EXHIBIT 2
MERGER AGREEMENT
DATED AS OF DECEMBER 17, 1997
BY AND AMONG
INNOVATIVE VALVE TECHNOLOGIES, INC.,
DIVT ACQUISITION, LLC,
AND
DALCO, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into as of the 17th
day of December, 1997, by and among INNOVATIVE VALVE TECHNOLOGIES, INC., a
Delaware corporation ("Invatec"), DIVT ACQUISITION, LLC, a Kentucky limited
liability company ("Invatec Sub"), JAMES H. MERRELL, an individual whose address
is 7213 Leafland Place, Prospect, Kentucky 40059 ("Mr. Merrell"), CHRISTIAN G.
SAWYER, an individual whose address is 7510 Springvale Drive, Louisville,
Kentucky 40241 ("Mr. Sawyer"), (Mr. Merrell and Mr. Sawyer being sometimes
hereinafter referred to collectively as the "Stockholders" and individually as a
"Stockholder"), and DALCO, INC., a Kentucky corporation whose address is 2601
Grassland Drive, Louisville, Kentucky 40299 (the "Company"). Invatec, Invatec
Sub, Stockholders and the Company are sometimes hereinafter referred to
collectively as the "Parties" or individually as a "Party."
PRELIMINARY STATEMENT
WHEREAS, (a)Mr. Merrell is the legal and beneficial owner and holder of
One Hundred Fifty (150) shares of no par value Common Stock of the Company, and
(b) Mr. Sawyer is the legal and beneficial owner and holder of One Hundred Fifty
(150) shares of no par value Common Stock of the Company (collectively, the
"Company Capital Stock"), the Company Capital Stock constituting all of the
issued and outstanding capital stock of the Company; 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 set forth herein (such merger being the "Acquisition");
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 1. CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms have the meanings assigned to them below in this PARAGRAPH
1. Capitalized terms used in this Agreement and not defined below in this
PARAGRAPH 1 have the meanings assigned to them in the preamble of this
Agreement, the Preliminary Statement or ARTICLE IX of the Uniform Provisions, as
the case may be.
"ACCOUNTING FIRM" means Ernst & Young LLP, in Louisville,
Kentucky.
"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.
"ACQUISITION CONSIDERATION" has the meaning specified in
SUBPARAGRAPH 2(A)(IV).
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"CEILING AMOUNT" means Nine Million One Hundred Thousand and
No/100 Dollars ($9,100,000.00).
"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.
"CONVERTIBLE NOTES" means the Convertible Subordinated
Promissory Notes to be executed as of the Closing Date by Invatec, each
of which shall be payable to order of a Stockholder, in the form
attached hereto as EXHIBIT A.
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDERS" means Brown,
Todd & Heyburn PLLC of Louisville, Kentucky.
"COUNSEL FOR INVATEC" means Boyer, Ewing & Harris Incorporated
of Houston, Texas.
"CURRENT BALANCE SHEET" means the balance sheet of the Company
as of October 31, 1997.
"CURRENT BALANCE SHEET DATE" means October 31, 1997.
"DISCLOSURE STATEMENT" means the written statement executed by
the Company and each of the Stockholders and delivered to Invatec prior
to the execution and delivery of this Agreement by Invatec in which
either (a) exceptions are taken to any of certain of the
representations and warranties made by the Company 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 the Certificate of Merger to be filed in
connection with the Merger.
"EMPLOYMENT AGREEMENTS" means the Employment Agreements to be
entered into as of the Closing Date between (a) Invatec and Mr.
Merrell, and (b) Invatec and Mr. Sawyer, in the forms thereof attached
hereto as EXHIBIT B-1 and EXHIBIT B-2, respectively.
"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
Indebtedness of Company at the Current Balance Sheet Date is $282,505,
determined as provided in SCHEDULE I hereto.
"INITIAL FINANCIAL STATEMENTS" means the balance sheets of the
Company as of October 31, 1996 and 1995, and the related statements of
operations and retained earnings
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for the Company's fiscal years then ended, in each case, reviewed by
Hamilton Thomas & Co., and the internally prepared balance sheets of
the Company as of October 31, 1997, and the related internally prepared
statements of operations and retained earnings for the Company's fiscal
year then ended. The Initial Financial Statements are attached hereto
as EXHIBIT C.
"INVATEC SUB" has the meaning set forth in the preamble of
this Agreement.
"KRS" means the Kentucky Revised Statutes.
"LEASE AGREEMENT" means the Lease Agreement dated as of the
Closing Date, between Invatec Sub and the Grassland Properties, LLC, in
the form attached hereto as EXHIBIT D.
"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).
"PLAN OF MERGER" means the Plan of Merger dated as of the
Closing Date, between the Company and Invatec Sub, in the form attached
hereto as EXHIBIT E.
"PRO RATA SHARE" of a Stockholder means: fifty percent (50.0%)
in the case of Mr. Merrell, and fifty percent (50.0%) in the case of
Mr. Sawyer.
"RECAPTURE REIMBURSEMENT" as to a Stockholder means that
amount of cash which when added to the Acquisition Consideration will
cause the Acquisition Consideration (valued at its issue price for
federal income tax purposes) and such Recapture Reimbursement reduced
by all federal, state or local income taxes payable by that Stockholder
by reason of the Merger to be equal to the Acquisition Consideration
(valued at its issue price for federal income tax purposes) reduced by
all federal, state or local income taxes which would be payable by the
Stockholder if he had sold his stock in the Company to Invatec for the
Acquisition Consideration. The Recapture Reimbursement shall be
calculated assuming that each such federal and state income tax is
imposed at the maximum statutory rate (estimated to be 44%), each
Stockholder is liable for state income tax only in Kentucky and is not
subject to any local income tax, without regard to the installment
method of accounting, the Company is an S corporation, and no federal,
state or local income tax is imposed on the Company by reason of the
Merger.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement to be entered into as of the Closing Date among Invatec and
the Stockholders, in the form thereof attached hereto as EXHIBIT F.
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"RESPONSIBLE OFFICER" means either Stockholder, for the
Company, and either John L. King or Charles F. Schugart, for Invatec.
"STOCK OPTION AGREEMENTS" means the Stock Option Agreements to
be entered into as of the Closing Date between Invatec and certain
employees of the Company to be designated by the Stockholders, pursuant
to which Invatec grants options to such employees to purchase an
aggregate of five thousand (5,000) unregistered shares of Invatec
Common Stock at a per share price equal to the closing price on the
Closing Date, in a form reasonably acceptable to Stockholders and
Invatec. The parties acknowledge that the Stock Option Agreements will
be tendered to such designated employees of the Company promptly
following the Closing.
"SUBORDINATION AGREEMENT" means the Subordination Agreement to
be entered into as of the Closing Date among the Stockholders, Invatec
and Texas Commerce Bank, N.A., in substantially the form thereof
attached hereto as EXHIBIT G.
"SURVIVING COMPANY" means Invatec Sub, which is to be
designated in the Certificate of Merger as the Surviving Company.
"TERM NOTES" means the Term Notes to be executed as of the
Closing Date by Invatec, each of which shall be payable to the order of
a Stockholder, in the form attached hereto as EXHIBIT H.
"THRESHOLD AMOUNT" means one and one-half percent (1.5%) of
the Ceiling Amount, as same may be adjusted after Closing pursuant to
PARAGRAPH 5.
"UNIFORM PROVISIONS" means the Uniform Provisions for Stock
Acquisitions By Taxable Merger attached hereto as ANNEX 1.
"WORKING CAPITAL" means the current assets minus (i) the
current liabilities of the Company determined in accordance with GAAP
(calculated as provided in SCHEDULE II attached hereto), and (ii) an
amount equal to the sum of (a) the product of the highest state and
federal combined marginal personal income tax rates (estimated by both
parties to approximate 44.0%) MULTIPLIED BY the Company's taxable
profits for the Company's fiscal year ended October 31, 1997, less (b)
the amount of estimated income taxes paid by the Stockholders through
the Closing Date with respect to such profits, and (iii) an amount
equal to the product of the highest state and federal combined marginal
personal income tax rates (estimated by both parties to approximate
44.0%) MULTIPLIED BY the Company's taxable profits for the Company's
termination year commencing on November 1, 1997 (as such profits may be
adjusted following the Closing upon audit). The Parties acknowledge and
agree that such amount described in (ii) above for the Company's fiscal
year ended October 31, 1997, is approximately $300,000 based on the
Company's estimated taxable profits of $1,095,000 for the fiscal year
ended October 31, 1997, considering estimated payments related thereto
of $228,180 which have been made by the Stockholders prior to the
Closing Date. Current liabilities shall expressly EXCLUDE current
maturities of long-term
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Indebtedness, the current portion of obligations under capital leases,
and the Company's line of credit payable to a financial institution.
The Working Capital at the Current Balance Sheet Date is $2,103,765,
determined as provided in SCHEDULE II attached hereto. For purposes of
PARAGRAPH 5, the Working Capital as of the Closing Date is $1,773,765,
assuming that (i) the reimbursable income taxes through the Current
Balance Sheet Date are $300,000, (ii) the reimbursable professional
fees and expenses pursuant to SUBPARAGRAPH 2(B) are $30,000, and (iii)
the Recapture Reimbursement is zero.
PARAGRAPH 2. THE ACQUISITION. (A) THE MERGER. (i) CERTIFICATE
OF MERGER. Subject to the terms and conditions hereof, the Company will cause
the Certificate of Merger to be duly executed and delivered on or promptly after
the Closing Date and filed with the Secretary of State of the State of Kentucky.
(ii) THE EFFECTIVE TIME. The Effective Time will be upon the
filing of the Certificate of Merger with the Secretary of State of the
Commonwealth of Kentucky, unless specified to the contrary in the Certificate of
Merger, 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 KRS, (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 KRS, (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 Kentucky, (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 Articles of Organization) or (b) their terms
(in the case of the Operating Agreement)) the Charter Documents of the Surviving
Company, except that the Articles of Organization shall be amended to change the
name of the Surviving Company to "Dalco, LLC," (5) the initial member of the
Board of Directors of the Surviving Company will be William E. Haynes, and he
will hold the office of manager of the Surviving Company, subject to the
provisions of the applicable laws of the State of Kentucky 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, President & Chief
Executive Officer................................... William E. Haynes
Chief Financial Officer, Senior Vice President,
Treasurer and Secretary............................. Charles F. Schugart
Senior Vice President............................... Christian G. Sawyer
Senior Vice President............................... James H. Merrell
Vice President & Assistant Secretary................ Douglas R. Harrington, Jr.
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Vice President & Assistant Secretary................ Frank L. Lombard
Vice President & Assistant Secretary................ John L. King
(iv) EFFECT OF THE MERGER ON 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 2(C) and
PARAGRAPH 5, without interest, on surrender of the certificates
evidencing those shares, the following (the "Acquisition
Consideration"):
(a) Term Notes in the aggregate principal amount of Four
Million Five Hundred Fifty Thousand and No/100 Dollars
($4,550,000.00); and
(b) Convertible Notes in the aggregate principal amount of
Four Million Five Hundred Fifty Thousand and No/100 Dollars
($4,550,000.00);
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 the Company's 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 membership interest of Invatec Sub issued and
outstanding immediately prior to the Effective Time will be converted
into one membership interest of the Surviving Company and the
membership interests of the Surviving Company issued on that conversion
will constitute all the issued and outstanding membership interests of
the Surviving Company.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time 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 2(C) and PARAGRAPH 5,
his or her pro rata share of the Acquisition Consideration.
(v) DELIVERY, EXCHANGE AND PAYMENT. On the Closing Date, the
Stockholders, as holders of 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 that Stockholder, and with all necessary transfer tax and
other revenue stamps, acquired at that 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 2(C) and 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
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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 delivered by
that Stockholder.
(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 to any party other than Stockholders for any business, occupation,
income, withholding or similar tax, or any taxes of any kind, of the
Stockholders. 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, except
that notwithstanding the provision of SECTION 10.05 of the Uniform Provisions,
the Company will reimburse Stockholders for one-half of the amount of any
professional fees and expenses incurred by them in connection with the
Acquisition, up to an aggregate maximum reimbursement of Thirty Thousand Dollars
($30,000), upon presentation of invoices from Stockholders' attorneys and
accountants.
(C) COMPANY DEBT LIMITATION. The Stockholders shall cause the total
Indebtedness of the Company to be, immediately prior to Closing, equal to or
less than Two Hundred Eighty-Three Thousand Four Hundred Fifty-Nine and No/100
Dollars ($283,459.00), including the prepayment penalties resulting from or
arising out of the prepayment of such Indebtedness in connection with or as a
result of the Acquisition. The original principal amounts of the Term Notes
shall be increased or reduced by an aggregate amount equal to the amount by
which the Company's Indebtedness at Closing is less than or greater than
$283,459.00. Except for the reimbursement of professional fees and expenses
contemplated by PARAGRAPH 2(B), the payments or distributions for payment of S
corporation taxes contemplated in SUBPARAGRAPH 2(D)(III), the Recapture
Reimbursement contemplated in SUBPARAGRAPH 2(D)(III), and salary accrued in the
ordinary course of business, on the Closing Date there will not be any
Indebtedness owed by the Company to any Stockholder, and each Stockholder shall
repay to the Company at Closing the Indebtedness owed by such Stockholder to the
Company.
(D) S CORPORATION TAX RETURNS. (i) The Stockholders shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, at Invatec's reasonable cost and expense, all income
Tax Returns of the Company that are due with respect to the Company's fiscal
year ended October 31, 1997. Such authority shall include, but not be limited
to, the determination of the manner in which any items of income, gain,
deduction, loss or credit arising out of the income, properties and operations
of the Company shall be reported or disclosed in such Returns; provided, that
such Returns shall be prepared by treating items on such Returns in a manner
consistent with past practices with respect to such items, and in accordance
with applicable law. The Stockholders shall provide to Invatec drafts of all
income Tax Returns of the Company required to be prepared and filed by the
Stockholders under this PARAGRAPH 2(D) at least 30 days prior to the date for
the filing of such Returns. At least 15 days prior to the due date for the
filing of such Returns, Invatec shall notify the Stockholders of the existence
of any objection (specifying in reasonable detail the nature and basis of such
objection) Invatec may have to any item
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set forth on such draft Returns. Invatec and the Stockholders agree to consult
and resolve in good faith any such objections.
(ii) Except as provided in SUBPARAGRAPH 2(D)(I), Invatec shall
have the exclusive authority and obligation, at Invatec's sole cost and expense,
to prepare and timely file, or cause to be prepared and timely filed, all
Returns of the Company; provided, that such Returns shall be prepared by
treating items on such Returns in a manner consistent with past practices with
respect to such items, and in accordance with applicable law. Such authority
shall include, but not be limited to, the determination of the manner in which
any items of income, gain, deduction, loss or credit arising out of the income,
properties and operations of the Company shall be reported or disclosed in such
Returns. The Returns for which Invatec shall be responsible pursuant to the
foregoing sentence shall include the short year S Corporation Tax Return for the
period beginning November 1, 1997. Invatec shall provide to the Stockholders
drafts of all Returns of the Company required to be prepared and filed by
Invatec under this SUBPARAGRAPH 2(D)(II) at least 30 days prior to the date for
the filing of such Returns. At least 15 days prior to the due date for the
filing of such Returns, the Stockholders shall notify Invatec of the existence
of any objections (specifying in reasonable detail the nature and basis of such
objection) the Stockholders may have to any items set forth on such draft
Returns. Invatec and the Stockholders agree to consult and resolve in good faith
any such objection.
(iii) The Company has distributed or shall distribute to the
Stockholders (a) an aggregate amount of up to $300,000 to pay the federal, state
and/or local or other Taxes attributable to the income of the Company for the
Company's fiscal year ended October 31, 1997, (b) an aggregate amount adequate
to pay the federal, state and/or local or other Taxes attributable to the income
of the Company for the Company's S corporation termination year commencing as of
November 1, 1997, and (c) an amount adequate to pay the Recapture Reimbursement,
as determined in connection with the filing of the Company's tax return for the
S corporation termination year commencing as of November 1, 1997, or thereafter
changed as a result of audit or the filing of an amended tax return. The
Stockholders shall promptly refund any overpayment or excess distribution.
(iv) In connection with the preparation, execution and filing
of Returns, audit examinations and any administrative or judicial proceedings
related to Tax liabilities imposed on the Stockholders with respect to the
income or operations of the Company for all periods ending on or prior to the
Closing Date, the Surviving Company and Invatec on the one hand, and the
Stockholders on the other hand, will cooperate fully with each other, including,
without limitation, the furnishing or making available for inspection during
normal business hours of records, personnel (as reasonably required), books of
account, powers of attorney or other materials necessary or helpful for the
preparation of such returns, the conduct of audit examinations or the defense of
claims by Taxing Authorities as to the imposition of Taxes.
(v) Each Party shall promptly notify the other Parties in
writing upon receipt by such Party or any of such Party's Affiliates of written
notice of any inquiries, claims, assessments, audits or similar events with
respect to Taxes relating to a taxable period ending on or prior to the Closing
Date (any such inquiry, claims, assessment, audit or similar event, a
"Pre-Closing Tax Matter"). The Stockholders, at their sole cost and expense,
shall have the exclusive authority to
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represent the interests of the Company with respect to any Pre-Closing Tax
Matter before any Taxing Authority or court and shall have the sole right to
extend or waive the statute of limitations with respect to a Pre-Closing Tax
Matter and to control the defense, compromise or other resolution of any
Pre-Closing Tax Matter, including responding to inquiries, filing returns and
settling audits; provided that the Stockholders shall not enter into any
settlement of or otherwise compromise any Pre-Closing Tax Matter that affects or
may affect the Tax liability (or the reporting position) of the Company or
Invatec for any periods beginning on or after the Closing Date without the prior
written consent of the Company, the Surviving Company and Invatec, which consent
shall not be unreasonably withheld.
(vi) None of the Stockholders shall file or cause to be filed
any amended Return for the Company without the prior written consent of Invatec,
which consent shall not be unreasonably withheld. The Company and Invatec shall
not file any amended Return for the Company with respect to any period prior to
the Closing Date without the prior written consent of the Stockholders, which
consent shall not be unreasonably withheld.
PARAGRAPH 3. 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 Greenway
Plaza, Suite 3100, Houston, Texas 77046 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) STOCKHOLDERS' 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, or Invatec's third party lender:
(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 Investor Representation Letter in the form attached
hereto as EXHIBIT I from each Stockholder, duly executed by such
Stockholder with respect to such Stockholder's acquisition of a
Convertible Note as part of the Acquisition Consideration;
(iii) The Certificate of Merger;
(iv) The Plan of Merger;
(v) The Subordination Agreement;
(vi) The Employment Agreements;
(vii) The Registration Rights Agreement;
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(viii) Resignations of all directors and officers of the
Company, effective as of the Closing Date;
(ix) The Lease Agreement;
(x) Payment of any outstanding amounts owed by either
Stockholder to the Company, as expressly set forth in PARAGRAPH 2(C)
hereof;
(xi) An opinion of counsel issued by Counsel for the Company
and the Stockholders, in the form attached hereto as EXHIBIT J;
(xii) No Withholding Certificates duly executed by the
Stockholders in the form attached hereto as EXHIBIT K;
(xiii) 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; and
(xiv) A Termination Agreement terminating any existing
shareholder, voting or similar agreement between or among the
Stockholders and/or 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.
