EXHIBIT 2
MERGER AGREEMENT
DATED AS OF MARCH 16, 1998
BY AND AMONG
INNOVATIVE VALVE TECHNOLOGIES, INC.,
IPSCO ACQUISITION, INC.,
THE STOCKHOLDERS OF IPS HOLDING, LTD.,
EDWARD H. WACHS,
ESTATE OF KURT HOFSTETTER,
HERBERT PORTER,
KENNETH MORENCY,
THE RESTATED EDWARD H. WACHS, III FAMILY TRUST,
THE DANA HOFSTETTER REVOCABLE TRUST
AND
THE MAX A. HOFSTETTER REVOCABLE TRUST
AND
IPS HOLDING, LTD.
AND ITS SUBSIDIARIES,
INTERNATIONAL PIPING SERVICES COMPANY,
IPSCO (U.K.) LIMITED,
MID-AMERICA ENERGIES, CORP.
AND
IPSCO-FLORIDA, INC.
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into as of the 16th
day of March, 1998, by and among INNOVATIVE VALVE TECHNOLOGIES, INC., a Delaware
corporation ("Invatec"), IPSCO ACQUISITION, INC., a Delaware corporation
("Invatec Sub"), EDWARD H. WACHS, an individual whose address is 1800 Shore Dr.,
Lake Bluff, Illinois 60044 ("Mr. Wachs"), ESTATE OF KURT HOFSTETTER, whose
address is Segantnistr.80, 8049 Zurich ("Mr. Hofstetter"), HERBERT PORTER an
individual whose address is 253 Middaugh Clarendon Hills, Illinois 60514 ("Mr.
Porter "), KENNETH MORENCY, an individual whose address is 435 Oriole, Elmhurst,
Illinois 60126 ("Mr. Morency"), THE RESTATED EDWARD H. WACHS, III FAMILY TRUST,
a trust organized under the laws of Illinois whose address is 100 Shepard,
Wheeling, Illinois 60090 (the "Wachs Family Trust"), THE DANA HOFSTETTER
REVOCABLE TRUST, a trust organized under the laws of Illinois, whose address is
1 South 85 Spring Rd., Oakbrook Terrace, Illinois 60181, (the "Dana Hofstetter
Trust"), THE MAX A. HOFSTETTER REVOCABLE TRUST, a trust organized under the laws
of Illinois whose address is 1 South 85 Spring Rd., Oakbrook Terrace, Illinois
60181 (the "Max Hofstetter Trust") (Messrs. Wachs, Hofstetter, Morency and
Porter, the Wachs Family Trust, the Dana Hofstetter Trust and the Max Hofstetter
Trust being sometimes hereinafter referred to collectively as the "Stockholders"
and individually as a "Stockholder"), and IPS HOLDING, LTD., a Delaware
corporation whose address 2424 Wisconsin Avenue, Downers Grove, Illinois 60515
(the "Company") and its direct and indirect subsidiaries, INTERNATIONAL PIPING
SERVICES COMPANY, IPSCO (U.K.) LIMITED, MID-AMERICA ENERGIES, CORP. and IPSCO-
FLORIDA, INC. (collectively the "Subsidiaries"). Invatec, Invatec Sub, the
Stockholders, the Company and the Subsidiaries are sometimes hereinafter
referred to collectively as the "Parties" or individually as a "Party." Invatec,
Invatec Sub and the Company are sometimes collectively referred to as the
"Constituent Corporations."
PRELIMINARY STATEMENT
WHEREAS, the Stockholders are the legal and beneficial owners and
holders of Twenty-One Thousand Forty-Five (21,045) shares of Common Stock, $1.00
par value per share, of the Company (collectively the "Company Capital Stock"),
the Company Capital Stock constituting all of the authorized and 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");
and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code");
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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.
"ACQUIRED BUSINESS" means the business conducted by the Company
and its Subsidiaries. For purposes of ARTICLE VIII of the Uniform
Provisions, the term "Acquired Business" shall include any business
conducted by the Company and its Subsidiaries during the twelve (12)
months preceding the Closing Date.
"ACQUISITION CONSIDERATION" has the meaning specified in
SUBPARAGRAPH 2(A)(iv).
"CEILING AMOUNT" means $24,982,154.00
"CLOSING" has the meaning specified in PARAGRAPH 3.
"CLOSING DATE"has the meaning specified in PARAGRAPH 3.
"COMPANY" has the meaning specified in the preamble of this
Agreement.
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDERS" means Chuhak &
Tecson, P.C. of Chicago, Illinois.
