
COLONIAL ACQUISITION, INC.
AND
COLONIAL PROCESS EQUIPMENT CO., INC.,
COLONIAL SERVICE COMPANY, INC.
AND
THEIR SOLE STOCKHOLDER, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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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"), COLONIAL ACQUISITION, INC, a Delaware corporation
("Invatec Sub"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual whose address is ▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Stockholder"), COLONIAL PROCESS
EQUIPMENT CO., INC., a Massachusetts corporation whose address is ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Equipment"), and COLONIAL SERVICE
COMPANY, INC., a Massachusetts corporation whose address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Service") (Equipment and Service being
hereinafter referred to individually and collectively as the "Company").
Invatec, Invatec Sub, the Stockholder and the Company are sometimes hereinafter
referred to collectively as the "Parties" or individually as a "Party."
PRELIMINARY STATEMENT
WHEREAS, the Stockholder is the legal and beneficial owner and holder of
Fifty-One (51) shares of Common Stock of Equipment and Fifty-One (51) shares of
Common Stock of Service, which constitutes all of the issued and outstanding
Capital Stock of each of those corporations; 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");
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 14. 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, 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 Effective Time.
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"ACQUISITION CONSIDERATION" has the meaning specified in
SUBPARAGRAPH 2(A)(IV)(1).
"CEILING AMOUNT" means One Million One Hundred Eighty-Five Thousand
and No/100 Dollars ($1,185,000.00).
"CLOSING" has the meaning specified in PARAGRAPH 3.
"CLOSING DATE" means July 31, 1998, or such other date as to which
Invatec and the Stockholder may agree.
"COMPANY" has the meaning specified in the preamble of this
Agreement.
"COMPANY CAPITAL STOCK" means the Common Stock, no par value per
share, of each of Equipment and Service, considered collectively.
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDER" means ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ of Dedham, Massachusetts.
"COUNSEL FOR INVATEC" means ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated of
Houston, Texas.
"CURRENT BALANCE SHEET" means the combined balance sheets of
Equipment and Service 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.
"DISCLOSURE STATEMENT" means the written statement executed by the
Company and the Stockholders and delivered to Invatec prior to the
execution and delivery of this Agreement by Invatec in which either (a)
exceptions are taken to any of certain of the representations and
warranties made by the Company or the Stockholders herein or (b) it is
confirmed that no exception is taken to that representation and warranty.
"EFFECTIVE TIME" means the Effective Time of the Merger, as such
term is defined in SUBPARAGRAPH 2(A)(II).
"EMPLOYMENT AGREEMENT" means the Employment Agreement to be entered
into as of the Effective Time between Invatec and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, in the
form thereof attached hereto as EXHIBIT A.
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"EXPIRATION DATE" means September 15, 1998.
"FORMER STOCKHOLDER DEBT" means the agreed current value of the debt
owed to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, a former stockholder of the Company,
pursuant to the noncompetition provisions of his Redemption Agreement with
the Company dated March 19, 1997.
"INDEBTEDNESS" means all items, except for items of capital stock,
surplus or general contingency, which in accordance with GAAP would be
included on the liability side of the combined balance sheet of the
Company, other than accounts payable, accrued expenses and other trade
payables. The Indebtedness of the Company at February 28, 1998 is
$336,188, determined as provided in SCHEDULE I hereto.
"INITIAL FINANCIAL STATEMENTS" means (a) the combined balance sheets
of Equipment and Service as of August 31, 1997 and 1996 and the related
combined statements of income and retained earnings for each of the
Company's fiscal years in the two-year period ended August 31, 1997, and
(b) the Current Balance Sheet and the related combined income statements
for the two months ended on the Current Balance Sheet Date, which the
Company has delivered to Invatec. The Company's financial statements for
the nine month period ended May 31, 1998, and the one year periods ended
August 31, 1997 and 1996 are attached hereto as EXHIBIT B.
"INVATEC SUB" has the meaning set forth in the preamble of this
Agreement.
"LEASE means that five year, triple net lease covering the real
property owned by Lighthouse Realty Trust (the "Trust") and used by the
Company in its business, to be entered into by Invatec Sub on the Closing
Date in the form attached hereto as EXHIBIT C.
"MERGER" means a transaction as a result of which the Acquisition
is effected and in which the Company is merged with and into Invatec Sub.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of the
business of the Company and the Company Subsidiaries, consistent with past
customs and practice (including with respect to quantity and frequency).