(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:
(i) The Term Notes;
(ii) The Convertible Notes;
(iii) The Certificate of Merger;
(iv) The Plan of Merger;
(v) The Registration Rights Agreement;
(vi) The Employment Agreements;
(vii) An opinion of counsel issued by Counsel for Invatec, in
the form attached hereto as EXHIBIT L;
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(viii) An opinion of counsel issued by Baker & Botts, L.L.P.,
in form and content reasonably acceptable to Counsel for the Company
and the Stockholders;
(ix) 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;
(x) Certificate of the Secretary or Assistant Secretary of
Invatec Sub certifying as to copies of the Articles of Organization and
Operating Agreement of Invatec Sub attached thereto, and the
resolutions of the managers and members of Invatec Sub, in form and
content reasonably acceptable to Counsel for the Company and the
Stockholders, authorizing the transactions contemplated herein; and
(xi) The Lease Agreement.
(D) FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby, including any subordination agreements requested by any
holder of Senior Indebtedness, as such term is defined in the Convertible Notes,
provided such subordination agreements do not materially and adversely change
the Stockholders' subordination obligations set forth in the Convertible Notes
and/or the Subordination Agreement. 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.
PARAGRAPH 4. 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.
PARAGRAPH 5. 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 Stockholders unless the Stockholders
furnish written notice of their 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 Stockholders 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
-11-
of Disagreement, or (ii) the date any disputed matters are finally resolved in
writing by the Accounting Firm. During the 10-day period following the delivery
of a Notice of Disagreement, the Parties shall seek in good faith to resolve in
writing any differences which they may have with respect to any matter specified
in the Notice of Disagreement. If, at the end of such 10-day period (or such
longer period of time as the Parties may agree upon in writing), the Parties
have not reached agreement on such matters, the matters which remain in dispute,
together with copies of this Agreement, the Post-Closing Financial Statements,
and the Notice of Disagreement, shall be submitted, within five (5) days
following the expiration of such 10-day period (or any agreed upon extension
thereof), to the Accounting Firm for review and resolution. 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 Louisville, Kentucky. 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 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 pay to Invatec within five 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 (a) Two Million One Hundred Three
Thousand Seven Hundred Sixty-Five and No/100 Dollars ($2,103,765.00) minus (i)
the reimbursement for S Corporation taxes, the Recapture Reimbursement and the
reimbursement for professional fees and expenses contemplated herein, and (ii)
$15,200 for equipment acquired and capitalized by the Company between October
31, 1997, and the Closing Date, as disclosed on SCHEDULE 2.17(A) of the
Disclosure Statement exceeds (b) the Working Capital, as set forth in the Final
Post-Closing Financial Statements. Determinations hereunder shall be consistent
with the methodology reflected in SCHEDULES I AND II.
PARAGRAPH 6. OFFSET; ATTORNEYS' FEES. To the extent permitted by
applicable law, and subject to the limits on Damage Claims and on
indemnification claims in SECTION 6.03 and SECTION 7.05 of the Uniform
Provisions, all amounts due and owing to a Stockholder under this Agreement or a
Term Note or Convertible Note 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 either
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. Any offset against a Term Note
or Convertible Note shall be against (i) the payments next coming due under such
Term Note or Convertible Note, or (ii) the then outstanding principal balance of
the Term Note or Convertible Note, as applicable, at the election of Invatec.
Each Stockholder hereby acknowledges and agrees that but for the right of offset
contained in this PARAGRAPH 6, Invatec would not have entered into this
Agreement or any of the transactions contemplated herein.
-12-
PARAGRAPH 7. THIRD PARTY CONSENTS. Invatec acknowledges and agrees that
the Company and the Stockholders have not attempted, and need not attempt, to
obtain the consent of any party to the contracts described in SECTION 2.03 of
the Disclosure Statement prior to the Closing or as a condition to the
consummation of the transactions contemplated by this Agreement. The
Stockholders will cooperate with Invatec, the Company and the Surviving Company
in obtaining such consents after the Closing. Notwithstanding any other
provision contained herein, the Stockholders make no representations or
warranties whatsoever regarding the effect the transactions contemplated herein
may have on the validity and enforceability of the contracts described in
SECTION 2.03 of the Disclosure Statement.
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 (other than Term Notes or Convertible Notes),
facsimile signatures shall be deemed to be original signatures. In addition, if
any Party executes facsimile copies of this Agreement or any documents,
instruments of agreements executed in connection herewith (other than Term Notes
or Convertible Notes), such copies shall be deemed originals.
PARAGRAPH 9. INSURANCE ISSUES. The Parties hereby agree that the
Company shall keep its existing general liability insurance policy in place
until the earlier of (i) the expiration of three (3) months from the Closing
Date or (ii) such time as the Stockholders and Invatec agree that it is no
longer advisable to keep to such policy in place. If the Stockholders and
Invatec cannot agree that it is no longer advisable to keep such policy in place
prior to the expiration of three (3) months from the Closing Date, then the
Company shall obtain "tail coverage" with respect to the matters covered by the
general liability policy, which coverage shall remain in place for a period of
two (2) years from the Closing Date. The cost for such tail coverage shall be
divided evenly between the Company, on the one hand, and the Stockholders,
jointly and severally, on the other hand. Precision Valve Services, Inc. shall
be covered by such tail coverage, if any; however, such coverage shall be at the
sole cost and expense of Stockholders.
-13-
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first above written.
INVATEC:
INNOVATIVE VALVE TECHNOLOGIES, INC.
By: /s/ JOHN L. KING
Name: John L. King
Title: Vice President
INVATEC SUB:
DIVT ACQUISITION, LLC
By: /s/ JOHN L. KING
Name: Jonh L. King
Title: Vice President
STOCKHOLDERS:
/s/ JAMES H. MERRELL
James H. Merrell
/s/ CHRISTIAN G. SAWYER
Christian G. Sawyer
THE COMPANY:
DALCO, INC.
By: /s/ JAMES H. MERRELL
Name: James H. Merrell
Title: President
By: /s/ CHRISTIAN G. SAWYER
Name: CHRISTIAN G. SAWYER
Title: Vice President
-14-
The undersigned, the spouse of Christian G. Sawyer, is fully
aware of, understands, and fully consents and agrees to the provisions of this
Merger Agreement, and its binding effect upon any community or other property
interests that she may own in the Company Capital Stock (or alternatively, in
order to confirm that she has no right, title or interest, legal or beneficial,
in the shares of Company Capital Stock standing in the name of Christian G.
Sawyer), and her awareness, understanding, consent and agreement are evidenced
by her execution hereof.
/s/ SYLVIA L. SAWYER
NAME: Sylvia L. Sawyer,
SPOUSE OF CHRISTIAN G. SAWYER
Schedule I - Indebtedness
Schedule II - Working Capital
Schedule 3.04 - Capital Stock of Invatec
Schedule 3.05 - Subsidiaries of Invatec
Exhibit A - Convertible Notes
Exhibit B-1 - Merrell Employment Agreement
Exhibit B-2 - Sawyer Employment Agreement
Exhibit C - Initial Financial Statements
Exhibit D - Lease Agreement
Exhibit E - Plan of Merger
Exhibit F - Registration Rights Agreement
Exhibit G - Subordination Agreement
Exhibit H - Term Note
Exhibit I - Investor Representation Letter
Exhibit J - Opinion of Counsel for Company and Stockholders
Exhibit K - No Withholding Certificates
Exhibit L - Opinion of Counsel for Invatec
-15-
SCHEDULE I
INDEBTEDNESS
October 31, 1997
Unsecured Credit Line Payable to Bank $100,954
Installment Loans Payable to Bank 124,294
Obligations under Capital Leases 58,211
TOTAL $283,459
-16-
SCHEDULE II
WORKING CAPITAL
Current Assets ................................................... $ 2,644,872
Current Liabilities .............................................. (787,545)
Add Back:
Note Payable to Bank, Unsecured .................................. 100,000
Current Portion of Notes Payable ................................. 79,438
Current Portion of Capital Leases ................................ 17,000
Deferred Tax Asset - Profit Sharing Plan ......................... 50,000
-----------
Working Capital as of the Current Balance Sheet Date ............. $ 2,103,765
Certain Deductions:
S Corporation Tax Distribution (through October 31, 1997) (300,000*
Recapture Reimbursement ................................. (0)
Professional Fees and Expenses Reimbursement ............ (30,000)(a)
----------
Working Capital as of the Closing Date ........................... 1,773,765(b)
* Assumes Maximum Permissible Reimbursement
(a) Fifty Percent (50%) of the Stockholders' professional fees and expenses
related to the Acquisition will be reimbursed to Stockholders by the
Company, up to a maximum reimbursement of $30,000, in accordance with
SUBPARAGRAPH 2(B).
(b) This amount will be adjusted for S Corporation income taxes relating to
the period from November 1, 1997 through the Closing Date in accordance
with the definition of the term "Working Capital."
-17-
Annex 1
INNOVATIVE VALVE TECHNOLOGIES, INC.
UNIFORM PROVISIONS
FOR
STOCK ACQUISITIONS
BY TAXABLE MERGER
TABLE OF CONTENTS
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER......................-1-
Section 1.01. OWNERSHIP AND STATUS OF COMPANY CAPITAL STOCK............-1-
Section 1.02. POWER OF THE STOCKHOLDER; APPROVAL OF THE ACQUISITION....-1-
Section 1.03. NO CONFLICTS OR LITIGATION...............................-2-
Section 1.04. NO BROKERS...............................................-2-
Section 1.05. PREEMPTIVE AND OTHER RIGHTS; WAIVER......................-2-
Section 1.06. CONTROL OF RELATED BUSINESSES............................-2-
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS........................................-3-
Section 2.01. ORGANIZATION.............................................-3-
Section 2.02. QUALIFICATION............................................-3-
Section 2.03. AUTHORIZATION; ENFORCEABILITY;
ABSENCE OF CONFLICTS; REQUIRED CONSENTS..................-3-
Section 2.04. CHARTER DOCUMENTS AND RECORDS; NO VIOLATION..............-4-
Section 2.05. NO DEFAULTS..............................................-4-
Section 2.06. COMPANY SUBSIDIARIES.....................................-5-
Section 2.07. CONTROLLING AFFILIATES...................................-5-
Section 2.08. CAPITAL STOCK OF THE COMPANY AND
THE COMPANY SUBSIDIARIES.................................-5-
Section 2.09. TRANSACTIONS IN CAPITAL STOCK............................-6-
Section 2.10. NO BONUS SHARES..........................................-6-
Section 2.11. PREDECESSOR STATUS; ETC..................................-6-
Section 2.12. RELATED PARTY AGREEMENTS.................................-6-
Section 2.13. LITIGATION...............................................-6-
Section 2.14. FINANCIAL STATEMENTS; DISCLOSURE.........................-6-
Section 2.15. COMPLIANCE WITH LAWS.....................................-7-
Section 2.16. CERTAIN ENVIRONMENTAL MATTERS............................-8-
Section 2.17. LIABILITIES AND OBLIGATIONS..............................-8-
Section 2.18. RECEIVABLES..............................................-9-
Section 2.19. OWNED AND LEASED REAL PROPERTIES.........................-9-
Section 2.20. OTHER TANGIBLE ASSETS...................................-10-
Section 2.21. PROPRIETARY RIGHTS......................................-10-
Section 2.22. RELATIONS WITH GOVERNMENTS, ETC.........................-10-
Section 2.23. COMMITMENTS.............................................-10-
-i-
Section 2.24. CAPITAL EXPENDITURES....................................-12-
Section 2.25. INVENTORIES.............................................-12-
Section 2.26. INSURANCE...............................................-12-
Section 2.27. EMPLOYEE MATTERS........................................-13-
Section 2.28. COMPLIANCE WITH ERISA, ETC..............................-15-
Section 2.29. TAXES...................................................-18-
Section 2.30. GOVERNMENT CONTRACTS....................................-19-
Section 2.31. ABSENCE OF CHANGES......................................-19-
Section 2.32. BANK RELATIONS; POWERS OF ATTORNEY......................-20-
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF INVATEC AND INVATEC SUB.............................................-21-
Section 3.01. ORGANIZATION; POWER.....................................-21-
Section 3.02. AUTHORIZATION; ENFORCEABILITY;
ABSENCE OF CONFLICTS; REQUIRED CONSENTS.................-21-
Section 3.03. CHARTER DOCUMENTS.......................................-22-
Section 3.04. CAPITAL STOCK OF INVATEC................................-22-
Section 3.05. SUBSIDIARIES............................................-23-
Section 3.06. COMPLIANCE WITH LAWS; NO LITIGATION.....................-23-
Section 3.07. SECURITIES REPORTS......................................-23-
Section 3.08. TAX REPRESENTATIONS RELATING TO CONVERTIBLE NOTES.......-23-
ARTICLE IV
[INTENTIONALLY OMITTED.................................................-24-
ARTICLE V
[INTENTIONALLY OMITTED]................................................-24-
ARTICLE VI
COVENANTS FOLLOWING THE CLOSING DATE...................................-24-
Section 6.01. ........................................................-24-
REMOVAL OF GUARANTIES..................................................-24-
Section 6.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............-24-
Section 6.03. LIMITATIONS ON DAMAGE CLAIMS............................-25-
Section 6.04. ........................................................-26-
-ii-
ARTICLE VII
INDEMNIFICATION........................................................-26-
Section 7.01. IN RESPECT OF REPRESENTATIONS AND WARRANTIES............-26-
Section 7.02. INDEMNIFICATION OF INVATEC INDEMNIFIED PARTIES..........-27-
Section 7.03. INDEMNIFICATION OF STOCKHOLDER INDEMNIFIED PARTIES......-27-
Section 7.04. CONDITIONS OF INDEMNIFICATION...........................-27-
Section 7.05. LIMITATIONS ON INDEMNIFICATION..........................-29-
ARTICLE VIII
CONFIDENTIALITY AND NONCOMPETITION PROVISIONS..........................-30-
Section 8.01. PROHIBITED ACTIVITIES...................................-30-
Section 8.02. INJUNCTIVE RELIEF.......................................-31-
Section 8.03. NOTICE OF POTENTIAL VIOLATIONS..........................-31-
Section 8.04. SPECIAL JURISDICTIONAL PROVISIONS.......................-31-
Section 8.05. SPECIAL ATTORNEY FEE PROVISIONS.........................-32-
Section 8.06. REASONABLENESS; REFORMATION; SEVERABILITY...............-32-
Section 8.07. INDEPENDENT COVENANT....................................-32-
Section 8.08. MATERIALITY.............................................-32-
Section 8.09. ........................................................-32-
ARTICLE IX
DEFINITIONS............................................................-33-
Section 9.01. DEFINED TERMS...........................................-33-
Section 9.02. OTHER DEFINED TERMS.....................................-45-
Section 9.03. OTHER DEFINITIONAL PROVISIONS...........................-45-
Section 9.04. CAPTIONS................................................-46-
ARTICLE X
GENERAL PROVISIONS.....................................................-46-
Section 10.01. TREATMENT OF CONFIDENTIAL INFORMATION..................-46-
Section 10.02. BROKERS AND AGENTS.....................................-46-
Section 10.03. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES...............-46-
Section 10.04. ENTIRE AGREEMENT; AMENDMENT; WAIVERS...................-47-
Section 10.05. EXPENSES...............................................-47-
Section 10.06. NOTICES................................................-47-
Section 10.07. GOVERNING LAW; MEDIATION AND ARBITRATION;
JURISDICTION; VENUE. (a)..............................-48-
Section 10.08. EXERCISE OF RIGHTS AND REMEDIES........................-49-
-iii-
Section 10.09. TIME...................................................-49-
Section 10.10. REFORMATION AND SEVERABILITY...........................-50-
Section 10.11. REMEDIES CUMULATIVE....................................-50-
Section 10.12. RELEASE................................................-50-
ARTICLE XI
[INTENTIONALLY OMITTED]................................................-51-
-iv-
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each of the Stockholders represents and warrants to Invatec
that, as applied solely to such Stockholder, all the following representations
and warranties in this ARTICLE I are as of the date of this Agreement true and
correct:
Section 1.01. OWNERSHIP AND STATUS OF COMPANY CAPITAL STOCK.
The Stockholder is the record and beneficial owner (or, if the Stockholder is a
trust or the estate of a deceased natural person, the legal owner) of the number
of shares of Company Capital Stock set forth, by each class, and by each series
in each class, thereof, opposite the Stockholder's name in SECTION 1.01 OF THE
DISCLOSURE STATEMENT, free and clear of all Liens, except for the Liens set
forth in SECTION 1.01 OF THE DISCLOSURE STATEMENT, all of which will be released
on or before the Closing Date.
Section 1.02. POWER OF THE STOCKHOLDER; APPROVAL OF THE
ACQUISITION. (a) The Stockholder has the full power, legal capacity and
authority to execute and deliver this Agreement and each other Transaction
Document to which the Stockholder is a party and to perform the Stockholder's
obligations in this Agreement and in all other Transaction Documents to which
the Stockholder is a party. This Agreement constitutes, and each such other
Transaction Document, when executed in the Stockholder's individual capacity and
delivered by the Stockholder, will constitute, the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and (ii) subject to
general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law). If the Stockholder is an
Entity, the Stockholder has obtained, in accordance with all applicable
Governmental Requirements and its Charter Documents, all approvals and the
taking of all actions necessary for the authorization, execution, delivery and
performance by the Stockholder of this Agreement and the other Transaction
Documents to which the Stockholder is a party. If the Stockholder is acting
otherwise than in such Stockholder's individual capacity (whether as an executor
or a guardian or in any other fiduciary or representative capacity), all actions
on the part of the Stockholder and all other Persons (including any court)
necessary for the authorization, execution, delivery and performance by the
Stockholder of this Agreement and the other Transaction Documents to which the
Stockholder is a party have been duly taken.
(b) The Stockholder, acting in each capacity in which such
Stockholder is entitled, by reason of the Company's Charter Documents or the
Governmental Requirements of the Company's Organization State or for any other
reason, to vote to approve or disapprove the consummation of the Acquisition,
has voted all the shares of Company Capital Stock owned by him and entitled to a
vote or votes on that matter, in any one or more of the manners prescribed or
permitted by the Company's Charter Documents or the Governmental Requirements of
the
-1-
Company's Organization State, whichever are controlling, to approve this
Agreement and the consummation of the Acquisition and the other transactions
contemplated hereby.
Section 1.03. NO CONFLICTS OR LITIGATION. Except as set forth
in SECTION 1.03 OF THE DISCLOSURE STATEMENT, the execution, delivery and
performance in accordance with their respective terms by the Stockholder of this
Agreement and the other Transaction Documents to which the Stockholder is a
party do not and will not (a) violate or conflict with any Governmental
Requirement, (b) breach or constitute a default under any agreement or
instrument to which the Stockholder is a party or by which the Stockholder or
any of the shares of Company Capital Stock owned by the Stockholder is bound,
(c) result in the creation or imposition of, or afford any Person the right to
obtain, any Lien upon any of the shares of Company Capital Stock owned by the
Stockholder (or upon any revenues, income or profits of the Stockholder
therefrom) or (d) if the Stockholder is an Entity, violate the Stockholder's
Charter Documents. No Litigation is pending or, to the knowledge of the
Stockholder, threatened to which the Stockholder is or may become a party which
(a) questions or involves the validity or enforceability of any of the
Stockholder's obligations under any Transaction Document or (b) seeks (or
reasonably may be expected to seek) (i) to prevent or delay the consummation by
the Stockholder of the transactions contemplated by this Agreement to be
consummated by the Stockholder or (ii) damages in connection with any
consummation by the Stockholder of the transactions contemplated by this
Agreement.
Section 1.04. NO BROKERS. The Stockholder has not, directly or
indirectly, in connection with this Agreement or the transactions contemplated
hereby (a) employed any broker, finder or agent or (b) agreed to pay or incurred
any obligation to pay any broker's or finder's fee, any sales commission or any
similar form of compensation.