"COUNSEL FOR INVATEC" means Boyer, Ewing & Harris Incorporated of
Houston, Texas.
"CURRENT BALANCE SHEET" means the consolidated balance sheet of
the Company and its Subsidiaries as of December 31, 1997.
"CURRENT BALANCE SHEET DATE" means December 31, 1997.
"DGCL" means the Delaware General Corporation Law.
"DEBT TO STOCKHOLDERS" the aggregate of $818,368.00 owed by the
Company and its Subsidiaries to one or more of its Stockholders as
reflected in the Current Balance Sheet and further described on SCHEDULE
I.
"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
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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 PARAGRAPH 2(A)(ii).
"EMPLOYEE BONUSES" mean the bonuses to be paid to certain Key
Employees of the Company and its Subsidiaries set forth on SCHEDULE I.
"EMPLOYMENT AGREEMENTS" means the Employment Agreements to be
entered into as of the Closing Date between (a) Invatec and Herbert
Porter ("Porter") and (b) Invatec and Ken Morency ("Morency"), in the
forms thereof attached hereto as EXHIBIT A-1 and EXHIBIT A-2,
respectively.
"EXPIRATION DATE" means May 31, 1998.
"INITIAL FINANCIAL STATEMENTS" means the consolidated balance
sheets of the Company as of and for its fiscal years ended March 31,
1997 and 1996, and the related consolidated statements of operations and
retained earnings for the Company's fiscal years then ended, in the case
of each U.S. statement reviewed by Cray Kaiser, Ltd. and in the case of
each component United Kingdom statement audited by Wilson & Sharpe for
the fiscal year ended March 31, 1997, and by R. N. Store & Co. for the
fiscal year ended March 31, 1996, and the internally prepared
consolidated balance sheets of the Company as of the nine-month period
ended December 31, 1997, and the related internally prepared
consolidated statements of operations and retained earnings for the
Company's nine month period then ended. The Initial Financial Statements
are attached hereto as EXHIBIT B.
"INVATEC COMMON STOCK" means the Common Stock, $0.001 par value,
of Invatec.
"INVATEC SUB" has the meaning set forth in the preamble of this
Agreement.
"KEY EMPLOYEES" means the persons designated as Key Employees on
SCHEDULE I hereto.
"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.
"MINORITY INTEREST PURCHASE AGREEMENTS" shall mean the Stock
Acquisition Agreements entered into between each of the Subsidiary
Minority Stockholders and Invatec substantially in the form of EXHIBIT C
providing for the purchase at the Closing of all of the Subsidiary
Minority Interests, in consideration of the delivery to such Subsidiary
Minority Stockholder by Invatec of cash and shares of Invatec Common
Stock, as set forth in SCHEDULE I.
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"ORDINARY COURSE OF BUSINESS" means the ordinary course of the
business of the Company and each Subsidiary, consistent with past
customs and practice (including with respect to quantity and frequency).
"PRO RATA SHARE" of a Stockholder means with respect to each
Stockholder that percentage of all of the issued and outstanding Company
Capital Stock owned by such Stockholder at the Closing Date.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement to be entered into as of the Closing Date among Invatec, the
Stockholders and Subsidiary Minority Stockholders, in the form thereof
attached hereto as EXHIBIT D.
"RESPONSIBLE OFFICER" means either Mr. Porter or Mr. Morency, for
the Company, and either John L. King or Charles F. Schugart, for
Invatec.
"SUBSIDIARY MINORITY STOCKHOLDERS" shall mean the persons listed
on SCHEDULE I hereto as Subsidiary Minority Stockholders, who
collectively constitute the owners of all capital stock or other equity
or ownership interests in any of the Subsidiaries, other than the
majority interest in the capital stock of each of the Subsidiaries owned
by the Company (as set forth in the Disclosure Statement).
"SUBSIDIARY MINORITY INTEREST" means any direct or indirect
ownership of capital stock or other equity or other interest in any of
the Subsidiaries not owned directly by the Company or any of its
Subsidiaries.
"SURVIVING COMPANY" means Invatec Sub, which is to be designated
in the Certificate of Merger as the Surviving Company.
"THRESHOLD AMOUNT" means one and one-half percent (1.5%) of the
Ceiling Amount.
"UNIFORM PROVISIONS" means the Uniform Provisions for Stock
Acquisitions By Forward Subsidiary Merger attached hereto as ANNEX 1.
PARAGRAPH 2. THE ACQUISITION. (A) THE MERGER. (i) CERTIFICATE OF
MERGER. Subject to the terms and conditions hereof, the Company and Invatec will
cause the Certificate of Merger in the form attached as EXHIBIT E to be duly
executed and delivered by Invatec Sub and filed with the Secretary of State of
Delaware on or prior to the Closing Date.