"REORGANIZATION EXPENSES" means expenses solely and directly related
to the reorganization, such as legal and accounting fees, appraisal fees,
administrative costs and transfer taxes.
"RESPONSIBLE OFFICER" means (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ for Equipment or
Service, and (ii) ▇▇▇▇ ▇. ▇▇▇▇ for Invatec.
"SURVIVING COMPANY" means Invatec Sub, which is to be
designated in the Certificates of Merger as the Surviving Company.
"THRESHOLD AMOUNT" means one percent (1.0%) of the Ceiling Amount.
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"UNIFORM PROVISIONS" means the Uniform Provisions for Stock
Acquisitions By Subsidiary Merger attached hereto as ANNEX 1.
"WORKING CAPITAL" means the current assets minus the current
liabilities of the Company determined in accordance with GAAP (calculated
as provided in SCHEDULE II attached hereto). Current liabilities shall
expressly include all accrued and unpaid tax liability, and exclude
current maturities of long-term Indebtedness and the current portions
under capital leases. The Working Capital on February 28, 1998 is
$358,162, determined as provided in SCHEDULE II attached hereto.
PARAGRAPH 15. THE ACQUISITION. (A) THE MERGER. (i) CERTIFICATES OF
MERGER. Subject to the terms and conditions hereof, the Company will cause the
Certificates of Merger to be duly executed and delivered on the Closing Date and
filed on or promptly after the Closing Date with the Secretary of State of
Massachusetts and the Secretary of State of Delaware.
(ii) THE EFFECTIVE TIME. The "Effective Time" will be upon (a) the
filing of the Certificate of Merger with the Secretary of State of
Massachusetts, and issuance by the Secretary of State of Massachusetts of a
Certificate of Merger with respect thereto, and (b) the filing of the
Certificate of Merger with the Secretary of State of Delaware, and issuance by
the Secretary of State of Delaware of a Certificate of Merger with respect
thereto, and in any event, on or as promptly as practicable after the Closing
Date.
(iii) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective
Time, (1) the Company will be merged with and into Invatec Sub in accordance
with the provisions of the General Corporation Law of the State of Delaware, (2)
the Company will cease to exist as a separate legal entity, (3) Invatec Sub will
be the Surviving Company and, as such, will, all with the effect provided by the
General Corporation Law of the State of Delaware (a) possess all the properties
and rights, and be subject to all the restrictions, duties and obligations, of
the Company and Invatec Sub and (b) be governed by the laws of the State of
Delaware, (4) the Charter Documents of Invatec Sub then in effect will become
and thereafter remain (until changed in accordance with (a) applicable law (in
the case of the Certificate of Incorporation) or (b) their terms (in the case of
the Bylaws)) the Charter Documents of the Surviving Company, except that the
Certificate of Incorporation shall be amended to change the name of the
Surviving Company to "Colonial Process Equipment & Service Co., Inc." (5) the
initial member of the Board of Directors of the Surviving Company will be
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and he will hold the office of director of the Surviving
Company, subject to the provisions of the applicable laws of the State of
Massachusetts and the Charter Documents of the Surviving Company, and (6) the
initial officers of the Surviving Company will be as set forth below, and each
of those persons will serve in each office specified for that person below,
subject to the provisions of the Charter Documents of the Surviving Company,
until that person's successor is duly elected to, and, if necessary, qualified
for, that office:
OFFICE: NAME:
Chairman of the Board & Chief Executive Officer. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President....................................... ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Chief Financial Officer, Senior Vice President,
Treasurer and Secretary......................... ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President & Assistant Secretary............ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
Vice President & Assistant Secretary............ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President & Assistant Secretary............ ▇▇▇▇ ▇. ▇▇▇▇
(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, without interest, on
surrender of the certificates evidencing those shares, the following (the
"Acquisition Consideration"):
(a) shares of Invatec Common Stock in an aggregate amount equal to
(a) Five Hundred Ninety-Two Thousand Five Hundred Dollars ($592,500)
divided by (b) the Current Market Price of Invatec Stock on the
Closing Date; and
(b) cash or other immediately available funds in the aggregate
amount of Three Hundred Seventy-One Thousand Three Hundred and
Twelve Dollars ($371,312);
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 Stockholder hereby covenants and
agrees shall only be him) 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, 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 the Closing Date; however, such Stockholder shall
be treated for all purposes as having been the record holder of such shares as
of the Effective Time.