Section 1.05. PREEMPTIVE AND OTHER RIGHTS; WAIVER. Except for
the right of the Stockholder to receive shares of Invatec Common Stock as a
result of the Acquisition or to acquire Invatec Common Stock pursuant to the
Convertible Notes, if any, or any written option granted by Invatec to the
Stockholder and except as set f orth in SECTION 1.05 OF THE DISCLOSURE
STATEMENT, the Stockholder either (a) does not own or otherwise have any
statutory or contractual preemptive or other right of any kind (including any
right of first offer or refusal) to acquire any shares of Company Capital Stock
or Invatec Common Stock or (b) hereby irrevocably waives each right of that type
the Stockholder does own or otherwise has.
Section 1.06. CONTROL OF RELATED BUSINESSES. Except as set
forth in SECTION 1.06 OF THE DISCLOSURE STATEMENT, the Stockholder is not, alone
or with one or more other Persons, the controlling Affiliate of any Entity,
business or trade (other than the Company and the Company Subsidiaries, if the
Stockholder is an Affiliate of the Company) that (a) is engaged in any line of
business which is the same as or similar to any line of business in which the
Company or any Company Subsidiary is engaged or (b) is, or has within the
three-year period ending on the date of this Agreement, engaged in any
transaction with the Company or any Company Subsidiary, except for transactions
in the ordinary course of business of the Company or that Company Subsidiary.
-2-
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally
represent and warrant to, and agree with, Invatec that all the following
representations and warranties in this ARTICLE II are as of the date of this
Agreement true and correct:
Section 2.01. ORGANIZATION. SECTION 2.01 OF THE DISCLOSURE
STATEMENT sets forth the Organization State of each of the Company and the
Company Subsidiaries. Each of the Company and the Company Subsidiaries (a) is a
corporation duly organized, validly existing and in good standing under the laws
of its Organization State, (b) has all requisite corporate power and authority
under those laws and its Charter Documents to own or lease and to operate its
properties and to carry on its business as now conducted and (c) is duly
qualified and in good standing as a foreign corporation in all jurisdictions in
which it owns or leases property or in which the carrying on of its business as
now conducted so requires, except where the failure to be so qualified, singly
or in the aggregate, would not have a Material Adverse Effect.
Section 2.02. QUALIFICATION. SECTION 2.02 OF THE DISCLOSURE
STATEMENT lists all the jurisdictions in which each of the Company and the
Company Subsidiaries is authorized or qualified to own or lease and to operate
its properties or to carry on its business as now conducted, and neither the
Company nor any Company Subsidiary owns, leases or operates any properties, or
carries on any business, that is Material to the Acquired Business in any
jurisdiction not listed in that Section.
Section 2.03. AUTHORIZATION; ENFORCEABILITY; ABSENCE OF
CONFLICTS; REQUIRED CONSENTS. (a) The execution, delivery and performance by the
Company of this Agreement and each other Transaction Document to which it is a
party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate or other power under
its Charter Documents and the applicable Governmental Requirements of its
Organization State and have been duly authorized by all proceedings, including
actions permitted to be taken in lieu of proceedings, required under its Charter
Documents and those Governmental Requirements.
(b) This Agreement has been, and each of the other Transaction
Documents to which the Company is a party, when executed and delivered to
Invatec (or, in the case of the Certificates of Merger the applicable
Governmental Authorities) will have been, duly executed and delivered by the
Company and is, or when so executed and delivered will be, the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally
-3-
and (ii) subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by the Company of the Transaction Documents to which it
is a party have not and will not (i) violate, breach or constitute a default
under (A) the Charter Documents of any of the Company and the Company
Subsidiaries, (B) any Governmental Requirement applicable to any of the Company
and the Company Subsidiaries or (C) any Material Agreement of the Company
(except as set forth in SECTION 2.03 OF THE DISCLOSURE STATEMENT), (ii) except
as set forth in SECTION 2.03 OF THE DISCLOSURE STATEMENT, result in the
acceleration or mandatory prepayment of any Indebtedness, or any Guaranty not
constituting Indebtedness, of any of the Company and the Company Subsidiaries or
afford any holder of any of that Indebtedness, or any beneficiary of any of
those Guaranties, the right to require any of the Company and the Company
Subsidiaries to redeem, purchase or otherwise acquire, reacquire or repay any of
that Indebtedness, or to perform any of those Guaranties, (iii) cause or result
in the imposition of, or afford any Person the right to obtain, any Lien upon
any property or assets of any of the Company and the Company Subsidiaries (or
upon revenues, income or profits of any of the Company and the Company
Subsidiaries therefrom) or (iv) except as set forth in SECTION 2.03 OF THE
DISCLOSURE STATEMENT, result in the revocation, cancellation, suspension or
material modification, in any single case or in the aggregate, of any
Governmental Approval possessed by any of the Company and the Company
Subsidiaries at the date hereof and necessary for the ownership, lease or
operation of its properties or the conduct of its business as now conducted,
including any necessary Governmental Approval under each applicable
Environmental Law.
(d) Except for the filing of the Certificates of Merger with
the applicable Governmental Authorities, and as may be required by the HSR Act
or the applicable state securities or blue sky laws, no Governmental Approvals
are required to be obtained, and no reports or notices to or filings with any
Governmental Authority are required to be made, by any of the Company and the
Company Subsidiaries for the execution, delivery or performance by the Company
of the Transaction Documents to which it is a party, the enforcement against the
Company of its obligations thereunder or the effectuation of the Acquisition and
the other transactions contemplated thereby.
Section 2.04. CHARTER DOCUMENTS AND RECORDS; NO VIOLATION. The
Company has caused true, complete and correct copies of the Charter Documents,
each as in effect on the date hereof, and the minute books and similar corporate
or other Entity records of each of the Company and the Company Subsidiaries to
be delivered or otherwise made available to Invatec. No breach or violation of
any Charter Document of any of the Company and the Company Subsidiaries has
occurred and is continuing.
Section 2.05. NO DEFAULTS. Except as disclosed in SECTION 2.05
OF THE DISCLOSURE STATEMENT, no condition or state of facts exists, or, with the
giving of notice or the lapse of time or both, would exist, which (a) entitles
any holder of any outstanding Indebtedness, or any Guaranty
-4-
not constituting Indebtedness, of any of the Company and the Company
Subsidiaries, or a representative of that holder, to accelerate the maturity, or
require a mandatory prepayment, of that Indebtedness or Guaranty, or affords
that holder or its representative, or any beneficiary of that Guaranty, the
right to require any of the Company and the Company Subsidiaries to redeem,
purchase or otherwise acquire, reacquire or repay any of that Indebtedness, or
to perform that Guaranty in whole or in part, (b) entitles any Person to obtain
any Lien (other than a Permitted Lien) upon any properties or assets
constituting any part of the Acquired Business (or upon any revenues, income or
profits of any of the Company and the Company Subsidiaries therefrom) or (c)
constitutes a violation or breach of, or a default under, any Material Agreement
of the Company by any of the Company and the Company Subsidiaries.
Section 2.06. COMPANY SUBSIDIARIES. SECTION 2.01 OF THE
DISCLOSURE STATEMENT either (a) sets forth the form of organization, legal name,
each assumed name and Organization State of each Company Subsidiary or (b)
correctly states no Entity is a Company Subsidiary. Except as disclosed in
SECTION 2.06 OF THE DISCLOSURE STATEMENT, each Company Subsidiary is a Wholly
Owned Subsidiary. In the case of any Company Subsidiary that is not a Wholly
Owned Subsidiary, SECTION 2.06 OF THE DISCLOSURE STATEMENT sets forth, by each
class and each series within each class, (a) the number of outstanding shares
(or other percentage ownership interests) of Capital Stock of the Company
Subsidiary, (b) the Company's aggregate direct and indirect ownership of those
shares (or interests) and (c) the name and address of record and percentage
ownership of those shares (or interests) of each holder of record thereof other
than the Company or a Company Subsidiary. No Lien exists on any outstanding
share of Capital Stock of any Company Subsidiary which is owned directly or
indirectly by the Company other than (a) the Liens, if any, described in SECTION
2.06 OF THE DISCLOSURE STATEMENT, all of which will be released on or before the
Closing Date, and (b) Permitted Liens. Except as set forth in SECTION 2.06 OF
THE DISCLOSURE STATEMENT, the Company does not own, of record or beneficially,
directly or indirectly through any Person, and does not control, directly or
indirectly through any Person or otherwise, any Capital Stock or Derivative
Securities of any Entity other than a Company Subsidiary.
Section 2.07. CONTROLLING AFFILIATES. SECTION 2.07 OF THE
DISCLOSURE STATEMENT sets forth the name of each Person who at the time the
Acquisition was submitted for vote or consent to the Stockholders, is, was or
will be an Affiliate of the Company by reason of that Person's control of the
Company.
Section 2.08. CAPITAL STOCK OF THE COMPANY AND THE COMPANY
SUBSIDIARIES. SECTION 2.08 OF THE DISCLOSURE STATEMENT sets forth, by each class
and by each series within each class, the total number of shares of authorized
Company Capital Stock and the total number of such shares that have been issued
and are now outstanding. Except as set forth in SECTION 2.08 OF THE DISCLOSURE
STATEMENT: (a) no shares of Company Capital Stock are held by the Company or any
Company Subsidiary as treasury shares; and (b) no outstanding options, warrants
or rights to acquire Capital Stock of the Company or any Company Subsidiary
exist. All the issued and outstanding shares of Capital Stock of each of the
Company and the Company Subsidiaries (a) have been duly authorized and validly
issued in accordance with the applicable Governmental Requirements of their
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issuer's Organization State and Charter Documents and (b) are fully paid and
nonassessable. Neither the Company nor any Company Subsidiary has issued or sold
any shares of its outstanding Capital Stock in breach or violation of (a) any
applicable statutory or contractual preemptive rights, or any other rights of
any kind (including any rights of first offer or refusal), of any Person or (b)
the terms of any of its Derivative Securities which then were outstanding. No
Person has, otherwise than solely by reason of that Person's right, if any, to
vote shares of the Capital Stock of the Company or any Company Subsidiary it
holds (to the extent those shares afford the holder thereof any voting rights)
any right to vote on any matter with the holders of Capital Stock of the Company
or any Company Subsidiary.
Section 2.09. TRANSACTIONS IN CAPITAL STOCK. Except as set
forth in SECTION 2.09 OF THE DISCLOSURE STATEMENT: (a) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire or
reacquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof; and (b) no transaction has
been effected, and no action in contemplation of the transactions described in
this Agreement has been taken, respecting the equity ownership of either the
Company or any Company Subsidiary.
Section 2.10. NO BONUS SHARES. Except as set forth in SECTION
2.10 OF THE DISCLOSURE STATEMENT, no outstanding share of Capital Stock of the
Company was issued for less than the fair market value thereof at the time of
issuance or was issued in exchange for any consideration other than cash.
Section 2.11. PREDECESSOR STATUS; ETC. Except as disclosed in
SECTION 2.11 OF THE DISCLOSURE STATEMENT, the Company has not been a Subsidiary
or division of another corporation during the past five years.
Section 2.12. RELATED PARTY AGREEMENTS. Except as set forth in
SECTION 2.12 OF THE DISCLOSURE STATEMENT, each Related Party Agreement in effect
on the date hereof will have been terminated as of the Closing Date, and no
Related Party Agreement will exist then or thereafter to and including the
Effective Time.
Section 2.13. LITIGATION. Except as disclosed in SECTION 2.13
OF THE DISCLOSURE STATEMENT, no Litigation is pending or, to the knowledge of
the Company or any Stockholder, threatened to which the Company, any Company
Subsidiary or any Stockholder is or may become a party.
Section 2.14. FINANCIAL STATEMENTS; DISCLOSURE. (a) FINANCIAL
STATEMENTS. (i) The Company's Financial Statements prepared as of the Company's
fiscal years ending in 1995, 1996 and 1997, each year-end and each fiscal
quarter of the Company thereafter (including in each case the related schedules
and notes) present fairly, in all material respects, the financial position of
the Acquired Business at the respective dates of the balance sheets included
therein and the results of operations and cash flows of the Acquired Business
and stockholders' or other owners' equity for the respective periods set forth
therein and have been prepared in accordance with GAAP.
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As of the date of any balance sheet included in those Financial Statements,
neither the Company nor any Company Subsidiary then had any outstanding
Indebtedness to any Person or any liabilities of any kind (including contingent
obligations, tax assessments or unusual forward or long-term commitments), or
any unrealized or anticipated loss, which in the aggregate then were Material to
the Acquired Business and required to be reflected in such Financial Statements
or in the notes related thereto in accordance with GAAP which were not so
reflected.
(ii) Since the Current Balance Sheet Date, no change has
occurred in the business, operations, properties or assets, liabilities,
condition (financial or other) or results of operations of the Company or any
Company Subsidiary that could reasonably be expected, either alone or together
with all other such changes, to have a Material Adverse Effect.
(b) DISCLOSURE. As of the date hereof, all Information that
has been furnished to Invatec by or on behalf of the Company prior to the date
of this Agreement in connection with the transactions contemplated hereby is,
taken together, true and correct in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which those statements were made.
Section 2.15. COMPLIANCE WITH LAWS. (a) Except as disclosed in
SECTION 2.15 OF THE DISCLOSURE STATEMENT: (i) each of the Company and the
Company Subsidiaries possesses, or, if required by the applicable Environmental
Laws (including those relating to the maintenance, repair or servicing of
industrial valves or other process-system components or equipment containing
volatile organic compounds, hazardous air pollutants or Solid Wastes, Hazardous
Wastes or Hazardous Substances), one or more of its employees as required by
those Environmental Laws possesses, all material certifications and licenses and
similar Governmental Approvals required for the conduct of its business; and
(ii) each of the Company and the Company Subsidiaries and such one or more of
its employees are in compliance in all material respects with the terms and
conditions of all Governmental Approvals necessary for the ownership or lease
and the operation of its properties (including all the facilities and sites it
owns or holds under any lease) and the carrying on of its business as now
conducted, except to the extent that any such noncompliance would not be
reasonably anticipated to result in a Material Adverse Effect. The Company has
provided Invatec with a complete written list of all the Governmental Approvals
so possessed (other than permits for particular jobs for customers at their
facilities). All the Governmental Approvals so listed are valid and in full
force and effect, and, except as disclosed in SECTION 2.15 OF THE DISCLOSURE
STATEMENT, neither the Company nor any Company Subsidiary has received, nor to
the knowledge of any Stockholder and the Company has any employee of either
received, any notice from any Governmental Authority of its intention to cancel,
terminate or not renew any of those Governmental Approvals.
(b) Except as disclosed in SECTION 2.15 OF THE DISCLOSURE
STATEMENT, each of the Company and the Company Subsidiaries: (i) has been and
continues to be in compliance in all material respects with all Governmental
Requirements applicable to it or any of its presently or
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previously owned or operated properties (including all the facilities and sites
now or previously owned or held by it under any lease), businesses or
operations, including all applicable Governmental Requirements under ERISA and
Environmental Laws except to the extent that any such noncompliance would not be
reasonably anticipated to result in a Material Adverse Effect; and (ii)(A)
neither the Company nor any Company Subsidiary has received, nor to the
knowledge of the Stockholders and of the Company has any employee of either
received, any notice from any Governmental Authority which asserts, or raises
the possibility of assertion of, any noncompliance with any of those
Governmental Requirements and, (B) to the knowledge of each of the Company, the
Company Subsidiaries and the Stockholders, no condition or state of facts exists
which would provide a valid basis for any such assertion.
Section 2.16. CERTAIN ENVIRONMENTAL MATTERS. Except as
disclosed in SECTION 2.16 OF THE DISCLOSURE STATEMENT: (a) the Company and each
Company Subsidiary have complied, and remain in compliance, in all material
respects with the provisions of all Environmental Laws applicable to any of them
or any of their respective owned or operated facilities, sites or other
properties, businesses and operations, including those which relate to the
reporting by the Company and each Company Subsidiary of all sites owned or
operated by any of them where Solid Wastes, Hazardous Wastes or Hazardous
Substances have been treated, stored, disposed of or otherwise handled; (b) no
release (as defined in those Environmental Laws) at, from, in or on any site
owned or operated by the Company or any Company Subsidiary has occurred which,
if all relevant facts were known to the relevant Governmental Authorities, (i)
would require remediation to avoid deed record notices, restrictions,
liabilities or (ii) would result in other consequences that would not be
applicable if that release had not occurred; (c) neither the Company nor any
Company Subsidiary (or any agent or contractor of either) has transported or
arranged for the transportation of any Solid Wastes, Hazardous Wastes or
Hazardous Substances to, or disposed or arranged for the disposition of any
Solid Wastes, Hazardous Wastes or Hazardous Substances at, any off-site location
that could lead to any claim against the Company, any Company Subsidiary,
Invatec or any Subsidiary of Invatec, as a potentially responsible party or
otherwise, for any fines, clean-up costs, remedial work, damage to natural
resources, personal injury or property damage, including any claim under CERCLA;
and (d) no storage tanks exist, or have ever existed, on or under any of the
properties owned or operated by the Company or any Company Subsidiary from which
any Solid Wastes, Hazardous Wastes or Hazardous Substances have been released
into the surrounding environment. The Company has provided Invatec with copies
(or if not available, accurate written summaries) of all environmental
investigations, studies, audits, reviews and other analyses conducted by or on
behalf, or which otherwise are in the actual or constructive possession, of the
Company or any Company Subsidiary respecting any facility, site or other
property presently owned or operated by the Company or any Company Subsidiary.
Section 2.17. LIABILITIES AND OBLIGATIONS. SECTION 2.17 OF THE
DISCLOSURE STATEMENT lists or describes all present liabilities, of every kind,
character and description and whether accrued, absolute, fixed, contingent or
otherwise, of each of the Company and the Company Subsidiaries which (a) exceed
or reasonably could be expected to exceed $15,000 and (b) (i) had been incurred
prior to the Current Balance Sheet Date, but are not reflected on the Current
Balance Sheet, or
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(ii) were incurred after the Current Balance Sheet Date otherwise than in the
ordinary course of business, and consistent with the past practice, of that
Entity. That Section also lists and describes, for each of the Company and the
Company Subsidiaries: (a) each of its outstanding secured and unsecured
Guaranties not constituting its Indebtedness and, for each of those Guaranties,
whether any Stockholder or Related Person or Affiliate of any Stockholder is a
Person whose obligation is covered by that Guaranty, and (b) for each of the
items listed under clause (a) of this sentence, (i) if that item is secured by
any property or asset of the Company or any Company Subsidiary, the nature of
that security, and (ii) if that item is covered in whole or in part by a
Guaranty of any Stockholder or any Related Person or Affiliate of any
Stockholder, the name of the guarantor.
Section 2.18. RECEIVABLES. Except as set forth in SECTION 2.18
OF THE DISCLOSURE STATEMENT, all the accounts and notes or other accounts
receivable of the Company and the Company Subsidiaries reflected on the Current
Balance Sheet were collected, or are valid and enforceable claims arising in the
ordinary course of business and, in the good faith belief of the Company's
management, collectible, in the aggregate respective amounts so reflected, net
of the reserves, if any, reflected in the Current Balance Sheet.
Section 2.19. OWNED AND LEASED REAL PROPERTIES. (a) SECTION
2.19 OF THE DISCLOSURE STATEMENT lists and correctly describes in all material
respects: (i) all real properties owned by any of the Company and the Company
Subsidiaries and, for each of those properties, the address thereof, the type
and approximate square footage of each structure located thereon and the use
thereof in the business of the Company and the Company Subsidiaries; (ii) all
real properties of which any of the Company and the Company Subsidiaries is the
lessee and, for each of those properties, the address thereof, the type and
approximate square footage of each structure located thereon the Company or a
Company Subsidiary is leasing, the use thereof in the business of the Company
and the Company Subsidiaries and the expiration date of its lease; and (iii) in
the case of each real property listed as being owned, whether it was previously
owned, and in the case of each real property listed as being leased, whether it
is presently owned, by any Stockholder or any of such Stockholder's Related
Persons or Affiliates (other than the Company or the Company Subsidiaries, if
the Stockholder is an Affiliate of the Company).