(ii) THE EFFECTIVE TIME. The Effective Time will be upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, unless specified to the contrary in the Certificate of Merger, and in
any event, on or as promptly as practicable at or after the Closing Date.
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(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 DGCL, (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 DGCL, (a) possess all the
properties and rights, and be subject to all the restrictions, duties and
obligations, of the Company and Invatec Sub and (b) be governed by the laws of
the State of Delaware, (4) the Charter Documents of Invatec Sub then in effect
will become and thereafter remain (until changed in accordance with (a)
applicable law (in the case of the Certificate of Incorporation) or (b) in
accordance with their terms (in the case of By-laws)), the Charter Documents of
the Surviving Company, except that the Certificate of Incorporation shall be
amended to change the name of the Surviving Company to "IPSCO Holding, Inc.,"
(5) the initial member of the Board of Directors of the Surviving Company will
be William E. Haynes, subject to the provisions of the applicable laws of the
State of Delaware and the Charter Documents of the Surviving Company, and (6)
the initial officers of the Surviving Company will be as set forth below, and
each of those persons will serve in each office specified for that person below,
subject to the provisions of the Charter Documents of the Surviving Company,
until that person's successor is duly elected to, and, if necessary, qualified
for, that office:
OFFICE: NAME:
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Chairman of the Board..................... William E. Haynes
Chief Executive Officer................... Herbert Porter
President................................. Kenneth Morency
Chief Financial Officer, Senior
Vice President, Treasurer and Secretary... Charles F. Schugart
Vice President & Assistant Secretary...... Douglas R. Harrington, Jr.
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) all of the shares of Company Capital Stock issued and
outstanding immediately prior to the Effective Time will be converted
into the right to receive, without interest, on surrender of the
certificates evidencing those shares, the following, subject to
reduction as set forth below in this PARAGRAPH (iv) (the "Acquisition
Consideration"):
(a) Cash or other immediately available funds in the aggregate
amount of Seven Million Seven Hundred and Seventy-Six Thousand
Six Hundred and Thirty Two and 00/100 Dollars ($7,776,632); and
(b) Eight Hundred and Seven Thousand Eight Hundred and Twenty
Eight (807,828) shares of Invatec Common Stock;
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and as further described on SCHEDULE I whereupon all such shares of
Company Capital Stock shall cease to be outstanding and to exist, and
shall be canceled and retired; PROVIDED HOWEVER, that the payments of
cash or deliveries of Invatec Common Stock to be made by Invatec to the
Subsidiary Minority Stockholders under the Minority Interest Purchase
Agreements (collectively the "Minority Interest Payments") and with
respect to the Employee Bonuses shall be made at the Closing by the
Company by delivery by Invatec to the Company of sufficient cash (net of
any amounts required under the Code to be withheld for tax purposes),
and the Acquisition Consideration otherwise payable or deliverable to
the Stockholders shall be reduced by such Employee Bonuses and Minority
Interest Payments;
(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 share of common stock of Invatec Sub issued and
outstanding immediately prior to the Effective Time will remain one
share of common stock of the Surviving Company and such shares of common
stock of the Surviving Company will constitute all the issued and
outstanding common stock of the Surviving Company.
Each Stockholder of the Company 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 such Stockholder's Pro Rata Share of the
Acquisition Consideration payable or deliverable to the Stockholders.
(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 3(C), the
Acquisition Consideration. Until any certificate representing Company Capital
Stock has been surrendered pursuant to this SUBPARAGRAPH 2(A)(v), that
certificate will, for all purposes, be deemed to evidence only the right to
receive the Pro Rata Share of the Acquisition Consideration evidenced thereby.
Each Stockholder shall promptly cure any deficiencies in the endorsement of the
certificates or other documents of conveyance or surrender respecting, or in the
stock powers accompanying, the certificates representing Company Capital Stock
surrendered by that Stockholder.
(B) INCOME AND OTHER TAXES; TRANSACTION EXPENSES. The Stockholders and
Subsidiary Minority 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 the Subsidiary Minority Interests,
or receipt of payments therefor, or any consideration delivered in connection
therewith. Neither Invatec, the Surviving Company, the Company nor any
Subsidiary shall be responsible for any business, occupation, income,
withholding or similar tax, or any taxes of any
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kind, of the Stockholders, Key Employees or Subsidiary Minority Stockholders.
Invatec, on the one hand, and the Stockholders and Subsidiary Minority
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.