(v) DELIVERY, EXCHANGE AND PAYMENT. On the Closing Date, the
Stockholder, as the holder 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
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powers in blank duly executed by Stockholder, and with all necessary transfer
tax and other revenue stamps, acquired at Stockholder's 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, 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. The 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 him.
(B) INCOME AND OTHER TAXES; TRANSACTION EXPENSES. Stockholder 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 the Stockholder, including without limitation any income taxes
assessed against the Stockholder which result from the failure of the
Acquisition to qualify as a tax-free reorganization. Invatec, on the one hand,
and the Stockholder, 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; provided, however, that Invatec will pay one-half
of the Reorganization Expenses incurred by the Stockholder after June 22, 1998,
up to $15,000. In no event shall any costs or expenses incurred by the
Stockholder be borne by the Company. 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 Stockholder shall pay
and be solely responsible for any income taxes assessed against the Stockholder
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.
(C) COMPANY DEBT LIMITATION; STOCKHOLDER AND FORMER STOCKHOLDER DEBT. The
Stockholder shall cause the total Indebtedness of the Company to be, immediately
prior to Closing, equal to or less than Three Hundred Thirty-Six Thousand One
Hundred Eighty-Eight Dollars ($336,188), and to consist solely of Indebtedness
described on SCHEDULE I, but exclusive of any prepayment penalties resulting
from or arising out of the prepayment of the Company's Indebtedness in
connection with or as a result of the Acquisition, all of which shall be paid by
the Stockholder. Except for salary accrued in the Ordinary Course of Business,
on the Closing Date there will not be any Indebtedness owed by the Company to
the Stockholder or any affiliate of the Stockholder, and the Stockholder and his
affiliate shall repay to the Company at Closing the Indebtedness owed by him or
such affiliate, as applicable, to the Company. On the date of execution hereof,
the only Indebtedness of the Stockholder or his affiliates to the Company is
$87,000 owed by the Trust, which amount shall be payable by the Trust to Invatec
at Closing. Invatec will pay the Former Stockholder Debt to ▇▇. ▇▇▇▇▇▇▇▇▇▇, at
the Closing and will provide to him health insurance in accordance with the
Company's existing agreement with him.
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(D) LEASE OF REAL ESTATE. At the Closing Invatec Sub will enter into the
Lease for the real property owned by the Trust substantially in the form of
EXHIBIT C attached hereto.
(E) LIFE INSURANCE. The two life insurance policies issued by ▇▇▇▇ ▇▇▇▇▇▇▇
Insurance Company and maintained by the Company on the lives of the Stockholder
and Ray Santusso, an employee, shall be redeemed for their cash surrender
values. The cash surrender value of the policy covering the Stockholder, in the
approximate amount of $28,000, will be payable to Invatec at the Closing, and
the cash surrender value of the policy covering Mr. Santusso, in the approximate
amount of $32,000, will be paid to Mr. Santusso.
(F) FORWARD SUBSIDIARY MERGER TAX REPRESENTATIONS. The Company and the
Stockholder hereby represent and warrant the following to be true and correct as
of the Effective Time:
(i) The fair market value of the Invatec Common Stock and other
consideration received by the Stockholder 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 the Stockholder to have
Invatec redeem, or have a party related to Invatec acquire, shares of
Invatec Common Stock received in the Acquisition which would reduce the
Stockholder's ownership of a number of shares of Invatec Common Stock
received in the Acquisition to a number of shares having a value, as of
the date of the Acquisition, of less than 50% of the sum of (i) the value
at the Effective Time of all the Company Capital Stock held immediately
prior to the Acquisition by the Stockholders and (ii) the value at the
Effective Time of any other instruments (such as debt of the Company which
is guaranteed by the Stockholder) which are classified for federal income
tax purposes as stock of the Company (collectively, "Shares") and which
are held immediately prior to the Acquisition by the Stockholder. For
purposes of this representation, shares of Company Capital Stock
outstanding immediately prior to the Acquisition include shares redeemed
prior to the Acquisition by reason of this Agreement or otherwise as part
of the Acquisition, and the value of all shares of Company Capital Stock
outstanding immediately prior to the Acquisition shall be determined with
regard to any extraordinary distributions (i.e., distributions with
respect to shares of Company Capital Stock other than regular, normal
dividends) by the Company by reason of this Agreement or otherwise as part
of the Acquisition. For purposes of this representation, a party is
related to Invatec if such party and Invatec would be treated as related
parties within the meaning of Treasury Regulations Section 1.368-1(e)(3).