(b) Except as set forth in SECTION 2.19 OF THE DISCLOSURE
STATEMENT, the Company has provided Invatec with true, complete and correct
copies of all title reports and insurance policies relating to any of the real
properties listed as being owned or leased in that Section. Except as set forth
in that Section or those reports and policies, and except for Permitted Liens,
the Company or a Company Subsidiary owns in fee, and has good, valid and
marketable title to, free and clear of all Liens, each property listed in that
Section as being owned.
(c) The Company has provided Invatec with true, correct and
complete copies of all leases under which the Company or a Company Subsidiary is
leasing each of the properties listed in SECTION 2.19 OF THE DISCLOSURE
STATEMENT as being leased and, except as set forth in SECTION 2.19 OF THE
DISCLOSURE STATEMENT, (i) each of those leases is, to the knowledge of the
Stockholders and
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of the Company, valid and binding on the lessor party thereto, and (ii) the
lessee party thereto has not sublet any of the leased space to any Person other
than the Company or a Company Subsidiary.
(d) The fixed assets of each of the Company and the Company
Subsidiaries are affixed only to one or more of the real properties listed in
SECTION 2.19 OF THE DISCLOSURE STATEMENT and, except as set forth in that
Section, are adequate for the purposes for which they presently are being used
or held for use, ordinary wear and tear excepted.
Section 2.20. OTHER TANGIBLE ASSETS. (a) SECTION 2.20 OF THE
DISCLOSURE STATEMENT discloses all leases, including Capital Leases, that are
Material to the Company under which the Company or a Company Subsidiary is
leasing its property, plant and equipment and other tangible assets other than
real properties. Except as set forth in that Section, (i) each of those leases
is, to the knowledge of the Stockholders and of the Company, valid and binding
on the lessor party thereto and (ii) the lessee party thereto has not sublet any
of the leased property to any Person other than the Company or a Company
Subsidiary.
(b) Except as set forth in SECTION 2.20 OF THE DISCLOSURE
STATEMENT, all the property, plant and equipment of the Company and the Company
Subsidiaries are adequate for the purposes for which they presently are being
used or held for use.
Section 2.21. PROPRIETARY RIGHTS. Except as set forth in
SECTION 2.21 OF THE DISCLOSURE STATEMENT, each of the Company and the Company
Subsidiaries owns, free and clear of all Liens other than Permitted Liens, or
has the legal right to use all Proprietary Rights that are necessary to the
conduct of its business as now conducted, in each case free of any claims or
infringements known to the Company or any Stockholder. SECTION 2.21 OF THE
DISCLOSURE STATEMENT (a) lists these Proprietary Rights and (b) indicates those
owned by the Company or any Company Subsidiary and, for those not listed as so
owned, the agreement or other arrangement pursuant to which they are possessed.
Except as set forth in that Section, (a) no consent of any Person will be
required for the use of any of these Proprietary Rights by Invatec or any
Subsidiary of Invatec following the Closing Date and (b) no governmental
registration of any of these Proprietary Rights has lapsed or expired or been
canceled, abandoned, opposed or the subject of any reexamination request.
Section 2.22. RELATIONS WITH GOVERNMENTS, ETC. Neither the
Company nor any Company Subsidiary has made, offered or agreed to offer anything
of value to any governmental official, political party or candidate for
government office which would cause the Company or any Company Subsidiary to be
in violation of the Foreign Corrupt Practices Act of 1977 or any Governmental
Requirement to a similar effect.
Section 2.23. COMMITMENTS. (a) Except as set forth in SECTION
2.23 OF THE DISCLOSURE STATEMENT, the Company has provided Invatec with a
complete list of, or made available to Invatec copies of, each of the following
(each a "Company Commitment") to which any of the
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Company and the Company Subsidiaries is a party or by which any of its
properties is bound and which presently remains executory in whole or in any
part:
(i) each partnership, joint venture or cost sharing agreement;
(ii) each guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iii) each instrument, agreement or other obligation
evidencing or relating to Indebtedness of any of the Company and the
Company Subsidiaries or to money lent or to be lent to another Person
involving more than $25,000;
(iv) each contract to purchase or sell real property;
(v) each agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys
(other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any 12-month
period in excess of $25,000 and which is not terminable without penalty
and on no more than 30 days' prior notice;
(vi) each agreement for the acquisition or provision of
services, supplies, equipment, inventory, fixtures or other property
involving more than $25,000 in the aggregate;
(vii) each Related Party Agreement involving total payments
within any 12-month period in excess of $10,000 and which is not
terminable without penalty on no more than 30 days' prior notice;
(viii) each contract containing any noncompetition agreement,
covenant or undertaking;
(ix) each agreement providing for the purchase from a supplier
of all or substantially all the requirements of the Company or any
Company Subsidiary for a particular product or service; or
(x) each other agreement or commitment not made in the
ordinary course of business which is Material to the Acquired Business.
True, correct and complete copies of all written Company Commitments have
heretofore been delivered or made available to Invatec. Except as set forth in
SECTION 2.23 OF THE DISCLOSURE STATEMENT: (i) there are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that, with
the giving of notice or lapse of time or both, would constitute defaults or
events of default under any Company Commitment Material to the Company by any of
the
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Company and the Company Subsidiaries or, to the knowledge of the Stockholders
and of the Company, any other party thereto; and (ii) no penalties have been
incurred, nor are amendments pending, with respect to the Company Commitments
Material to the Acquired Business. The Company Commitments are in full force and
effect and are valid and enforceable obligations of the Company or the Company
Subsidiaries parties thereto and, to the knowledge of the Stockholders and of
the Company, the other parties thereto in accordance with their respective
terms, except as that enforceability may be (A) limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and (B) subject to general principles
of equity (regardless of whether that enforceability is considered in a
proceeding in equity or at law), and no defenses, off-sets or counterclaims have
been asserted or, to the knowledge of the Stockholders and of the Company, may
be made by any party thereto (other than by the Company or a Company
Subsidiary), nor has the Company or a Company Subsidiary, as the case may be,
waived any rights thereunder, except as described in SECTION 2.23 OF THE
DISCLOSURE STATEMENT.
(b) Except as disclosed in SECTION 2.23 OF THE DISCLOSURE
STATEMENT or contemplated hereby or by any other Transaction Document to which
the Company or any Company Subsidiary or Stockholder is a party, neither the
Company nor any Company Subsidiary or Stockholder has knowledge of any plan or
intention of any other party to any Company Commitment that is Material to the
Acquired Business to exercise any right to cancel or terminate that Company
Commitment, and neither the Company nor that Company Subsidiary or any
Stockholder has knowledge of any condition or state of facts which would justify
the exercise of such a right.
Section 2.24. CAPITAL EXPENDITURES. SECTION 2.24 OF THE
DISCLOSURE STATEMENT sets forth the total amount of capital expenditures
currently budgeted to be incurred by the Company and the Company Subsidiaries in
excess of $25,000 in the aggregate during the balance of the Company's current
fiscal year.
Section 2.25. INVENTORIES. Except as set forth in SECTION 2.25
OF THE DISCLOSURE STATEMENT: (a) all inventories, net of reserves determined in
accordance with GAAP, of each of the Company and the Company Subsidiaries which
are classified as such on the Current Balance Sheet are, to the knowledge of the
Stockholders and of the Company, merchantable and salable or usable in the
ordinary course of business of the Acquired Business; and (b) the Acquired
Business does not depend on any single vendor for its inventories the loss of
which could have a Material Adverse Effect.
Section 2.26. INSURANCE. Except as set forth in SECTION 2.26
OF THE DISCLOSURE STATEMENT: (a) the Company has provided Invatec with: (i) a
list as of the Current Balance Sheet Date of all insurance policies then carried
by each of the Company and the Company Subsidiaries; (ii) a list of all
insurance loss runs and worker's compensation claims received for the most
recently ended three policy years; and (iii) true, complete and correct copies
of all insurance policies carried by each of the Company and the Company
Subsidiaries which are in effect, all of which (A) have been issued by insurers
of recognized responsibility and (B) currently are, and will remain without
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interruption through the Effective Time, in full force and effect; (b) no
insurance carried by the Company or any Company Subsidiary has been canceled by
the insurer during the past five years, and neither the Company nor any Company
Subsidiary has ever been denied coverage; and (c) neither the Company nor any
Company Subsidiary or Stockholder has received any notice or other communication
from any issuer of any such insurance policy of any material increase in any
deductibles, retained amounts or the premiums payable thereunder, and, to the
knowledge of the Company and the Stockholders, no such increase in deductibles,
retainages or premiums is threatened.
Section 2.27. EMPLOYEE MATTERS. (a) CASH COMPENSATION. The
Company has provided Invatec with a complete written list of the names, titles
and rates of annual Cash Compensation, at the Current Balance Sheet Date (and
the portions thereof attributable to salary or the equivalent, fixed bonuses,
discretionary bonuses and other Cash Compensation, respectively) of key
employees (including all employees who are officers or directors), nonemployee
officers, nonemployee directors and key consultants and independent contractors
of each of the Company and the Company Subsidiaries.
(b) EMPLOYMENT AGREEMENTS. SECTION 2.27 OF THE DISCLOSURE
STATEMENT lists all Employment Agreements remaining executory in whole or in
part on the date hereof, and the Company has provided Invatec with true,
complete and correct copies of all those Employment Agreements. Neither the
Company nor any Company Subsidiary is a party to any oral Employment Agreement.
(c) OTHER COMPENSATION PLANS. SECTION 2.27 OF THE DISCLOSURE
STATEMENT lists all Other Compensation Plans either remaining executory at the
date hereof or to become effective after the date hereof. The Company has
provided Invatec with, or made available to Invatec, a true, correct and
complete copy of each of those Other Compensation Plans that is in writing and
an accurate written description of each of those Other Compensation Plans that
is not written. Except as set forth in SECTION 2.27 OF THE DISCLOSURE STATEMENT,
each of the Other Compensation Plans, including each that is a Welfare Plan, may
be unilaterally amended or terminated by the Company or any Company Subsidiary
without liability to any of them, except as to benefits accrued thereunder prior
to that amendment or termination.
(d) ERISA BENEFIT PLANS. SECTION 2.27 OF THE DISCLOSURE
STATEMENT (i) lists each ERISA Pension Benefit Plan (A)(1) the funding
requirements of which (under Section 301 of ERISA or Section 412 of the Code)
are, or at any time during the six-year period ending on the date hereof were,
in whole or in part, the responsibility of the Company or any Company Subsidiary
or (2) respecting which the Company or any Company Subsidiary is, or at any time
during that period was, a "contributing sponsor" or an "employer" as defined in
Sections 4001(a)(13) and 3(5), respectively, of ERISA (each plan described in
this clause (A) being a "Company ERISA Pension Plan"), (B) each other ERISA
Pension Benefit Plan respecting which an ERISA Affiliate is, or at any time
during that period was, such a "contributing sponsor" or "employer" (each plan
described in this clause (B) being an "ERISA Affiliate Pension Plan") and (C)
each other ERISA Employee Benefit
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Plan that is being, or at any time during that period was, sponsored, maintained
or contributed to by the Company or any Company Subsidiary (each plan described
in this clause (C) and each Company ERISA Pension Plan being a "Company ERISA
Benefit Plan"), (ii) states the termination date of each Company ERISA Benefit
Plan and ERISA Affiliate Pension Plan that has been terminated and (iii)
identifies for each ERISA Affiliate Pension Plan the relevant ERISA Affiliates.
The Company has provided Invatec with (i) true, complete and correct copies of
(A) each Company ERISA Benefit Plan and ERISA Affiliate Pension Plan, (B) each
trust agreement related thereto and (C) all amendments to those plans and trust
agreements. Except as set forth in SECTION 2.27 OF THE DISCLOSURE STATEMENT, (i)
neither the Company nor any Company Subsidiary is, or at any time during the
six-year period ended on the date hereof was, a member of any ERISA Group that
currently includes, or included when the Company or a Company Subsidiary was a
member, among its members any Person other than the Company and the Company
Subsidiaries and (ii) no Person is an ERISA Affiliate of the Company or any
Company Subsidiary (other than the Company or any Company Subsidiary in the case
of any other Company Subsidiary or any Company Subsidiary in the case of the
Company, if the Company and the Company Subsidiaries comprise an ERISA Group).
(e) EMPLOYEE POLICIES AND PROCEDURES. SECTION 2.27 OF THE
DISCLOSURE STATEMENT lists all Employee Policies and Procedures. The Company has
provided Invatec with a copy of all written Employee Policies and Procedures and
a written description of all unwritten Employee Policies and Procedures that in
the aggregate are Material to the Company.
(f) UNWRITTEN AMENDMENTS. Except as described in SECTION 2.27
OF THE DISCLOSURE STATEMENT, no unwritten amendments have been made, whether by
oral communication, pattern of conduct or otherwise, with respect to any of the
Employment Agreements, Other Compensation Plans or Employee Policies and
Procedures which in the aggregate are Material to the Company.
(g) LABOR COMPLIANCE. (a)(i) each of the Company and the
Company Subsidiaries has been and is in material compliance with all applicable
Governmental Requirements respecting employment and employment practices, terms
and conditions of employment and wages and hours, and (ii) neither the Company
nor any Company Subsidiary is liable for any arrears of wages or penalties for
failure to comply with any of the foregoing, and (b) neither the Company nor any
Company Subsidiary has engaged in any unfair labor practice or discriminated on
the basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices. Except as set forth in
SECTION 2.27 OF THE DISCLOSURE STATEMENT, there are no (i) unfair labor practice
charges or complaints or racial, color, religious, sex, national origin, age,
disability or handicap discrimination charges or complaints pending or, to the
knowledge of the Stockholders and of the Company, threatened against the Company
or any of the Company Subsidiaries before any Governmental Authority (nor, to
the knowledge of the Stockholders and of the Company, does any valid basis
therefor exist) or (ii) existing or, to the knowledge of the Stockholders and of
the Company, threatened labor strikes, disputes, grievances, controversies or
other labor troubles
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affecting the Company or any of the Company Subsidiaries (nor, to the knowledge
of the Stockholders and of the Company, does any valid basis therefor exist).
(h) UNIONS. Neither the Company nor any Company Subsidiary or
ERISA Affiliate has ever been a party to any agreement with any union, labor
organization or collective bargaining unit. No employees of the Company and the
Company Subsidiaries are represented by any union, labor organization or
collective bargaining unit. Except as set forth in SECTION 2.27 OF THE
DISCLOSURE STATEMENT, to the knowledge of the Stockholders and of the Company,
none of the employees of the Company and the Company Subsidiaries has threatened
to organize or join a union, labor organization or collective bargaining unit.
(i) NO ALIENS. To the knowledge of the Stockholders and of the
Company, all employees of each of the Company and the Company Subsidiaries are
citizens of, or are authorized in accordance with federal immigration laws to be
employed in, the United States.
(j) CHANGE OF CONTROL BENEFITS. Except as set forth in SECTION
2.27 OF THE DISCLOSURE STATEMENT, neither the Company nor any of the Company
Subsidiaries is a party to any agreement, or has established any policy,
practice or program, requiring it to make a payment or provide any other form of
compensation or benefit or vesting rights to any person performing services for
the Company or any of the Company Subsidiaries which would not be payable or
provided in the absence of this Agreement or the consummation of the
transactions contemplated by this Agreement, including any parachute payment
under Section 280G of the Code.
(k) RETIREES. Except as described in SECTION 2.27 OF THE
DISCLOSURE STATEMENT, neither the Company nor any of the Company Subsidiaries
has any obligation or commitment to provide medical, dental or life insurance
benefits to or on behalf of any of its employees who may retire or any of its
former employees who have retired except as may be required pursuant to the
continuation of coverage provisions of Section 4980B of the Code and the
applicable parallel provisions of ERISA.
Section 2.28. COMPLIANCE WITH ERISA, ETC. (a) COMPLIANCE. Each
of the Company ERISA Benefit Plans and Other Compensation Plans (each, a "Plan")
(i) is in substantial compliance with all applicable provisions of ERISA, as
well as with all other applicable Governmental Requirements, and (ii) has been
administered, operated and managed in accordance with its governing documents in
all material respects.
(b) QUALIFICATION. All Plans that are intended to qualify
under Section 401(a) of the Code (the "Qualified Plans") are so qualified and
have been determined by the IRS to be so qualified (or application for
determination letters have been timely submitted to the IRS). The Company has
provided Invatec with true, complete and correct copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R, filed with respect to each
such Qualified Plan and most recent trustee or custodian report. To the extent
that any Qualified Plans have not been amended to comply with
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applicable Governmental Requirements, the remedial amendment period permitting
retroactive amendment of these Qualified Plans has not expired and will not
expire within 120 days after the Effective Time. All reports and other documents
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including annual reports, summary annual reports,
actuarial reports, PBGC-1 Forms, audits or Returns) have been timely filed or
distributed.
(c) NO PROHIBITED TRANSACTIONS, ETC. None of the Stockholders,
any Plan or the Company or any Company Subsidiary has engaged in any Prohibited
Transaction. No Plan has incurred an accumulated funding deficiency, as defined
in Section 412(a) of the Code and Section 302(a) of ERISA, and no circumstances
exist pursuant to which the Company or any Company Subsidiary could have any
direct or indirect liability whatsoever (including being subject to any
statutory Lien to secure payment of any such liability), to the PBGC under Title
IV of ERISA or to the IRS for any excise tax or penalty with respect to any Plan
now maintained or contributed to by the Company or any of its ERISA Affiliates.
Further:
(i) there have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan without a
determination by the IRS that such action does not adversely affect the
tax-qualified status of that plan;
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect to any
Plan which was not properly reported;
(iv) the valuation of assets of any Qualified Plan, as of the
Effective Time, shall equal or exceed the actuarial present value of
all "benefit liabilities" (within the meaning of Section 4001(a)(16) of
ERISA) under that plan in accordance with the assumptions contained in
the regulations of the PBGC governing the funding of terminated defined
benefit plans;
(v) with respect to Plans qualifying as "group health plans"
under Section 4980B of the Code or Section 607(l) or 609 of ERISA and
related regulations (relating to the benefit continuation rights
imposed by "COBRA" or qualified medical child support orders), the
Company and each Company Subsidiary and the Stockholders have complied
(and at the Effective Time will have complied) in all material respects
with all reporting, disclosure, notice, election and other benefit
continuation and coverage requirements imposed thereunder as and when
applicable to those plans, and neither the Company nor any Company
Subsidiary has incurred (or will incur) any direct or indirect
liability or is (or will be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction,
arising on account of or in respect of any direct or indirect failure
by the Company, any Company Subsidiary or any Stockholder, at any time
prior to the Effective Time, to comply with any such federal or state
benefit continuation or coverage requirement, which is capable of being
assessed or asserted before or after the Effective Time directly or
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indirectly against the Company, any Company Subsidiary, any
Stockholder, Invatec or any Subsidiary of Invatec with respect to any
of those group health plans;
(vi) the Financial Statements as of the Current Balance Sheet
Date reflect the approximate total pension, medical and other benefit
liability for all Plans, and no material funding changes or
irregularities are reflected thereon which would cause those Financial
Statements to be not representative of prior periods; and
(vii) neither the Company nor any Company Subsidiary has
incurred liability under Section 4062 of ERISA.
(d) MULTIEMPLOYER PLANS. Except as set forth in SECTION 2.28
OF THE DISCLOSURE STATEMENT, neither the Company nor any Company Subsidiary, and
no ERISA Affiliate of any of them, is, or at any time during the six-year period
ended on the date hereof was, obligated to contribute to a Multiemployer Plan.