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 shall be at 10:00 a.m. at the offices of Counsel for Invatec
located at Nine Greenway Plaza, Suite 3100, Houston, Texas 77046 at such
date designated by written notice from Invatec or Counsel for Invatec to
the Company (the "Closing Date"), which date shall be not later than the
third business day after such date as the waiting period set forth under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Premerger
Act") with respect to the filing made by Invatec and the Company shall
have expired within the meaning of Section 8.0310 of the Premerger Act.
(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 hereto, other than Invatec Sub or
Invatec:
(i) All of the stock certificates evidencing the Company Capital
Stock or Subsidiary Minority Interests, 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) The Certificate of Merger;
(iii) An Investor Representation Letter in the form attached
hereto as EXHIBIT F from each Stockholder and Subsidiary Minority
Stockholder receiving Invatec Common Stock as contemplated herein;
(iv) The Employment Agreements;
(v) The Registration Rights Agreements;
(vi) The Minority Interest Purchase Agreements;
(vii) Resignations of all directors and officers of the Company
and its Subsidiaries (other than IPSCO (U.K.) Limited), effective as of
the Closing Date;
(viii) Payment of the Debt to Stockholders;
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(ix) Opinions of counsel issued by Counsel for the Company and
the Stockholders, in the forms attached hereto as EXHIBIT G-1 and G-2;
(x) No Withholding Certificates duly executed by the Stockholders
and Subsidiary Minority Stockholders in the form attached hereto as
EXHIBIT H (other than for the Estate of Kurt Hofstetter, a foreign
estate for which no withholding of tax is required);
(xi) Certificate of the Secretary or Assistant Secretary of the
Company, certifying as to copies of the Certificate 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
(xii) Certificate of the Secretary or Assistant Secretary of each
Subsidiary certifying as to copies of the Certificate of Incorporation
and Bylaws of such Subsidiary, and the resolutions of the Board of
Directors of such Subsidiary in form and content acceptable to Invatec,
authorizing the transactions contemplated herein;
(xiii) 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 or the capital stock of any Subsidiary, and waiving the
rights of the parties thereunder, in form and content reasonably
acceptable to Invatec.
(C) INVATEC'S OBLIGATIONS. At the Closing (or in the case of stock
certificates for the Invatec Common Stock, within ten business days after the
Closing), Invatec will deliver or cause to be delivered to the Stockholders
Subsidiary Minority Stockholders or Key Employees, as appropriate, the
following, all of which shall be duly executed by Invatec and Invatec Sub, as
required:
(i) The $7,776,632 in cash or immediately available funds
consisting of the cash portion of the Acquisition Consideration payable
to the Stockholders hereunder, the Subsidiary Minority Stockholders
under the Minority Interest Purchase Agreements and the Employee Bonuses
payable to the Key Employees;
(ii) Certificates representing an aggregate of Eight Hundred and
Seven Thousand Eight Hundred and Twenty Eight (807,828) shares of
Invatec Common Stock;
(iii) The Minority Interest Purchase Agreements;
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(iv) Cash or immediately available funds in the aggregate amount
of the Debt to Stockholders, paid or payable to the respective
Stockholders owed such debt;
(v) The Certificate of Merger;
(vi) The Registration Rights Agreements;
(vii) The Employment Agreements;
(viii) An opinion of counsel issued by Counsel for Invatec, in
the form attached hereto as EXHIBIT I;
(ix) A 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; and
(x) Certificate of the Secretary or Assistant Secretary of
Invatec Sub certifying as to copies of the Certificate of Incorporation
and By-laws of Invatec Sub attached thereto, and the resolutions of the
sole director and sole stockholder of Invatec Sub, in form and content
reasonably acceptable to Counsel for SECTION 9.01 and the Stockholders,
authorizing the transactions contemplated herein.
(D) FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. Each Stockholder, at any time at or after the Closing, will
execute, acknowledge and deliver any further stock powers, deeds, bills of sale,
assignments and other assurances, documents and instruments of transfer
reasonably requested by Invatec, and will take any other action consistent with
the terms of this Agreement that may reasonably be requested by Invatec, for the
purpose of effecting the Acquisition.
PARAGRAPH 4. INCORPORATION OF PROVISIONS. (A) The Uniform
Provisions and Addendum 368 (a)(2)(D) attached hereto 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.