(iii) Invatec Sub will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by the Company immediately prior to the
Acquisition. For purposes of this representation, amounts paid by the
Company to the Stockholder in cash or other property, amounts used by the
Company to pay Reorganization Expenses, and all redemptions and
distributions
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(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 Stockholder will pay their respective
expenses, if any, incurred in connection with the Acquisition; provided
however, that Invatec will pay one-half of the Reorganization Expenses
incurred by the Stockholder after June 22, 1998, up to $15,000.
(vi) There is no intercorporate indebtedness existing between
Invatec and the Company or between Invatec Sub and the Company that was
issued, acquired or will be settled at a discount.
(vii) The Company is not an investment company. For purposes of this
representation, an investment company means a regulated investment company
(as defined in the Code), a real estate investment trust (as defined in
the Code), or a corporation, 50 percent or more of the value of whose
total assets are stock and securities and 80 percent or more of the value
of whose total assets are assets held for investment within the meaning of
Section 368(a)(2)(F)(iii) of the Code.
(viii)The Company is not under the jurisdiction of a court in a case
under Title 11 of the United States Code, or a receivership, foreclosure,
or similar proceeding in a federal or state court.
(ix) At the Effective Time, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which its assets are subject.
(x) None of the compensation received by any stockholder-employee of
the Company will be separate consideration for, or allocable to, any of
his shares of Company Capital Stock. None of the shares of Invatec Common
Stock to be received by any stockholder-employee will be separate
consideration for, or allocable to, any employment agreements, and the
compensation paid to any stockholder-employee will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services.
PARAGRAPH 16. THE CLOSING. (A) TIME AND PLACE. On or before the
Closing Date, the Parties will take all actions necessary to effect the
Acquisition (all those actions collectively being the "Closing"). The Closing
will take place at the offices of Counsel for Invatec at 10:00 a.m.,
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local time, or at such later time on the Closing Date as Invatec shall specify
by written notice to Stockholders.
(B) STOCKHOLDER'S DELIVERIES. At or before the Closing, Stockholder shall
deliver or cause to be delivered to Invatec the following, all of which shall be
duly executed by all of the parties thereto, other than Invatec, Invatec Sub and
Invatec's third party lender, and shall be in form and content acceptable to the
Parties:
(i) All of the stock certificates evidencing the Company Capital
Stock, with all necessary transfer tax and other revenue stamps acquired
and attached at the expense of the holder of such certificate, together
with irrevocable stock powers in form and content acceptable to Invatec,
duly authorized and executed by the record holder of each such stock
certificate;
(ii) An Affiliate Letter in the form attached hereto as EXHIBIT D
from the Stockholder, duly executed by him with respect to his acquisition
of Invatec Common Stock as part of the Acquisition Consideration;
(iii) The Certificates of Merger to be filed in Massachusetts;
(iv) The Certificate of Merger to be filed in Delaware;
(v) The Employment Agreement;
(vi) The Lease;
(vii) Resignations of all directors and officers of the Company,
effective as of the Effective Time;
(viii)Evidence of the receipt by ▇▇. ▇▇▇▇▇▇▇▇▇▇ of payment of the
Former Stockholder Debt amount, together with an executed release by him
of the Company's further payment obligations under the Redemption
Agreement, in form and content acceptable to Invatec;
(ix) The Subordination of Landlord's Lien executed by the Trust in
favor of Invatec's third party lender in the form attached hereto as
EXHIBIT E.