Neither the Company nor any Company Subsidiary, and no ERISA Affiliate of any of
them, has made a complete or partial withdrawal from a Multiemployer Plan so as
to incur withdrawal liability as defined in Section 4201 of ERISA. SECTION 2.28
OF THE DISCLOSURE STATEMENT lists for each Multiemployer Plan the Company's best
estimate of the amount of withdrawal liability that would be incurred if the
Company and each of the its ERISA Affiliates were to make a complete withdrawal
from such Multiemployer Plan as of the Effective Time. Except as set forth in
that Section, the aggregate amount of such withdrawal liability if the Company
and each of its ERISA Affiliates were to make a complete withdrawal from each
such Multiemployer Plan would not exceed $25,000.
(e) CLAIMS AND LITIGATION. Except as set forth in SECTION 2.28
OF THE DISCLOSURE STATEMENT, no Litigation or claims (other than routine claims
for benefits) are pending or, to the knowledge of the Stockholders and of the
Company, threatened against, or with respect to, any of the Plans or with
respect to any fiduciary, administrator or sponsor thereof (in their capacities
as such), or any party-in-interest thereof.
(f) EXCISE TAXES, DAMAGES AND PENALTIES. No act, omission or
transaction has occurred which would result in the imposition on the Company or
any Company Subsidiary of (i) breach of fiduciary duty liability damages under
Section 409 of ERISA, (ii) a civil penalty assessed pursuant to subsection (c),
(i) or (l) of Section 502 of ERISA or (iii) any excise tax under applicable
provisions of the Code with respect to any Plan.
(g) VEBA WELFARE TRUST. Any trust funding a Plan, which is
intended to be exempt from federal income taxation pursuant to Section 501(c)(9)
of the Code, satisfies the requirements of that section and has received a
favorable determination letter from the IRS regarding that exempt status and has
not, since receipt of the most recent favorable determination letter, been
amended or operated in a way that would adversely affect that exempt status.
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Section 2.29. TAXES. (a) Each of the following representations
and warranties in this SECTION 2.29 is qualified to the extent set forth in
SECTION 2.29 OF THE DISCLOSURE STATEMENT.
(b) All Returns required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries is liable have been
duly and timely filed with the appropriate Taxing Authority; each such Return is
true, correct and complete in all respects Material to the Company (and, in the
case of a Return filed by a Company Subsidiary, the Company Subsidiary); each
Tax shown to be payable on each such Return has been paid; each Tax payable by
the Company or a Company Subsidiary by assessment has been timely paid in the
amount assessed; and adequate reserves have been established on the consolidated
books of the Company and the Company Subsidiaries for all Taxes for which any of
the Company and the Company Subsidiaries is liable, but the payment of which is
not yet due. Neither the Company nor any Company Subsidiary is, or ever has
been, liable for any Tax payable by reason of the income or property of a Person
other than the Company or a Company Subsidiary. Each of the Company and the
Company Subsidiaries has timely filed true, correct and complete declarations of
estimated Tax in each jurisdiction in which any such declaration is required to
be filed by it. No Liens for Taxes exist upon the assets of the Company or any
Company Subsidiary except Liens for Taxes which are not yet due. Neither the
Company nor any Company Subsidiary is, or ever has been, subject to Tax in any
jurisdiction outside of the United States. No Litigation with respect to any Tax
for which the Company or any Company Subsidiary is asserted to be liable is
pending or, to the knowledge of the Stockholders and of the Company or any
Stockholder, threatened and no basis which the Company or any Stockholder
believes to be valid exists on which any claim for any such Tax can be asserted
against the Company or any Company Subsidiary. There are no requests for rulings
or determinations in respect of any Taxes pending between the Company or any
Company Subsidiary and any Taxing Authority. No extension of any period during
which any Tax may be assessed or collected and for which the Company or any
Company Subsidiary is or may be liable has been granted to any Taxing Authority.
Neither the Company nor any Company Subsidiary is or has been a party to any tax
allocation or sharing agreement. All amounts required to be withheld by any of
the Company and the Company Subsidiaries and paid to governmental agencies for
income, social security, unemployment insurance, sales, excise, use and other
Taxes have been collected or withheld and paid to the proper Taxing Authority.
The Company and each Company Subsidiary have made all deposits required by law
to be made with respect to employees' withholding and other employment taxes.
(c) Neither the Company or any Company Subsidiary nor any
Stockholder is a "foreign person," as that term is referred to in Section
1445(f)(3) of the Code.
(d) The Company has not filed a consent pursuant to Section
341(f) of the Code or any comparable provision of any other tax statute and has
not agreed to have Section 341(f)(2) of the Code or any comparable provision of
any other tax statute apply to any disposition of an asset. The Company has not
made, is not obligated to make and is not a party to any agreement that could
require it to make any payment that is not deductible under Section 280G of the
Code. No asset of the Company or of any Company Subsidiary is subject to any
provision of applicable law which
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eliminates or reduces the allowance for depreciation or amortization in respect
of that asset below the allowance generally available to an asset of its type.
No accounting method changes of the Company or of any Company Subsidiary exist
or are proposed or threatened which could give rise to an adjustment under
Section 481 of the Code. If the Company or any predecessor corporation at any
time has filed an election to be an S corporation, within the meaning of Section
1361(a)(1) of the Code or any predecessor provision or comparable provisions of
state laws, the Company and any predecessor corporation have at all times met
all requirements for such election, and such election has at all times been and
is presently valid and in full force and effect.
Section 2.30. GOVERNMENT CONTRACTS. Except as set forth in
SECTION 2.30 OF THE DISCLOSURE STATEMENT, neither the Company nor any Company
Subsidiary is a party to any governmental contract subject to price
redetermination or renegotiation.
Section 2.31. ABSENCE OF CHANGES. Since the Current Balance
Sheet Date, except as set forth in SECTION 2.31 OF THE DISCLOSURE STATEMENT,
none of the following has occurred with respect to the Company or any Company
Subsidiary:
(a) any circumstance, condition, event or state of facts
(either singly or in the aggregate), other than conditions generally
affecting Valve Repair and Distribution Services Business, which has
caused, is causing or will cause a Material Adverse Effect;
(b) any change in its authorized Capital Stock or in any of
its outstanding Capital Stock or Derivative Securities;
(c) any Restricted Payment, except any declaration or payment
of dividends by any Company Subsidiary solely to the Company;
(d) any increase in, or any commitment or promise to increase,
the rates of Cash Compensation as of the date hereof, or the amounts or
other benefits paid or payable under any Company ERISA Pension Benefit
Plan or Other Compensation Plan, except for ordinary and customary
bonuses and salary increases for employees (other than the Stockholders
or their Immediate Family Members) at the times and in the amounts
consistent with its past practice;
(e) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, that will have a
Material Adverse Effect on the Surviving Company following the
Effective Time;
(f) any distribution, sale or transfer of, or any Company
Commitment to distribute, sell or transfer, any of its assets or
properties of any kind which singly is or in the aggregate are Material
to the Acquired Business, other than distributions, sales or transfers
in the ordinary course of its business and consistent with its past
practices to Persons other than the Stockholders and their Immediate
Family Members and Affiliates;
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(g) any cancellation, or agreement to cancel, any
Indebtedness, obligation or other liability owing to it, including any
Indebtedness, obligation or other liability of any Stockholder or any
Related Person or Affiliate thereof, provided that it may negotiate and
adjust bills in the course of good faith disputes with customers in a
manner consistent with past practice;
(h) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of its
assets, property or rights or requiring consent of any Person to the
transfer and assignment of any such assets, property or rights;
(i) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of its business or not consistent with
its past practices;
(j) any waiver of any of its rights or claims that singly is
or in the aggregate are Material to the Acquired Business;
(k) any transaction by it outside the ordinary course of its
business or not consistent with its past practices;
(l) any incurrence by it of any Indebtedness or any Guaranty
not constituting its Indebtedness, or any Company Commitment to incur
any Indebtedness or any such Guaranty;
(m) any investment in the Capital Stock, Derivative Securities
or Indebtedness of any Person other than a Permitted Investment;
(n) except in accordance with the Company's consolidated
capital expenditure budget for the Company's current fiscal year, any
capital expenditure or series of related capital expenditures by the
Company and the Company Subsidiaries collectively in excess of $25,000,
or commitments by the Company and the Company Subsidiaries to make
capital expenditures totaling in excess of $25,000; or
(o) any cancellation or termination of a Material Agreement of
the Acquired Business.
Section 2.32. BANK RELATIONS; POWERS OF ATTORNEY. The Company
has provided Invatec with an accurate, complete written statement setting forth:
(a) the name of each financial institution in which the
Company or any Company Subsidiary has borrowing or investment
arrangements, deposit or checking accounts or safe deposit boxes;
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(b) the types of those arrangements and accounts, including,
as applicable, names in which accounts or boxes are held, the account
or box numbers and the name of each Person authorized to draw thereon
or have access thereto; and
(c) the name of each Person holding a general or special power
of attorney from the Company or any Company Subsidiary and a
description of the terms of each such power.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF INVATEC AND INVATEC SUB
Invatec and Invatec Sub jointly and severally represent and
warrant to the Company and each Stockholder that all the following
representations and warranties in this ARTICLE III are as of the date of this
Agreement true and correct:
Section 3.01. ORGANIZATION; POWER. Each of Invatec and Invatec
Sub is a corporation or limited liability company, as the case may be, duly
organized, validly existing and in good standing under the laws of its
Organization State, and each of Invatec and Invatec Sub has all requisite
corporate or company power and authority under the laws of its Organization
State and its Charter Documents to own or lease and to operate its properties
presently and following the Effective Time and to carry on its business as now
conducted and as proposed to be conducted following the Effective Time.
Section 3.02. AUTHORIZATION; ENFORCEABILITY; ABSENCE OF
CONFLICTS; REQUIRED CONSENTS. (a) The execution, delivery and performance by
each of Invatec and Invatec Sub of this Agreement and each other Transaction
Document to which it is a party, and the effectuation of the Acquisition and the
other transactions contemplated hereby and thereby, are within its corporate or
company power under its Charter Documents and the applicable Governmental
Requirements of its Organization State and have been duly authorized by all
proceedings, including actions permitted to be taken in lieu of proceedings,
required under its Charter Documents and the applicable Governmental
Requirements of its Organization State.
(b) This Agreement has been, and each of the other Transaction
Documents to which either of Invatec or Invatec Sub is a party, when executed
and delivered to the other parties thereto (or, in the case of the Certificates
of Merger, the applicable Governmental Authorities), will have been, duly
executed and delivered by it and is, or when so executed and delivered will be,
its legal, valid and binding obligation, enforceable against it in accordance
with its terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and (ii) subject to
general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law).
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(c) The execution, delivery and performance in accordance with
their respective terms by each of Invatec and Invatec Sub of the Transaction
Documents to which it is a party have not and will not (i) violate, breach or
constitute a default under (A) the Charter Documents of Invatec or Invatec Sub,
(B) any Governmental Requirement applicable to Invatec or Invatec Sub or (C) any
Material Agreement of Invatec or Invatec Sub, (ii) result in the acceleration or
mandatory prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of Invatec or Invatec Sub or afford any holder of any of that
Indebtedness, or any beneficiary of any of those Guaranties, the right to
require Invatec or Invatec Sub to redeem, purchase or otherwise acquire,
reacquire or repay any of that Indebtedness, or to perform any of those
Guaranties, (iii) cause or result in the imposition of, or afford any Person the
right to obtain, any Lien upon any property or assets of Invatec or Invatec Sub
(or upon any revenues, income or profits of either Invatec or Invatec Sub
therefrom), other than those in favor of Invatec's third party lender, or (iv)
result in the revocation, cancellation, suspension or material modification, in
any single case or in the aggregate, of any Governmental Approval possessed by
Invatec or Invatec Sub at the date hereof and necessary for the ownership or
lease and the operation of its properties or the carrying on of its business as
now conducted, including any necessary Governmental Approval under each
applicable Environmental Law.
(d) Except for the filing of the Certificates of Merger with
the applicable Governmental Authorities, (and to the knowledge of Invatec and
Invatec Sub as may be required by the HSR Act or the applicable state securities
or blue sky laws), no Governmental Approvals are required to be obtained, and no
reports or notices to or filings with any Governmental Authority are required to
be made, by Invatec or Invatec Sub for the execution, delivery or performance by
Invatec or Invatec Sub of the Transaction Documents to which it is a party, the
enforcement against Invatec or Invatec Sub, as the case may be, of its
obligations thereunder or the effectuation of the Acquisition and the other
transactions contemplated thereby.
Section 3.03. CHARTER DOCUMENTS. Invatec has delivered or
otherwise made available to the Company true, complete and correct copies of the
Charter Documents of each of Invatec and Invatec Sub. No breach or violation of
any Charter Document of either Invatec or Invatec Sub has occurred and is
continuing.
Section 3.04. CAPITAL STOCK OF INVATEC . (a) Immediately prior
to the Effective Time, (i) the authorized Capital Stock of Invatec will be
comprised of (A) 30,000,000 shares of Invatec Common Stock, $.001 par value per
share, and (B) 5,000,000 shares of preferred stock, $.001 par value per share,
and (ii) before giving effect to the Acquisition (A) the number of shares of
Invatec Common Stock and Invatec preferred stock then issued and outstanding
will be as set forth in SCHEDULE 3.04 of the Agreement, and (B) Invatec will
have reserved for issuance pursuant to compensation plans or the exercise of
Derivative Securities the number of shares of Invatec Common Stock set forth in
SCHEDULE 3.04 of the Agreement.
(b) All shares of Invatec Common Stock outstanding immediately
prior to the Effective Time, and all shares of Invatec Common Stock to be issued
pursuant to PARAGRAPH 2 or
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pursuant to the Convertible Notes, when issued, (i) will have been duly
authorized and validly issued in accordance with the DGCL and Invatec's Charter
Documents and (ii) will be fully paid and nonassessable. None of the shares of
Invatec Common Stock to be issued pursuant to PARAGRAPH 2 or pursuant to the
Convertible Notes will, when issued, have been issued in breach or violation of
(i) any applicable statutory or contractual preemptive rights, or any other
rights of any kind (including any rights of first offer or refusal), of any
Person or (ii) the terms of any of its Derivative Securities then outstanding.
Section 3.05. SUBSIDIARIES. Immediately prior to the Effective
Time, (a) Invatec will have no Subsidiaries other than those listed in SCHEDULE
3.05 to the Agreement, and (b) neither Invatec nor Invatec Sub will not own, of
record or beneficially, directly or indirectly through any Person or otherwise
(except pursuant hereto), any Capital Stock or Derivative Securities of any
Entity not described in this SCHEDULE 3.05 to the Agreement as a Subsidiary of
Invatec.
Section 3.06. COMPLIANCE WITH LAWS; NO LITIGATION. Each of
Invatec and Invatec Sub is in compliance with all Governmental Requirements
applicable to it (except to the extent that such any noncompliance would not be
reasonably anticipated to result in a Material Adverse Effect), and no
Litigation is pending or, to the knowledge of Invatec, threatened to which
Invatec or Invatec Sub is or may become a party which (a) questions or involves
the validity or enforceability of any obligation of Invatec or Invatec Sub under
any Transaction Document, (b) seeks (or reasonably may be expected to seek) (i)
to prevent or delay consummation by Invatec or Invatec Sub of the transactions
contemplated by this Agreement to be consummated by Invatec or Invatec Sub, or
(ii) damages from Invatec or Invatec Sub in connection with any such
consummation.
Section 3.07. SECURITIES REPORTS. Invatec has provided the
Stockholders with true and correct copies of (i) Invatec's registration
statement on Form S-1 (including amendments and exhibits thereto), and (ii)
Invatec's quarterly report on Form 10-Q for the first fiscal quarter ended after
the effective date of such registration statement. Invatec has not filed, nor
been required to file, any other periodic or other reports with the SEC other
than as described in the immediately preceding sentence. The foregoing
registration statement and Form 10-Q complied as to form with the provisions of
the Securities Act and the Exchange Act, and did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they were
made, not false or misleading. Since the effective date of Invatec's
registration statement, there have been no material adverse changes in Invatec's
financial condition or business which have not been disclosed to the
Stockholders in writing. Invatec has complied with, and/or shall comply with,
all applicable securities laws with respect to the offering of the Convertible
Notes and the issuance of the Invatec Common Stock issuable upon the conversion
thereof, including, without limitation, the filing of all reports required to be
filed in connection therewith with the SEC or any stock exchange or the NASDAQ
stock market or any other regulatory authority.
Section 3.08. TAX REPRESENTATIONS RELATING TO CONVERTIBLE
NOTES. Invatec Sub will, pursuant to ss. 301.7701-3(b)(1), be disregarded as an
entity which is separate from Invatec for federal
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income tax purposes. In addition, the Term Notes and the Convertible
Subordinated Notes are not "readily tradable" within the meaning of Section
453(f)(5) of the Internal Revenue Code of 1986, as amended.
ARTICLE IV
[INTENTIONALLY OMITTED]
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
COVENANTS FOLLOWING THE CLOSING DATE
Section 6.01. REMOVAL OF GUARANTIES. Invatec will use its
reasonable efforts to ensure that, within 90 days after the Effective Time,
either (a) the Stockholder Guaranties, if any, listed in SECTION 6.01 OF THE
DISCLOSURE STATEMENT are terminated or (b) the Indebtedness to which those
Guaranties relate is retired; provided, however, that if Invatec is unable to
effect the termination of any of those Guaranties or the retirement of any of
that Indebtedness, Invatec will indemnify and hold harmless each Stockholder
from and against any liabilities, claims, demands, judgments, losses, costs,
damages or expenses whatsoever (including reasonable attorneys' fees) that such
Stockholder may sustain, suffer or incur and that result from or arise out of or
relate to that Guaranty or that Indebtedness, as the case may be.
Section 6.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a)
Notwithstanding any investigation at any time made by or on behalf of any party
hereto, the representations and warranties set forth in ARTICLES I, II AND III
and in any certificate delivered in connection herewith with respect to any of
those representations and warranties will survive the Closing and the Effective
Time until the day that is two years from the Effective Time, whereupon they
will terminate and expire, except as follows: (i) the representations and
warranties of the Stockholders which relate expressly or by necessary
implication to Taxes or ERISA will survive until the expiration of the
applicable statutes of limitations (including all periods of extension and
tolling); (ii) the representations and warranties of the Stockholders will
survive until the expiration of the applicable statutes of limitations
(including all periods of extension and tolling) with respect to any breach or
alleged breach of a representation or warranty based upon, or which relates
expressly or by necessary implication to, any wanton, willful or criminal
violations of other Governmental Requirements; (iii) the representations and
warranties of the Stockholders which relate expressly or by necessary
implication to the environment or Environmental Laws will survive indefinitely;
(iv) the representations and warranties of Invatec and Invatec Sub set forth in
Section 3.08 will survive until
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the expiration of the applicable statutes of limitations (including all periods
of extension and tolling); and (v) the representations and warranties of the
Company will terminate and expire at the Effective Time.
(b) After a representation and warranty has expired, as
provided in SECTION 6.02(A), no Damage Claim constituting an Invatec Indemnified
Loss will or may be made or prosecuted through Litigation or otherwise, by any
Person who would have been entitled to Damages on the basis of that
representation and warranty prior to its termination and expiration, provided
that: (i) the amount of that claim, if against any Stockholder, shall be taken
into account in determining whether the aggregate amount of all claims against
that Stockholder has exceeded that Stockholder's Pro Rata Share of the Threshold
Amount for purposes of SECTION 6.03; and (ii) in the case of each representation
and warranty that will terminate and expire as provided in this SECTION 6.02, no
Damage Claim presented in writing for Damages to the Person or Persons from
which or whom those damages are sought on the basis of that representation and
warranty prior to its termination and expiration will be affected in any way by
that termination and expiration.
Section 6.03. 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(A), exceeds,
and only to the extent the aggregate amount of all those Invatec Unindemnified
Losses and Invatec Indemnified Losses does exceed, the Threshold Amount. In no
event shall (i) the aggregate joint and several liability of the Stockholders
under this Agreement, including SECTION 7.02(A), exceed the Ceiling Amount or
(ii) the aggregate liability of each Stockholder under this Agreement, including
SECTIONS 7.02(A) AND 7.02(B), 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; however, effect
will be given to any insurance proceeds received by the Surviving Company or
Invatec on account of any such losses.
(b) In the event any Stockholder should have any Damage Claim
hereunder following the Effective Time against Invatec which does not involve a
Stockholder Indemnified Loss (each such Damage Claim not involving a Stockholder
Indemnified Loss being a "Stockholder Unindemnified Loss"), Invatec will not be
liable to that Stockholder on account of that Stockholder Unindemnified Loss
unless the liability of Invatec on account of that Stockholder Unindemnified
Loss, when aggregated with the liability of Invatec in respect of the sum of (i)
all Stockholder Unindemnified Losses for which it has become liable and (ii) all
Stockholder Indemnified Losses for which it has become liable, exceeds, and only
to the extent the aggregate amount of all those Stockholder Unindemnified Losses
and Stockholder Indemnified Losses does exceed, the Threshold Amount. In no
event shall Invatec be liable under this Agreement, including SECTION 7.03, for
any
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amount in excess of the Ceiling Amount. For purposes of determining the amount
of Stockholder Unindemnified Losses and Stockholder Indemnified Losses, no
effect will be given to any resulting Tax benefit to any Stockholder Indemnified
Party; however, effect will be given to any insurance proceeds received by a
Stockholder on account of any such loss. Notwithstanding any other provision of
this Agreement, the Threshold Amount described in this Sections 6.03(b) and
Section 7.05(b) shall not apply to any Damage Claim asserted by the Stockholders
or any Third Party Claim for which the Stockholders seek indemnification as
provided below, in each case, that arises out of a breach of Invatec's or
Invatec Sub's representations and warranties set forth in Section 3.08.
(c) Neither any Invatec Unindemnified Loss nor any Stockholder
Unindemnified Loss shall include any consequential, exemplary, punitive or
treble damage (including any loss of earnings or profits), and Invatec hereby
releases each Stockholder, and each Stockholder hereby releases Invatec, in each
case to the fullest extent permitted by applicable law, from liability for any
such excluded Damage.
Section 6.04. EMPLOYEE BENEFIT PLANS. (a) At, or as soon as
administratively feasible after (in which event the benefits of the Company
shall remain in effect until the Invatec benefits apply), the Effective Time,
employees and officers of the Company shall be provided with benefits, other
than benefits under retirement plans qualified under Section 401(a) of the Code
(which are specifically addressed below), comparable to those Invatec generally
provides to employees and officers of similarly situated Invatec Affiliates from
time to time, including, but not limited to, life, medical and hospitalization
and disability insurance and sick pay, personal leave and severance benefits
(collectively, "welfare benefits"), on a non-discriminatory and substantially
similar basis. For purposes of providing such welfare benefits to employees and
officers of the Company after the Effective Time, Invatec shall, to the extent
permitted by applicable law, credit such employees and officers for years of
service at the Company prior to the Effective Time for purposes of eligibility
and benefit amounts or privileges paid or provided. Invatec will endeavor to
cause its group health plan carrier to permit Company employees and their
dependents who are covered by a group health insurance policy under the
Company's existing group health insurance plan at the time that plan is
terminated to become participants in the Invatec group health plan without
pre-existing condition limitations as to benefit payments from and eligibility
for participation in the Invatec group health plan, except to the extent that
such limitations were applicable to participants under the Company's group
health plan; PROVIDED HOWEVER, to the extent that Invatec is unable to procure
such coverage without such preexisting condition limitations on a commercially
reasonable basis, Invatec will endeavor to continue the existing coverage for
such employees and their dependents, or provide to such Persons the reasonable
economic equivalent thereof.
(b) To the extent permitted by applicable law, the Company's
401(k) Profit Sharing Plan described in the Disclosure Statement shall be
continued after the Effective Time, to allow employee pre-tax retirement savings
and with the same level of Company contributions as was the Company's policy
prior to the Effective Time, for so long as the Company 401(k) Profit Sharing
Plan can be continued under Internal Revenue Code discrimination rules applied
on a controlled group basis, or until Invatec adopts a 401(k) Profit Sharing
Plan and Company employees begin
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participation in that Invatec plan. Upon Invatec's adoption of a 401(k) plan
covering Company employees, the Company 401(k) Profit Sharing Plan shall be
merged into the Invatec 401(k) plan, provided such merger can be accomplished
without jeopardizing the qualified status of the Invatec 401(k) plan and without
significant amendments to the Invatec 401(k) plan. If the Company 401(k) Profit
Sharing Plan cannot be merged into the Invatec 401(k) plan under those
guidelines, the Company 401(k) Profit Sharing Plan shall be frozen.
(c) For purposes of eligibility and vesting in any 401(k) plan
and any other qualified retirement plan adopted by Invatec, to the extent
permitted by applicable law, the Company's employees active at the Effective
Time shall be given credit for past service with the Company.
ARTICLE VII
INDEMNIFICATION
Section 7.01. IN RESPECT OF REPRESENTATIONS AND WARRANTIES.
After a representation and warranty has terminated and expired as provided in
SECTION 6.02, no indemnification will or may be sought pursuant to this ARTICLE
VII on the basis of that representation and warranty by any Person who would
have been entitled pursuant to this ARTICLE VII to indemnification on the basis
of that representation and warranty prior to its termination and expiration,
provided that: (a) the amount of that claim, if against any Stockholder, shall
be taken into account in determining whether the aggregate amount of all claims
against that Stockholder has exceeded that Stockholder's Pro Rata Share of the
Threshold Amount for purposes of SECTION 7.05; and (b) in the case of each
representation and warranty that will terminate and expire as provided in
SECTION 6.02, no claim presented in writing for indemnification pursuant to this
ARTICLE VII on the basis of that representation and warranty prior to its
termination and expiration will be affected in any way by that termination and
expiration.
Section 7.02. INDEMNIFICATION OF INVATEC INDEMNIFIED PARTIES.
(a) Subject to the applicable provisions of SECTIONS 7.01 AND 7.05, the
Stockholders covenant and agree that they, jointly and severally, will indemnify
each Invatec Indemnified Party against, and hold each Invatec Indemnified Party
harmless from and in respect of, all Third Party Claims that arise from, are
based on or relate or otherwise are attributable to (i) any breach of the
representations and warranties of the Stockholders or the Company set forth
herein (other than in ARTICLE I) or in certificates delivered in connection
herewith (other than in respect of certificates relating only to the
representations and warranties in ARTICLE I), or (ii) any nonfulfillment of any
joint and several covenant or agreement on the part of the Stockholders or the
Company under this Agreement (each such Third Party Claim and each Third Party
Claim described in SECTION 7.02(B) being an "Invatec Indemnified Loss").
(b) Each Stockholder, severally and not jointly with any other
Person, covenants and agrees that such Stockholder will indemnify each Invatec
Indemnified Party against, and hold each Invatec Indemnified Party harmless from
and in respect of, all Third Party Claims that arise
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from, are based on or relate or otherwise are attributable to (i) any breach of
the representations and warranties of that Stockholder solely as to that
Stockholder set forth in ARTICLE I or in certificates delivered by that
Stockholder and relating to those representations and warranties, or (ii) any
nonfulfillment of any several, and not joint and several, agreement on the part
of that Stockholder under this Agreement.
Section 7.03. INDEMNIFICATION OF STOCKHOLDER INDEMNIFIED
PARTIES. Subject to the provisions of SECTIONS 7.01 AND 7.05, Invatec covenants
and agrees that it will indemnify each Stockholder Indemnified Party against,
and hold each Stockholder Indemnified Party harmless from and in respect of, all
Third Party Claims that arise from, are based on or relate or otherwise are
attributable to (i) any breach by Invatec or Invatec Sub of its representations
and warranties set forth herein or in its certificates delivered to the Company
or the Stockholders in connection herewith, or (ii) any nonfulfillment of any
covenant or agreement on the part of Invatec under this Agreement (each such
Third Party Claim being a "Stockholder Indemnified Loss").
Section 7.04. CONDITIONS OF INDEMNIFICATION. (a) All claims
for indemnification under this Agreement shall be asserted and resolved as
follows in this SECTION 7.04.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any Third Party Claim
asserted against the Indemnified Party which could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying Party
a written notice ("Claim Notice") describing in reasonable detail the nature of
the Third Party Claim, a copy of all papers served with respect to that claim
(if any), an estimate of the amount of damages attributable to the Third Party
Claim to the extent feasible (which estimate shall not be conclusive of the
final amount of that claim) and the basis for the Indemnified Party's request
for indemnification under this Agreement. Except as set forth in SECTION 7.01,
the failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the related Third Party Claim except to the extent that the resulting delay is
materially prejudicial to the defense of that claim. Within 15 days after
receipt of any Claim Notice (the "Election Period"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this ARTICLE VII with
respect to that Third Party Claim and (ii) if the Indemnifying Party does not
dispute its potential liability to the Indemnified Party with respect to that
Third Party Claim, whether the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified Party against that
Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this
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SECTION 7.04(C) and the Indemnified Party will furnish the Indemnifying Party
with all information in its possession with respect to that Third Party Claim
and otherwise cooperate with the Indemnifying Party in the defense of that Third
Party Claim; provided, however, that the Indemnifying Party shall not enter into
any settlement with respect to any Third Party Claim that purports to limit the
activities of, or otherwise restrict in any way, any Indemnified Party or any
Affiliate of any Indemnified Party without the prior consent of that Indemnified
Party (which consent may be withheld in the sole discretion of that Indemnified
Party). The Indemnified Party is hereby authorized, at the sole cost and expense
of the Indemnifying Party, to file, during the Election Period, any motion,
answer or other pleadings that the Indemnified Party shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
SECTION 7.04(C) and will bear its own costs and expenses with respect to that
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and,
on its written notification of that employment, the Indemnifying Party shall not
have the right to assume or continue the defense of such action on behalf of the
Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period
(A) disputes its potential liability to the Indemnified Party under this ARTICLE
VII, (B) elects not to defend the Indemnified Party pursuant to SECTION 7.04(C)
or (C) fails to notify the Indemnified Party that the Indemnifying Party elects
to defend the Indemnified Party pursuant to SECTION 7.04(C) or (ii) elects to
defend the Indemnified Party pursuant to SECTION 7.04(C) but fails diligently
and promptly to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified Party to
the effect that the Indemnifying Party disputes its potential liability to the
Indemnified Party under this ARTICLE VII and if such dispute is resolved in
favor of the Indemnifying Party, the Indemnifying Party shall not be required to
bear the costs and expenses of the Indemnified Party's defense pursuant to this
SECTION 7.04 or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses of such
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
SECTION 7.04(D), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this ARTICLE VII relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the
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settlement of that Third Party Claim, (ii) the expiration of the period for
appeal of a final adjudication of that Third Party Claim or (iii) the expiration
of the period for appeal of a final adjudication of the Indemnifying Party's
liability to the Indemnified Party under this Agreement in respect of that Third
Party Claim.
Section 7.05. LIMITATIONS ON INDEMNIFICATION. (a)
Notwithstanding the provisions of SECTION 7.02(A), 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(A) unless the
liability of the Company and 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(A), exceeds, and only to the extent the
aggregate amount of all those Invatec Unindemnified Losses and Invatec
Indemnified Losses does exceed, the Threshold Amount. In no event shall (i) the
aggregate joint and several liability of the Stockholders under this Agreement,
including SECTION 7.02(A), exceed the Ceiling Amount or (ii) the aggregate
liability of each Stockholder under this Agreement, including SECTIONS 7.02(A)
AND 7.02(B), 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.
(b) Notwithstanding the provisions of SECTION 7.03, Invatec
shall not be required to indemnify or hold harmless any of the Stockholder
Indemnified Parties on account of any Stockholder Indemnified Loss unless the
liability of Invatec in respect of that Stockholder Indemnified Loss, when
aggregated with the liability of Invatec in respect of the sum of (i) all
Stockholder Unindemnified Losses and (ii) all Stockholder Indemnified Losses,
exceeds, and only to the extent the aggregate amount of all those Stockholder
Unindemnified Losses and Stockholder Indemnified Losses does exceed, the
Threshold Amount. In no event shall Invatec be liable under this Agreement,
including SECTION 7.03, for any amount in excess of the Ceiling Amount. For
purposes of determining the amount of Stockholder Indemnified Losses, no effect
will be given to any resulting Tax benefit to any Stockholder Indemnified Party.
ARTICLE VIII
CONFIDENTIALITY AND NONCOMPETITION PROVISIONS
Section 8.01. PROHIBITED ACTIVITIES. As a result of the
Stockholders' intimate knowledge of the business of the Company and the Company
Subsidiaries, and trade secrets and confidential information relating thereto,
as well as their reputations and relationships with, among others, the clients,
customers, subcontractors, vendors, suppliers, employees, independent
contractors and other agents of the Company and the Company Subsidiaries, the
parties recognize and acknowledge (i) the detrimental effect on the business of
Invatec and Invatec Sub and the substantially decreased value of the Company and
the Surviving Company which would result if a Stockholder were to disclose or
use any of the trade secrets or confidential information of the Company and the
Company Subsidiaries, (ii) the detrimental effect on the business of Invatec,
the
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Surviving Company and the Company Subsidiaries, and the substantially decreased
value of the Company, the Surviving Company and the Company Subsidiaries which
would result if a Stockholder were to enter into competition with Invatec or the
Surviving Company within an unreasonably brief period of time after Invatec's
acquisition of the Company and the Company Subsidiaries, (iii) that the
agreements and covenants in this ARTICLE VIII are essential to protect the
business and goodwill acquired by Invatec, and other legitimate business
interests of Invatec, Invatec Sub and the Surviving Company, and (iv) that
Invatec and Invatec Sub would not have entered into the Agreement but for the
covenants and agreements contained in this ARTICLE VIII, and the protection
afforded to Invatec hereby, each Stockholder hereby agrees as follows:
(a) Each Stockholder hereby acknowledges and agrees that such
Stockholder is familiar with the business of the Company and the Company
Subsidiaries, including without limitation their trade secrets and confidential
information, the exclusive right, title and interest in which are owned by the
Company and/or the Company Subsidiaries, which are to be acquired pursuant to
the terms hereof by Invatec. As used in this ARTICLE VIII, the term "TRADE
SECRETS AND CONFIDENTIAL INFORMATION" includes without limitation the following
with respect to the Company and the Company Subsidiaries: its plans, strategies,
costs, prices, sources of supply, formulas, methods, processes, computer
software, financial information, technical data, business records, business and
organization methods, customer and supplier information, technical data and
methods, credit sources, product and technological information, research and
development information, development plans and strategies, know-how rights,
trade secrets and other confidential, nonpublic or proprietary information and
the like which are not generally available to the public. Each Stockholder shall
maintain all such trade secrets and confidential information in strict
confidence and shall not use or disclose any of same.
(b) Each Stockholder agrees that commencing on the date of this
Agreement and continuing until the earlier of (i) three (3) years after the
Effective Time, or (ii) Invatec ceasing to carry on, directly or through any
Subsidiary, in the Acquired Business in the Noncompete Territory, such
Stockholder will not directly or indirectly engage in any Competitive
Activities. Each Stockholder understands that the foregoing restrictions limit
such Stockholder's ability to engage in a business similar to the Acquired
Business, but acknowledges receiving sufficiently high benefits from Invatec
under the Agreement to justify such restriction.
Section 8.02. INJUNCTIVE RELIEF. If a Stockholder commits a
breach, or overtly threatens to commit a breach, of any of the provisions of
SECTION 8.01, notwithstanding any provision of the Agreement to the contrary,
Invatec and the Surviving Company shall have the right and remedy to obtain
restraining orders and to have the provisions of this Agreement specifically
enforced, by any court having jurisdiction, it being acknowledged and agreed
that any such breach or threatened breach will cause immediate, irreparable
injury and continuing damage to Invatec and Invatec's Affiliates, the exact
amount of which would be difficult to ascertain. Further, each Stockholder,
Invatec and Invatec Sub hereby expressly acknowledge and agree that in any event
money damages will not provide an adequate remedy and Invatec and the Surviving
Company shall be entitled to injunctive relief restraining any violation of
SECTION 8.01. The rights
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and remedies enumerated above shall be independent, and in addition to, and not
in lieu of, any other rights and remedies available to Invatec or Invatec or
Invatec Sub, at law or in equity.
Section 8.03. NOTICE OF POTENTIAL VIOLATIONS. Each Stockholder
agrees to consult with and advise Invatec in writing in advance at any time such
Stockholder contemplates engaging in any activity which might be closely related
to or potentially connected in any manner to any of the "Competitive
Activities," so as to avoid the possibility of a breach of this Agreement.
Section 8.04. SPECIAL JURISDICTIONAL PROVISIONS. The parties
hereto intend to and hereby confer jurisdiction to enforce the covenants
contained in this Agreement upon the courts of any state within the geographical
scope of such covenants. If the courts of any one or more of such states or
jurisdictions shall fail to hold such covenants wholly enforceable by reason of
the breadth of such scope or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect Invatec's right to
the relief provided above in the courts of any other states or jurisdictions
within the geographical scope of such covenants, breaches of such covenants as
they relate to each state being, for this purpose, severable at Invatec's sole
option into diverse and independent covenants.
Section 8.05. SPECIAL ATTORNEY FEE PROVISIONS. If any action,
suit or other proceeding at law or in equity is brought against a Stockholder to
enforce the covenants contained in SECTION 8.01, or to obtain money damages for
the breach thereof, and such action results in the award of a judgment for money
damages or in the granting of specific performance or any injunction in favor of
Invatec, then such Stockholder shall, upon demand, pay all expenses (including
reasonable attorneys' fees and expenses) incurred by Invatec in connection with
such action, suit or other proceeding.
Section 8.06. REASONABLENESS; REFORMATION; SEVERABILITY. It is
expressly understood and agreed that Invatec and the Stockholders consider the
restrictions contained in SECTION 8.01 above to be reasonable and necessary for
the purposes of preserving and protecting the Acquired Business, including the
goodwill of the Company and the Company Subsidiaries, and other legitimate
business interests of Invatec and Invatec Sub. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to the scope of activity to be restrained,
geographic area or time, or otherwise unenforceable, the parties intend for the
restrictions therein set forth to be modified by such court in the minimal
amount necessary so as to be reasonable and enforceable and, as so modified by
the court, to be fully enforced. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
Section 8.07. INDEPENDENT COVENANT. All the covenants in this
ARTICLE VIII are intended by each party hereto to, and shall, be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any Stockholder
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against Invatec, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Invatec of any covenant in this
ARTICLE VIII. It is specifically agreed that the period specified in SECTION
8.01 shall be computed in the case of each Stockholder by excluding from that
computation any time during which that Stockholder is in violation of any
provision of SECTION 8.01. The covenants contained in this ARTICLE VIII shall
not be affected by any breach of any other provision hereof by any party hereto.
Section 8.08. MATERIALITY. The Company and the Stockholders
hereby acknowledge and agree that this ARTICLE VIII is a material and
substantial part of the transactions contemplated hereby.
Section 8.09. EMPLOYMENT AGREEMENTS. The provisions of this
ARTICLE 8 and SECTION 10.01 of this Agreement are in addition to, and not in
lieu of, any provisions regarding noncompetition and Confidential Information
contained in any Employment Agreement(s) with any of Stockholders delivered in
connection with the transactions set forth or contemplated herein.