(x) An opinion of counsel issued by Counsel for the Company and the
Stockholder in the form attached as EXHIBIT F;
(xi) No Withholding Certificate duly executed by the Stockholder;
(xii) Certificates of the Secretary or Assistant Secretary of the
Equipment and Service, certifying as to copies of the Articles of
Incorporation and Bylaws of Equipment and Service, and the resolutions of
the Board of Directors of those
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companies and the Stockholder, in form and content reasonably acceptable
to Invatec, authorizing the transactions contemplated herein;
(xiii)Closing Certificate duly executed by the Stockholder in the
form attached hereto as EXHIBIT G;
(xiv) All original promissory notes or other debt instruments
executed by the Company relating to the Indebtedness, together with an
executed release in form and content acceptable to Invatec
(xv) Evidence that the insurance policies described in PARAGRAPH
2(E) have been redeemed;
(xvi) All governmental, lender or other third party approvals to be
delivered by Stockholders as a condition to closing pursuant to ARTICLE V
of the Uniform Provisions, in form and content reasonably acceptable to
Invatec; and
(xvii) 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 Stockholder or other party named below the following, all
of which shall be duly executed by Invatec and Invatec Sub, and shall be in form
and content acceptable to the Parties:
(i) The shares of Invatec Common Stock to be delivered hereunder as
a portion of the Acquisition Consideration (provided that the certificates
evidencing such shares shall be delivered as promptly as practicable after
the Closing);
(ii) Cash or immediately available funds in the aggregate amount of
$256,312, representing the cash portion of the Acquisition Consideration
of $371,312, against which has been credited the $87,000 debt of the Trust
and the $28,000 cash surrender value of the life insurance policy on the
Stockholder, which amounts were payable to Invatec in cash at the Closing;
(iii) The cash surrender value of the insurance policy covering Mr.
Santusso, payable to him, as provided in PARAGRAPH 2(E);
(iv) Cash or immediately available funds in satisfaction of the
Former Stockholder Debt payable to ▇▇. ▇▇▇▇▇▇▇▇▇▇;
(v) Cash or immediately available funds in satisfaction of the
Indebtedness listed on Schedule I to the holders thereof;
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(vi) The Certificates of Merger to be filed in Massachusetts;
(vii) The Certificate of Merger to be filed in Delaware;
(viii)The Employment Agreement;
(ix) The Lease;
(x) Closing Certificate duly executed by Invatec in the form
attached hereto as EXHIBIT H;
(xi) An opinion of counsel issued by Counsel for Invatec, in the
form attached hereto as EXHIBIT I;
(xii) 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
Stockholder, authorizing the transactions contemplated herein;
(xiii)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 Stockholder, authorizing the
transactions contemplated herein; and
(xiv) 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. The 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.
PARAGRAPH 17. 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) Article III is hereby amended by inserting the following:
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Section 3.07. SEC FILINGS. (a) Invatec has filed with the
Securities and Exchange Commission ("SEC") all material forms,
statements, reports and documents (the "INVATEC SEC FILINGS")
required to be filed by it under the 1934 Act and the rules and
regulations thereunder.
(b) As of its filing date, each Invatec SEC Filing complied as
to form in all material respects with the applicable requirements of
the 1934 Act.
(c) As of its filing date, each Invatec SEC Filing filed
pursuant to the 1934 Act did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(d) Invatec has previously delivered to the Stockholder copies
of Invatec's prospectus, dated June 10, 1998, as supplemented (the
"PROSPECTUS"). As of its date, the Prospectus did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(e) Invatec's Financial Statements included in the Prospectus
present fairly, in all material respects, the financial position of
Invatec as of the date thereof and the results of operations and
cash flows of Invatec and stockholders' or other owners' equity for
the periods set forth therein and have been prepared in accordance
with GAAP.
(ii) Section 8.01(b) is hereby amended by inserting after the last
sentence of that section, "Notwithstanding the foregoing, if the Stockholder is
terminated without cause after the expiration of the term of his Employment
Agreement with Invatec, so that no lump sum cash payment provided for therein is
paid to the Stockholder, this covenant not to compete shall terminate and be of
no further force or effect."
PARAGRAPH 5. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE. (A)
DETERMINATION. Within sixty (60) days after the Closing Date, Invatec shall
deliver to the Stockholder an unaudited combined balance sheet of Equipment and
Service, 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 he 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 the Stockholder to Invatec in accordance with this
PARAGRAPH 5, then the Post-Closing Financial Statements shall become final and
binding upon the Parties on the earlier to occur of: (i) the date the Parties
resolve in writing any differences they have with respect to any matter
specified in the Notice of Disagreement, or (ii) the date any disputed matters
are finally resolved in writing by the Accounting Firm. During the 10-day period
following the delivery of a
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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 by
the Stockholder. The fees and disbursements of Stockholder's independent
auditors and counsel incurred in connection with this PARAGRAPH 5 shall be borne
by Stockholder, 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."