ARTICLE IX
DEFINITIONS AND DEFINITIONAL PROVISIONS
Section 9.01. DEFINED TERMS. As used in this Agreement, the
following terms have the meanings assigned to them below:
"ACQUIRED BUSINESS" has the meaning specified in PARAGRAPH 1.
"ACQUISITION" has the meaning specified in the Preliminary
Statement.
"ACQUISITION CONSIDERATION" has the meaning specified in
PARAGRAPH 2.
"AFFILIATE" means, as to any specified Person, any other
Person that, directly or indirectly through one or more intermediaries
or otherwise, controls, is controlled by or is under common control
with the specified Person. As used in this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person (whether
through ownership of Capital Stock of that Person, by contract or
otherwise).
"AGREEMENT" means this Agreement, including all attached
Schedules, Annexes, Addenda and Exhibits, as each of the same may be
amended, modified or supplemented from time to time pursuant to the
provisions hereof or thereof.
"CAPITAL LEASE" means a lease of (or other agreement conveying
the right to use) real or personal property that is required to be
classified and accounted for as a capital lease under GAAP as in effect
on the date of this Agreement.
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"CAPITAL STOCK" means, with respect to: (a) any corporation,
any share, or any depositary receipt or other certificate representing
any share, of an equity ownership interest in that corporation; and (b)
any other Entity, any share, membership or other percentage interest,
unit of participation or other equivalent (however designated) of an
equity interest in that Entity.
"CASH COMPENSATION" means, as applied to any employee,
nonemployee director or officer of, or any natural person who performs
consulting or other independent contractor services for, the Company or
any Company Subsidiary, the wages, salaries, bonuses (discretionary and
formula), fees and other cash compensation paid or payable by the
Company and each Company Subsidiary to that employee or other natural
person.
"CEILING AMOUNT" has the meaning specified in PARAGRAPH 1.
"CERTIFICATE OF MERGER" means the articles or certificate of
merger respecting the Merger which contains the information required by
the laws of Surviving Company's Organization State to effect the
Merger.
"CERCLA" means the Comprehensive Environmental Response,
Conservation, and Liability Act of 1980.
"CHARTER DOCUMENTS" means, with respect to any Entity at any
time, in each case as amended, modified and supplemented at that time,
the articles or certificate of formation, incorporation or organization
(or the equivalent organizational documents) of that Entity, (b) the
bylaws or limited liability company agreement or regulations (or the
equivalent governing documents) of that Entity and (c) each document
setting forth the designation, amount and relative rights, limitations
and preferences of any class or series of that Entity's Capital Stock
or of any rights in respect of that Entity's Capital Stock.
"CLAIM NOTICE" has the meaning specified in SECTION 7.04.
"CLOSING" has the meaning specified in PARAGRAPH 3.
"CLOSING DATE" has the meaning specified in PARAGRAPH 1.
"CODE" means the Internal Revenue Code of 1986.
"COMPANY" has the meaning specified in PARAGRAPH 1.
"COMPANY CAPITAL STOCK" has the meaning specified in the
Preliminary Statement.
"COMPANY COMMITMENT" has the meaning specified in SECTION
2.23.
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"COMPANY ERISA BENEFIT PLAN" has the meaning specified in
SECTION 2.27.
"COMPANY ERISA PENSION PLAN" has the meaning specified in
SECTION 2.27.
"COMPANY SUBSIDIARY" means at any time any Entity that is a
Subsidiary of the Company at that time.
"COMPETITIVE ACTIVITIES" means:
(a) directly or indirectly engaging in, continuing in or
carrying on in the Acquired Business within the Noncompete Territory,
including owning, controlling, participating in, joining, operating, or
managing or being a partner, stockholder or other equity interest
owner, or an employee, independent contractor, consultant, advisor,
sales representative or distributor of any kind, of any business which
competes with or is engaged in or carries on, in any material respect,
any aspect of the Acquired Business within the Noncompete Territory;
(b) consulting with, advising or assisting in any way, whether
or not for consideration, any corporation, partnership, firm or other
business organization which at the time of such consultation, advice or
assistance engages in or proposes to engage in the Acquired Business
within the Noncompete Territory, including, but not limited to,
advertising or otherwise endorsing the products or services of any such
competitor; soliciting clients or customers which were clients or
customers of the Company or the Company Subsidiaries (or persons or
entities from which the Company or any Company Subsidiary has solicited
orders for the sale of any products or services of the Acquired
Business within the twenty-four (24) months immediately preceding the
Effective Time) or otherwise serving as an intermediary for any such
competitor; loaning money or rendering any other form of financial
assistance to any such competitor;
(c) inducing or attempting to induce any present or former
director, officer, employee, agent, or customer, client, vendor,
supplier or lessor of the Company or any Company Subsidiary to
terminate his or her position or relationship with Invatec, the Company
or any of their respective Subsidiaries;
(d) operating within the Noncompete Territory any business or
offering any goods or services under the name of the Company, any
Company Subsidiary, or any name deceptively similar thereto, or any
variation of any of the foregoing; or
(e) calling on any Entity which has been called on by Invatec
in connection with a possible acquisition by Invatec, with knowledge of
that Entity's status as such an acquisition candidate, for the purpose
of acquiring that Entity or arranging the acquisition of that Entity by
any Person other than Invatec;
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PROVIDED, HOWEVER, that the term "Competitive Activities" shall not
include the ownership as a passive investment of capital stock of an
Entity engaged in Competitive Activities (i) if that class of capital
stock is listed on a national securities exchange or traded in the
national over-the-counter market in an amount which shall not exceed
five percent (5.0%) of the outstanding shares of such class of capital
stock of any such corporation, or (ii) if, and to the extent, that
ownership of such passive investment is disclosed in SECTION 1.06 of
the Disclosure Statement.
"CONFIDENTIAL INFORMATION" means, with respect to any Person,
all trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales
programs, capital expenditure projects, cost summaries, pricing
formulae, contract analyses, financial information, projections,
confidential filings with any Governmental Authority and all other
confidential, nonpublic concepts, methods of doing business, ideas,
materials or information prepared or performed for, by or on behalf of
that Person; provided, however, that Confidential Information shall not
include such information as (i) becomes known to the public generally
through no fault of any other party hereto, (ii) is required to be
disclosed by law or the order of any Governmental Authority under color
of law, provided, that prior to disclosing any information pursuant to
this clause (ii), each party shall, if possible, give prior written
notice thereof to the other parties hereto and provide the other
parties with the opportunity to contest such disclosure, or (iii) the
disclosing party reasonably believes is required to be disclosed in
connection with the defense of a lawsuit against the disclosing party.
"CONVERTIBLE NOTES" has the meaning specified in PARAGRAPH 1.
"CURRENT BALANCE SHEET" has the meaning specified in PARAGRAPH
1.
"CURRENT BALANCE SHEET DATE" has the meaning specified in
PARAGRAPH 1.
"DAMAGE" to any specified Person means, except as otherwise
provided in SECTION 6.03(C), any cost, damage (including any
consequential, exemplary, punitive or treble damage) or expense
(including reasonable fees and actual disbursements by attorneys,
consultants, experts or other Representatives and Litigation costs) to,
any fine of or penalty on or any liability (including loss of earnings
or profits) of any other nature of that Person.
"DAMAGE CLAIM" means, as asserted (a) against any specified
Person, any claim, demand or Litigation made or pending against the
specified Person for Damages to any other Person, or (b) by the
specified Person, any claim or demand of the specified Person against
any other Person for Damages to the specified Person.
"DGCL" means the General Corporation Law of the State of
Delaware.
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"DERIVATIVE SECURITIES" of a specified Entity means any
Capital Stock, debt security or other Indebtedness of the specified
Entity or any other Person which is convertible into or exchangeable
for, or any option, warrant or other right to acquire, (a) any unissued
Capital Stock of the specified Entity or (b) any Capital Stock of the
specified Entity which has been issued and is being held by the Entity
directly or indirectly as treasury Capital Stock.
"EFFECTIVE TIME" has the meaning specified in PARAGRAPH 2.
"ELECTION PERIOD" has the meaning specified in SECTION 7.04.
"EMPLOYEE POLICIES AND PROCEDURES" means at any time all
employee manuals and all material policies, procedures and work-related
rules that apply at that time to any employee, nonemployee director or
officer of, or any other natural person performing consulting or other
independent contractor services for, the Company or any Company
Subsidiary.
"EMPLOYMENT AGREEMENT" means at any time any (a) agreement to
which the Company or any Company Subsidiary is a party which then
relates to the direct or indirect employment or engagement, or arises
from the past employment or engagement, of any natural person by the
Company or any Company Subsidiary, whether as an employee, a
nonemployee officer or director, a consultant or other independent
contractor, a sales representative or a distributor of any kind,
including any employee leasing or service agreement and any
noncompetition agreement, and (b) agreement between the Company or any
Company Subsidiary and any Person which arises from the sale of a
business by that Person to the Company or any Company Subsidiary and
limits that Person's competition with the Company or any Company
Subsidiary.
"ENTITY" means any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited
liability company, business trust, unincorporated organization or
association, mutual company, joint stock company or joint venture.
"ENVIRONMENTAL LAWS" means any and all Governmental
Requirements relating to the environment or public or worker health or
safety, including ambient air, surface water, land surface or
subsurface strata, or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes (including Solid Wastes, Hazardous
Wastes or Hazardous Substances) or noxious noise or odor into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, recycling, removal,
transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes (including
petroleum, petroleum distillates, asbestos or asbestos-containing
material, volatile organic compounds or polychlorinated biphenyls).
"ERISA" means the Employee Retirement Income Security Act of
1974.
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"ERISA AFFILIATE" means, with respect to any specified Person
at any time, any other Person, including an Affiliate of the specified
Person, that is, or at any time within six years of that time was, a
member of any ERISA Group of which the specified Person is or was a
member at the same time.
"ERISA AFFILIATE PENSION PLAN" has the meaning specified in
SECTION 2.27.
"ERISA EMPLOYEE BENEFIT PLAN" means any "employee benefit
plan" as defined in Section 3(3) of ERISA and includes any ERISA
Pension Benefit Plan.
"ERISA GROUP" means any "group of organizations" within the
meaning of Section 414(b), (c), (m) or (o) of the Code or any
"controlled group" as defined in Section 4001(a)(14) of ERISA.
"ERISA PENSION BENEFIT PLAN" means any "employee pension
benefit plan," as defined in Section 3(2) of ERISA, including any plan
that is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code (excluding any Multiemployer
Plan).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINANCIAL STATEMENTS" means the Initial Financial Statements.
"GAAP" means, as applied to any of the Initial Financial
Statements, generally accepted accounting principles and practices in
the United States as in effect from time to time.
"GOVERNMENTAL APPROVAL" means at any time any authorization,
consent, approval, permit, franchise, certificate, license,
implementing order or exemption of, or registration or filing with, any
Governmental Authority, including any certification or licensing of a
natural person to engage in a profession or trade or a specific
regulated activity, at that time.
"GOVERNMENTAL AUTHORITY" means (a) any national, state,
county, municipal or other government, domestic or foreign, or any
agency, board, bureau, commission, court, department or other
instrumentality of any such government, or (b) any Person having the
authority under any applicable Governmental Requirement to assess and
collect Taxes for its own account.
"GOVERNMENTAL REQUIREMENT" means at any time (a) any law,
statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, writ, edict, award, authorization or other requirement of
any Governmental Authority in effect at that time or (b) any obligation
included in any certificate, certification, franchise, permit or
license issued by any
-38-
Governmental Authority or resulting from binding arbitration, including
any requirement under common law, at that time.
"GUARANTY" means, for any specified Person, without
duplication, any liability, contingent or otherwise, of that Person
guaranteeing or otherwise becoming liable for any obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any liability of the specified Person, direct
or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) that obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of
that obligation, (b) to purchase property, securities or services for
the purpose of assuring the owner of that obligation of its payment or
(c) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable
the primary obligor to pay that obligation; provided, that the term
"Guaranty" does not include endorsements for collection or deposit in
the ordinary course of the endorser's business.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
"IMMEDIATE FAMILY MEMBER" of a Stockholder means at any time:
(a) if that Stockholder is a natural person, any child or grandchild
(by blood or legal adoption) or spouse of that Stockholder at that
time, or any child of that spouse; and (b) if that Stockholder is an
Entity whose ultimate beneficial owner is a natural person, or a
natural person and his spouse, any child or grandchild (by blood or
legal adoption) or spouse at that time (if not then an ultimate
beneficial owner of that Entity), or any child of that spouse, of the
ultimate beneficial owner or owners.
"INDEMNIFIED PARTY" has the meaning specified in SECTION 7.04.
"INDEMNIFYING PARTY" has the meaning specified in SECTION
7.04.
"INFORMATION" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements)
and (b) summaries of unwritten agreements, arrangements, contracts,
plans, policies, programs or practices or of unwritten amendments or
modifications of, supplements to or waivers under any of the foregoing
documents.
"INVATEC COMMON STOCK" means the common stock, par value $.001
per share, of Invatec.
"INVATEC INDEMNIFIED PARTY" means Invatec and its Affiliates
and each of their respective officers, directors, employees, agents and
counsel; provided, however, that no Person who indemnifies Invatec
Indemnified Parties in this Agreement in his capacity as a Stockholder
will be an Invatec Indemnified Party for purposes of this Agreement.
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"INVATEC INDEMNIFIED LOSS" has the meaning specified in
SECTION 7.02.
"INVATEC UNINDEMNIFIED LOSS" has the meaning specified in
SECTION 6.03.
"INTEREST RATE PROTECTION AGREEMENT" means, for any Person,
any interest rate swap, cap or collar agreement or similar arrangement
providing for the transfer or mitigation of interest rate risks of that
Person either generally or under specific contingencies between that
Person and any other Person.
"INVATEC SUB" means DIVT Acquisition, LLC, a Kentucky limited
liability company formed for the purpose of consummating a Merger with
the Company.
"IRS" means the Internal Revenue Service.
"LIEN" means, with respect to any property or asset of any
Person (or any revenues, income or profits of that Person therefrom)
(in each case whether the same is consensual or nonconsensual or arises
by contract, operation of law, legal process or otherwise), (a) any
mortgage, lien, security interest, pledge, attachment, levy or other
charge or encumbrance of any kind thereupon or in respect thereof or
(b) any other arrangement under which the same is transferred,
sequestered or otherwise identified with the intention of subjecting
the same to, or making the same available for, the payment or
performance of any liability in priority to the payment of the
ordinary, unsecured creditors of that Person, including any "adverse
claim" (as defined in Section 8-302(b) of each applicable Uniform
Commercial Code) in the case of any Capital Stock. For purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any asset
that it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to that asset.
"LITIGATION" means any action, case, proceeding, claim,
grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration
proceeding.
"MATERIAL" means, as applied to any Entity or the Acquired
Business, material to the business, operations, property or assets,
liabilities, financial condition or results of operations of that
Entity and its Subsidiaries considered as a whole or the Acquired
Business, as the case may be.
"MATERIAL ADVERSE EFFECT" means, with respect to the
consequences of any fact or circumstance (including the occurrence or
non-occurrence of any event) to the Acquired Business, that such fact
or circumstance has caused, is causing or will cause, directly,
indirectly or consequentially, singly or in the aggregate with other
facts and circumstances, any Damages in excess of the Threshold Amount.
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"MATERIAL AGREEMENT" of any Entity means any contract or
agreement (a) to which that Entity or any of its Subsidiaries is a
party, or by which that Entity or any Company Subsidiary is bound or to
which any property or assets of that Entity or any of its Subsidiaries
is subject and (b) which is Material to that Entity.
"MERGER" has the meaning specified in PARAGRAPH 1.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA, Section 414 of the Code or Section
3(37) of ERISA.
"NONCOMPETE TERRITORY" means the area within a one hundred
(100) mile radius of any office or service facility of the Company or
any Company Subsidiary, as of the date of the Agreement and/or the
Effective Time.
"ORGANIZATION STATE" means, as applied to (a) any corporation,
its state or other jurisdiction of incorporation, (b) any limited
liability company or limited partnership, the state or other
jurisdiction under whose laws it is organized and existing in that
legal form, and (c) any other Entity, the state or other jurisdiction
whose laws govern that Entity's internal affairs.
"OTHER COMPENSATION PLAN" means any compensation arrangement,
plan, policy, practice or program established, maintained or sponsored
by the Company or any Company Subsidiary, or to which the Company or
any Company Subsidiary contributes, on behalf of any of its employees,
nonemployee directors or officers or other natural persons performing
consulting or other independent contractor services for the Company or
any Company Subsidiary, (a) including all such arrangements, plans,
policies, practices or programs providing for severance pay, deferred
compensation, incentive, bonus or performance awards or the actual or
phantom ownership of any Capital Stock or Derivative Securities of the
Company or any Company Subsidiary, but (b) excluding all Company ERISA
Pension Benefit Plans and Employment Agreements.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" means, as applied to the property or assets
of any Person (or any revenues, income or profits of that Person
therefrom): (a) Liens for Taxes if the same are not at the time due and
delinquent; (b) Liens of carriers, warehousemen, mechanics, laborers
and materialmen for sums not yet due; (c) Liens incurred in the
ordinary course of that Person's business in connection with worker's
compensation, unemployment insurance and other social security
legislation (other than pursuant to ERISA or Section 412(n) of the
Code); (d) Liens incurred in the ordinary course of that Person's
business in connection with deposit accounts or to secure the
performance of bids, tenders, trade contracts, statutory obligations,
-41-
surety and appeal bonds, performance and return-of-money bonds and
other obligations of like nature; (e) easements, rights-of-way,
reservations, restrictions and other similar encumbrances incurred in
the ordinary course of that Person's business or existing on property
and not materially interfering with the ordinary conduct of that
Person's business or the use of that property; (f) defects or
irregularities in that Person's title to its real properties which do
not materially (i) diminish the value of the surface estate or (ii)
interfere with the ordinary conduct of that Person's business or the
use of any of such properties; (g) any interest or title of a lessor of
assets being leased by any Person pursuant to any Capital Lease
disclosed in SECTION 2.18 OF THE DISCLOSURE STATEMENT or any lease
that, pursuant to GAAP, would be accounted for as an operating lease;
and (h) Liens securing purchase money Indebtedness disclosed in SECTION
2.17 OR 2.18 OF THE DISCLOSURE STATEMENT so long as such Liens do not
attach to any property or assets other than the properties or assets
purchased with the proceeds of that Indebtedness.
"PERSON" means any natural person, Entity, estate, trust,
union or employee organization or Governmental Authority or, for the
purpose of the definition of "ERISA Affiliate," any trade or business.
"PLAN" has the meaning specified in SECTION 2.28.
"PROHIBITED TRANSACTION" means any transaction that is
prohibited under Section 4975 of the Code or Section 406 of ERISA and
not exempt under Section 4975 of the Code or Section 408 of ERISA.
"PROPRIETARY RIGHTS" means (a) patents, applications for
patents and patent rights, (b) in each case, whether registered,
unregistered or under pending registration, trademark rights, trade
names, trade name rights, corporate names, business names, trade styles
or dress, service marks and logos and other trade designations and
copyrights and (c), in the case of the Company or any Company
Subsidiary, all agreements relating to the technology, know-how or
processes used in any business of the Company or any Company
Subsidiary.
"PRO RATA SHARE" has the meaning specified in PARAGRAPH 1.
"QUALIFIED PLANS" has the meaning specified in SECTION 2.28.