(B) PAYMENT. The Final Post-Closing Financial Statements shall set forth
the amount of the Company's Working Capital and Indebtedness as of the Effective
Time. Stockholder hereby agrees to deliver to Invatec within ten (10) business
days of delivery of the Final Post-Closing Financial Statements to Invatec and
to Stockholder, the number of shares of Invatec Common Stock determined at the
Current Market Price on the Closing Date (or, if the tax free nature of the
Acquisition would be violated by the delivery of stock, then cash), equal to the
amount, if any, by which the Company's (i) Indebtedness as of the Effective
Time, as set forth in the Final Post-Closing Financial Statements exceeds
$336,188 and (ii) Working Capital as of the Effective Time, as set forth in the
Final Post-Closing Financial Statements, is less than $358,162. Invatec hereby
agrees to deliver to the Stockholder, within ten (10) business days of delivery
of the Final Post-Closing Financial Statements to Invatec and to the
Stockholder, the number of shares of Invatec Common Stock determined at the
Current Market Price on the Closing Date, equal to the amount, if any, by which
the Company's (i) Indebtedness as of the Effective Time as set forth in the
Final Post-Closing Financial Statements is less than $336,188 and (ii) Working
Capital as of the Effective Time, as set forth in the Final Post-Closing
Financial Statements, exceeds $358,162.
Determinations under this PARAGRAPH 5 shall be consistent with the
methodology reflected in SCHEDULES I AND II.
PARAGRAPH 6. 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
the Stockholder under this Agreement shall be subject to offset by Invatec to
the extent of any damages incurred as a result of the Stockholder's breach of
this Agreement, commencing on the tenth (10th) day after Invatec sends written
notice to the Stockholder
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of the alleged breach, unless Stockholder cures same within such 10-day period.
The 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 7. SECURITIES LAWS.
(A) STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES CONCERNING SECURITIES. As
of the date hereof, the Stockholder hereby makes the following representations
and warranties to and for the benefit of Invatec: (i) that he 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 he 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 the Stockholder.
(B) TRANSFER RESTRICTIONS. The Stockholder hereby agrees that except for
transfers to immediate family members who agree to be bound by the restrictions
set forth in this PARAGRAPH 7(B) (or trusts for the benefit of the Stockholder
or family members, or trusts in which the 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, the Stockholder will not sell, assign, exchange,
transfer, appoint, or otherwise dispose of any of the shares of Invatec Common
Stock received by the Stockholder pursuant to this Agreement. The certificates
evidencing the Invatec Common Stock delivered to the Stockholder pursuant to
this Agreement which are subject to this restriction will bear a legend
substantially in the form set forth below and containing such other information
as Invatec may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF
WITHOUT THE WRITTEN CONSENT OF INVATEC, AND INVATEC SHALL NOT BE REQUIRED
TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO THE EXPIRATION OF
TWELVE (12) MONTHS FROM THE DATE OF THIS CERTIFICATE. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, INVATEC AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE DATE SPECIFIED ABOVE.
PARAGRAPH 8.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
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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: _______________________________________
Name:_____________________________________
Title:______________________________________
INVATEC SUB:
COLONIAL ACQUISITION, INC.
By: _______________________________________
Name:_____________________________________
Title:______________________________________
STOCKHOLDER:
________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
THE COMPANY:
COLONIAL PROCESS EQUIPMENT CO., INC.
By:_______________________________________
Name:_____________________________________
Title:______________________________________
COLONIAL SERVICE COMPANY, INC.
By: ___________________________________
Name:_________________________________
Title: __________________________________
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Schedule I - Indebtedness
Schedule II - Working Capital
Schedule 3.04 - Capital Stock of Invatec
Schedule 3.05 - Subsidiaries of Invatec
Exhibit A - Dooney Employment Agreement
Exhibit B - Certain Company Financial Statements
Exhibit C - Lease
Exhibit D - Affiliate Letter
Exhibit E - Subordination of Landlord's Lien
Exhibit F - Opinion of Counsel of Stockholder and Company
Exhibit G - Closing Certificate of Stockholder
Exhibit H - Closing Certificate of Invatec
Exhibit I - Opinion of Counsel of Invatec
Annex I - Uniform Provisions for Stock Acquisitions By Subsidiary Merger
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