"RELATED PARTY AGREEMENT" means any contract or other
agreement, written or oral, (a) to which the Company or any Company
Subsidiary is a party or is bound or by which any property of the
Company or any Company Subsidiary is bound or may be subject and (b)
(i) to which any Stockholder or any of that Stockholder's Related
Persons or Affiliates also is a party, (ii) of which any Stockholder or
any of that Stockholder's Related Persons or Affiliates is a
beneficiary or (iii) as to which any transaction contemplated thereby
properly would be characterized (without regard to the amount involved)
as a related party transaction
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for purposes of applying the disclosure requirements of GAAP or the SEC
applicable to the financial statements of the Company and the Company
Subsidiaries.
"RELATED PERSON" of a Stockholder means: (a) if that
Stockholder is a natural person, (i) any Immediate Family Member of
that Stockholder, (ii) any Estate of that Stockholder or any Immediate
Family Member of that Stockholder, (iii) the trustee of any inter vivos
or testamentary trust of which all the beneficiaries are Related
Persons of that Stockholder and (iv) any Entity the entire equity
interest in which is owned by any one or more of that Stockholder and
Related Persons of that Stockholder; and (b) if that Stockholder is an
Entity, Estate or trust, (i) any Person who owns an equity interest in
that Stockholder on the date hereof, (ii) any Person who would be a
Related Person under clause (a) of this definition of a natural person
who is an ultimate beneficial owner of that Stockholder or (iii) any
other Entity the entire equity interest in which is owned by any one or
more of that Stockholder and Related Persons of that Stockholder. As
used in this definition, "Estate" means, as to any natural person who
has died or been adjudicated mentally incompetent by a court of
competent jurisdiction, (a) that person's estate or (b) the
administrator, conservator, executor, guardian or representative of
that estate.
"REPORTABLE EVENT" means, with respect to any Company ERISA
Pension Plan, (a) the occurrence of any of the events set forth in
Section 4043(b) or (c) (other than a Reportable Event as to which the
provision of 30 days' notice to the PBGC is waived under applicable
regulations), 4062(e) or 4063(a) of ERISA with respect to that plan,
(b) any event requiring the Company or any ERISA Affiliate to provide
security to that plan under Section 401(a)(29) of the Code or (c) any
failure to make a payment required by Section 412(m) of the Code with
respect to that plan.
"REPRESENTATIVES" means, with respect to any Person, the
directors, officers, employees, Affiliates, accountants (including
independent certified public accountants), advisors, attorneys,
consultants or other agents of that Person, or any other
representatives of that Person or of any of those directors, officers,
employees, Affiliates, accountants (including independent certified
public accountants), advisors, attorneys, consultants or other agents.
"RCRA" means the Resource Conservation and Recovery Act of
1976.
"RESTRICTED PAYMENT" means, with respect to any Entity at any
time, any of the following effected by that Entity: (a) any declaration
or payment of any dividend or other distribution, direct or indirect,
on account of any Capital Stock of that Entity or any Affiliate of that
Entity or (b) any direct or indirect redemption, retirement, purchase
or other acquisition for value of, or any direct or indirect purchase,
payment or sinking fund or similar deposit for the redemption,
retirement, purchase or other acquisition for value of, or to obtain
the surrender of, any then outstanding Capital Stock of that Entity or
any Affiliate of that Entity or any then outstanding warrants, options
or other rights to acquire or subscribe
-43-
for or purchase unissued or treasury Capital Stock of that Entity or
any Affiliate of that Entity.
"RETURNS" of a Person means the returns, reports or statements
(including any information returns) any Governmental Requirement
requires to be filed by that Person for purposes of any Tax.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SOLID WASTES, HAZARDOUS WASTES OR HAZARDOUS SUBSTANCES" have
the meanings ascribed to those terms in CERCLA, RCRA or any other
Environmental Law applicable to the business or operations of the
Company or any Company Subsidiary which imparts a broader meaning to
any of those terms than does CERCLA or RCRA.
"S&P" means Standard and Poor's Rating Group.
"STOCKHOLDER INDEMNIFIED PARTY" means (a) each Stockholder and
each of that Stockholder's Affiliates (other than the Company or,
following the Closing Date, Invatec or any of its Subsidiaries, if the
Stockholder is an Affiliate of Invatec), agents and counsel and (b)
prior to the Effective Time, the Company and each of its officers,
directors, employees, agents and counsel who are not Stockholder
Indemnified Parties within the meaning of clause (a) of this
definition.
"STOCKHOLDER INDEMNIFIED LOSS" has the meaning specified in
SECTION 7.03.
"STOCKHOLDER UNINDEMNIFIED LOSS" has the meaning specified in
SECTION 6.03.
"SUBSIDIARY" of any specified Person at any time, means any
Entity a majority of the Capital Stock of which is at that time owned
or controlled, directly or indirectly, by the specified Person.
"SUPPLEMENTAL INFORMATION" has the meaning specified in
SECTION 4.07.
"SURVIVING COMPANY" has the meaning specified in PARAGRAPH 1.
"TAX" or "TAXES" means all net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise,
bank shares, withholding, payroll, employment, excise, property, deed,
stamp, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges or
assessments of any nature whatever imposed by any Governmental
Requirement, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
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"TAXING AUTHORITY" means any Governmental Authority having or
purporting to exercise jurisdiction with respect to any Tax.
"TERMINATION EVENT" means, with respect to any Company ERISA
Pension Plan, (a) any Reportable Event with respect to that plan which
is likely to result in the termination of that plan, (b) the
termination of, or the filing of a notice of intent to terminate, that
plan or the treatment of any amendment to that plan as a termination
under Section 4041(c) of ERISA or (c) the institution of proceedings to
terminate, or the appointment of a trustee to administer, that plan
under Section 4042 of ERISA.
"THIRD PARTY CLAIM" means any claim asserted by any Person
that or who is not a party to this Agreement against any Indemnified
Party.
"THRESHOLD AMOUNT" has the meaning specified in PARAGRAPH 1.
"TRANSACTION DOCUMENT" means this Agreement and the other
written agreements, documents, instruments and certificates executed
pursuant to or in connection with this Agreement, all as amended,
modified or supplemented from time to time.
"VALVE REPAIR AND DISTRIBUTION SERVICES BUSINESS" means the
assembly, setting, testing or sealing, the maintenance, repair,
reconditioning or remanufacturing, or the sale or other distribution,
of industrial valves and other process-system components or equipment.
"WELFARE PLAN" means an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA.
"WHOLLY OWNED SUBSIDIARY" means any corporation or other
Entity all of whose outstanding Capital Stock on a fully diluted basis
is owned and controlled, directly or indirectly through another Wholly
Owned Subsidiary, by the Company.
Section 9.02. OTHER DEFINED TERMS. Words and terms used in
these Uniform Provisions which are defined elsewhere in this Agreement are used
herein as therein defined.
Section 9.03. OTHER DEFINITIONAL PROVISIONS. (a) Except as
otherwise specified herein, all references herein to any Governmental
Requirement defined or referred to herein, including the Code, CERCLA, ERISA,
the Exchange Act, RCRA and the Securities Act, shall be deemed references to
that Governmental Requirement or any successor Governmental Requirement, as the
same may have been amended or supplemented from time to time, and any rules or
regulations promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article,"
"Paragraph," "Section," "Preliminary Statement," "Annex,"
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"Addendum," "Schedule" and "Exhibit" refer to Articles, Paragraphs and Sections
of, the Preliminary Statement in, and Annexes, Addenda, Schedules and Exhibits
to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes the
other gender and the neuter.
(d) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
Section 9.04. CAPTIONS. Captions to Articles, Paragraphs,
Sections and subsections of, and Annexes, Addenda, Schedules and Exhibits to,
this Agreement or any other Transaction Document are included for convenience of
reference only, and these captions shall not constitute a part of this Agreement
or any other Transaction Document for any other purpose or in any way affect the
meaning or construction of any provision of this Agreement or any other
Transaction Document.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. TREATMENT OF CONFIDENTIAL INFORMATION. (a) Each
of the Company and the Stockholders, severally and not jointly with any other
Person, acknowledges that it has or may have had in the past, currently has and
in the future may have access to Confidential Information of the Company and the
Company Subsidiaries, Invatec and its Subsidiaries. Each of the Company and the
Stockholders, severally and not jointly with any other Person, agrees that it
will keep confidential all such Confidential Information furnished to it and,
except with the specific prior written consent of Invatec, will not disclose
such Confidential Information to any Person except (a) Representatives of
Invatec and (b) its own Representatives, provided that these Representatives
(other than counsel) agree to the confidentiality provisions of this SECTION
10.01. In the event of a breach or threatened breach by any Stockholder of the
provisions of this SECTION 10.01 with respect to any Confidential Information,
Invatec shall be entitled to an injunction restraining such Stockholder from
disclosing, in whole or in part, that Confidential Information. Nothing herein
shall be construed as prohibiting Invatec from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in SECTION 10.01(A), and
because of the immediate and irreparable damage that would be caused to Invatec
for which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that Invatec may enforce the provisions of SECTION 10.01(A)
by injunctions and restraining orders against each of them who breaches any of
those provisions.
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Section 10.02. BROKERS AND AGENTS. The Stockholders jointly
and severally represent and warrant to Invatec that the Company has not directly
or indirectly employed or become obligated to pay any broker or similar agent in
connection with the transactions contemplated hereby and agree, without regard
to the Threshold Amount limitations set forth in ARTICLE VII, to indemnify
Invatec against all Damage Claims arising out of claims for any and all fees and
commissions of brokers or similar agents employed or promised payment by the
Company.
Section 10.03. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and the rights of the parties hereunder may not be assigned (except by
operation of law) and shall be binding on and inure to the benefit of the
parties hereto, the successors of Invatec, and the heirs and legal
representatives of the Stockholders (and, in the case of any trust, the
successor trustees of that trust). Neither this Agreement nor any other
Transaction Document is intended, or shall be construed, deemed or interpreted,
to confer on any Person not a party hereto or thereto any rights or remedies
hereunder or thereunder, except as provided in SECTION 10.12 or ARTICLE VII or
as otherwise provided expressly herein or therein.
Section 10.04. ENTIRE AGREEMENT; AMENDMENT; WAIVERS. This
Agreement and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Stockholders, the Company, Invatec and
Invatec Sub and supersede all prior agreements and understandings, both written
and oral, relating to the subject matter of this Agreement. This Agreement may
be amended, modified or supplemented, and any right hereunder may be waived, if,
but only if, that amendment, modification, supplement or waiver is in writing
and signed by the Stockholders. The waiver of any of the terms and conditions
hereof shall not be construed or interpreted as, or deemed to be, a waiver of
any other term or condition hereof.
Section 10.05. EXPENSES. Except as set forth in PARAGRAPH
2(B), (a) Invatec will pay the fees, expenses and disbursements of Invatec and
its Subsidiaries and their Representatives which are incurred in connection with
the subject matter of this Agreement and any amendments thereto, including all
costs and expenses incurred in the performance of and compliance with all
conditions to be performed by Invatec under this Agreement, and (b) if the
Effective Time occurs, the Stockholders will pay from personal funds, and not
from funds of the Company or any Company Subsidiary, all sales, use, transfer
and other similar taxes and fees incurred in connection with the transactions
contemplated hereby including the fees, expenses and disbursements of counsel
for the Company and the Stockholders incurred in connection with the subject
matter of this Agreement. The Stockholders will file all necessary documentation
and Returns with respect to all sales, use, transfer and other similar taxes and
fees they are required by this SECTION 10.05 to pay. In addition, each
Stockholder acknowledges that he, and not the Company or Invatec, will pay all
Taxes due upon receipt of the consideration payable to that Stockholder pursuant
to the transactions contemplated by this Agreement.
Section 10.06. NOTICES. All notices required or permitted
hereunder shall be in writing, and shall be deemed to be delivered and received
(a) if personally delivered or if delivered by telex, telegram, facsimile or
courier service, when actually received by the party to whom notice
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is sent or (b) if delivered by mail (whether actually received or not), at the
close of business on the third Houston, Texas business day next following the
day when placed in the mail, postage prepaid, certified or registered, addressed
to the appropriate party or parties, at the address of such party set forth
below (or at such other address as such party may designate by written notice to
all other parties in accordance herewith):
(i) if to Invatec or any of its Subsidiaries, addressed to it
at:
Innovative Valve Technologies, Inc.
14900 Woodham, Suite A-125
Houston, Texas 77073
Attn.: William E. Haynes
Fax No.: (281) 821-1123,
with a copy to Counsel for Invatec; and
(ii) if to the Company or any of the Stockholders, addressed
to such Person as set forth in the preamble to the Merger Agreement,
with a copy to Counsel for the Company and the Stockholders
Section 10.07. GOVERNING LAW; MEDIATION AND ARBITRATION;
JURISDICTION; VENUE. (A) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE CONFLICTS
OF LAW PROVISIONS THEREOF.
(b) Except for disputes to be resolved by the Accounting Firm as
contemplated in the Agreement, or any dispute, claim or controversy in which a
party is entitled to seek an injunction, specific performance, a protective
order or other equitable relief, in the event that any disputes arise regarding
the interpretation or enforcement of this Agreement, or any Convertible Notes or
any other document, instrument or agreement executed in connection herewith or
therewith which expressly incorporates this Section 10.07 by reference, such
disputes shall be resolved as follows:
(i) The parties shall first attempt to resolve them by good faith
negotiations. If any disputes cannot be resolved by direct
negotiations within fifteen (15) days or such longer time as
is mutually agreed by the parties, then the parties shall
submit such disputes to mediation, which shall focus on the
needs of all concerned parties and seek to solve problems
cooperatively, with an emphasis on dialogue and accommodation.
The goal of the mediation shall be to fairly resolve each
dispute in a manner which preserves and enhances the parties'
relationships. Any party desiring mediation may begin the
process by giving the other parties a written request to
mediate which describes the issues involved and invites such
other parties to join in naming a mutually agreeable mediator
and setting a time frame for the mediation meeting. The
parties and mediator may adopt any procedural format
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that seems appropriate for the particular dispute. The
contents of all discussions during the mediation shall be
confidential and non-discoverable in subsequent arbitration or
litigation, if any. If the parties can agree upon a mutually
acceptable resolution to the disagreement, it shall be reduced
to writing, signed by the parties, and the dispute shall be
deemed resolved. The costs of mediation shall be divided
equally among the parties to the dispute.
(ii) If any dispute cannot be resolved through mediation, or if any
party refuses to mediate or to name a mutually acceptable
mediator or establish a time frame for mediation within a
period of time that is reasonable considering the urgency of
the disputed matter, or fails to agree to procedures for the
mediation, then any party who desires dispute resolution shall
seek binding arbitration as hereinafter provided.
(iii) All disputes among the parties arising out of or related to
the Agreement which have not been settled by mediation shall
be resolved by binding arbitration within the State of
Kentucky. Within twenty (20) days of receiving written demand
for arbitration, the parties involved in the dispute shall
attempt to reach agreement upon the selection of a qualified
impartial arbitrator. If the parties cannot agree upon an
arbitrator within twenty (20) days from the date written
demand for arbitration is served, the party demanding
arbitration may commence an action for the limited purpose of
obtaining appointment of an arbitrator by the Presiding Judge
of the United States District Court for the Southern District
of Texas, Houston Division. Any arbitration shall be conducted
in accordance with the rules of the American Arbitration
Association then in effect, although the arbitration need not
be conducted under the auspices of the Association. Any
arbitration award may be enforced by judgment entered in the
United States District Court for the Southern District of
Texas, Houston Division.
(c) Except for those disputes resolved or to be resolved in accordance
with subsection (b) of this Section, any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, the Agreement, may be
brought against any of the parties in the courts of the State of Texas, County
of Harris, or, if it has or can acquire jurisdiction, in the United States
District Court for the Southern District of Texas, Houston Division, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
Section 10.08. EXERCISE OF RIGHTS AND REMEDIES. Except as
otherwise provided herein, no delay or omission in the exercise of any right,
power or remedy accruing to any party hereto as a result of any breach or
default hereunder by any other party hereto shall impair any such right, power
or remedy, nor shall it be construed, deemed or interpreted as a waiver of or
acquiescence in any such breach or default, or of any similar breach or default
occurring later; nor
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shall any waiver of any single breach or default be construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 10.09. TIME. Time is of the essence in the performance
of this Agreement in all respects.
Section 10.10. REFORMATION AND SEVERABILITY. If any provision
of this Agreement is invalid, illegal or unenforceable, that provision shall, to
the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties hereto as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 10.11. REMEDIES CUMULATIVE. Except for the limitations
set forth in SECTION 6.03 and SECTION 7.05, no right, remedy or election given
by any term of this Agreement shall be deemed exclusive, but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
Section 10.12. RELEASE. Subject to the limitations set forth
in the last sentence in this SECTION 10.12, each Stockholder hereby
unconditionally and irrevocably releases and forever discharges, effective as of
and forever after the Closing Date, to the fullest extent permitted by
applicable law, all past, present and future Invatec Indemnified Parties
(including, after the Effective Time, each of the Company and the Company
Subsidiaries which is a Subsidiary of Invatec immediately after the Effective
Time) (collectively, the "Released Parties") from any and all debts,
liabilities, obligations, claims, demands, actions or causes of action, suits,
judgments or controversies of any kind whatsoever (collectively,
"Pre-Acquisition Claims") against the Company and the Company Subsidiaries, if
any, or any of them that arises out of or is based on any agreement or
understanding or act or failure to act (INCLUDING ANY ACT OR FAILURE TO ACT THAT
CONSTITUTES ORDINARY OR GROSS NEGLIGENCE OR RECKLESS OR WILLFUL, WANTON
MISCONDUCT), misrepresentation, omission, transaction, fact, event or other
matter occurring prior to the Closing Date (whether based at law or in equity or
otherwise, foreseen or unforeseen, matured or unmatured, known or unknown,
accrued or not accrued) (collectively, "Pre-Acquisition Matters"), including:
(a) claims by the Stockholder with respect to repayment of loans or
indebtedness; (b) any rights, titles and interests in, to or under any
agreements, arrangements or understandings to which the Stockholder is a party;
and (c) claims by the Stockholder with respect to dividends, violation of
preemptive rights, or payment of salaries or other compensation or in any way
arising out of or in connection with the Stockholder's employment with the
Company or any Company Subsidiary, the cessation of that employment, the
Stockholder's status as an officer, director or stockholder of the Company or
otherwise (but excluding any and all claims in respect of (i) accrued and unpaid
amounts owing to the Stockholder pursuant to each Employment Agreement disclosed
in SECTION 2.27 TO THE DISCLOSURE STATEMENT to which the Stockholder is a party,
(ii) accrued and unpaid Cash Compensation owing to the Stockholder in the normal
and ordinary course of business and consistent with past practices, (iii)
benefits accrued under each Company ERISA Benefit Plan or Other
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Compensation Plan, the existence of which has been disclosed in SECTION 2.27 TO
THE DISCLOSURE STATEMENT, and (iv) amounts or other obligations owing to the
Stockholder, directly or indirectly, pursuant to each Related Party Agreement,
if any, which is disclosed in SECTION 2.12 TO THE DISCLOSURE STATEMENT and to
which the Stockholder is a party). The Stockholder further agrees not to file or
bring any Litigation before any Governmental Authority on the basis of or
respecting any Pre-Acquisition Claim concerning any Pre-Acquisition Matter
against any Related Party. Each Stockholder (a) acknowledges that he or she
fully comprehends and understands all the terms of this SECTION 10.12 and their
legal effects and (b) expressly represents and warrants that (i) he or she is
competent to effect the release made in this SECTION 10.12 knowingly and
voluntarily and without reliance on any statement or representation of any
Released Party or its Representatives and (ii) he or she had the opportunity to
consult with an attorney of his or her choice regarding this SECTION 10.12. This
SECTION 10.12 shall not affect the rights of the Stockholders under this
Agreement or any other Transaction Document.
ARTICLE XI
[INTENTIONALLY OMITTED]
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