(B) For purposes of all representations and warranties in the Uniform
Provisions "knowledge of the Company" or "knowledge of a Subsidiary" shall mean
only matters of which any of the executive officers and directors of the Company
or the Subsidiary have knowledge. In addition, to the extent that a factual
disclosure is made in the Disclosure Statement with respect to one or more
specified representations or warranties (the "Specified Representations and
Warranties") set forth in the Uniform Provisions or this Agreement and the
factual disclosure set forth therein is
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relevant to one or more other representations and warranties in the Uniform
Provisions or this Agreement (the "Other Representations and Warranties") such
factual disclosure shall not be required to be repeated by the Stockholders or
the Company and shall be deemed to have been made with respect to such Other
Representations and Warranties to the extent that the facts set forth in the
Disclosure Statement with respect to the Specified Representations and
Warranties would reasonably alert Invatec as to the potential applicability or
relevance of such factual disclosure to the Other Representations and
Warranties. In addition, to the extent that the Uniform Provisions provide that
the Company, the Stockholders or any of the Subsidiaries has "provided" Invatec
with documents or other materials, "provided" shall mean actually provided, or
in the case of (i) property or equipment leases, contracts or other related
documentation involving aggregate annual payments or other liabilities of less
than $20,000 per year or $100,000 over the life of the obligation (collectively
"Minor Obligations"), (ii) insurance policies, (iii) Employee Lists including
compensation and key consultants and independent contractors, and (iv) Employee
Policies and Procedures of the Company or Subsidiaries, have made such
documentation available to Invatec for review and Invatec has declined to review
such Minor Obligations or declined to require the Company or its Subsidiaries to
furnish copies thereof.
(C) SECTION 2.10 of the Uniform Provisions is hereby amended in its
entirety to read as follows:
Section 2.10. NO BONUS SHARES. Except as set forth in SECTION 2.10 OF
THE DISCLOSURE STATEMENT, during the last five years no outstanding
shares of Capital Stock of the Company were issued for less than the
fair market value thereof at the time of issuance or were issued in
exchange for any consideration other than cash.
(D) PARAGRAPH (d) of SECTION 2.19 of the of Uniform Provisions is hereby
amended in its entirety to read as follows:
(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 reasonably maintained and adequate for the purposes for
which they presently are being used or held for use, ordinary wear and
tear excepted.
(E) PARAGRAPH (b) of SECTION 2.20 of the of Uniform Provisions is hereby
amended in its entirety to read as follows:
(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 used in the operations of the business are in good working
order and condition, ordinary wear and tear excepted, and are reasonably
adequate for the purposes for which they presently are being used or
held for use.
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(F) PARAGRAPH (a) of SECTION 4.02 of the of Uniform Provisions is hereby
amended in its entirety to read as follows:
(a) carry on its businesses and operations (including billing practices)
in substantially the same manner as it has heretofore and not introduce
any new methods of management, operation or accounting that in the
aggregate are Material to the Company;
(G) SECTION 10.12 of the of Uniform Provisions is hereby amended in
its entirety to read as follows:
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 Effective Time, 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 Effective Time (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 a 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
a Stockholder is a party; and (c) claims by a 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
such Stockholder's employment with the Company or any Company
Subsidiary, the cessation of that employment, such 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 such Stockholder pursuant to each Employment Agreement
disclosed in SECTION 2.27 TO THE DISCLOSURE STATEMENT to which such
Stockholder is a party, (ii) accrued and unpaid Cash Compensation owing
to such 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 Compensation Plan, the existence of
which has been disclosed in SECTION 2.27 TO THE DISCLOSURE STATEMENT,
(iv) amounts or
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other obligations owing to such 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) and (v) as to Mr. Porter and Mr. Morency, any right to
indemnification such person may have under the Charter documents of the
Company or any Company Subsidiary, provided that such right to
indemnification does not arise, in whole or in part, as a result of
facts which, if known immediately subsequent to Closing, would be deemed
to be a breach of any representation, warranty, covenant or conditions
of this Agreement. Each 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;
(H) A new PARAGRAPH (iii) of SECTION 5.02 of the Uniform Provisions is
hereby added to the Uniform Provisions which shall read as set forth below:
(iii) the average closing sales or bid price for a share of Invatec
Common Stock reported on the NASDAQ National Market for the five trading
days immediately preceding the date of Closing shall not be less than
$15.50;
(I) A new paragraph (iii) shall be added to SECTION 7.02, which shall
read as follows:
or (iii) any liability with respect to Hot Taps Ltd. a former
U.K. subsidiary of the Company, which liability shall not be
limited under SECTION 7.06 or subject to the Threshold Amount
(provided that the Stockholders shall have no liability with
respect to attorneys' fees of Invatec unless and until such time
as any liability with respect to such former subsidiary shall
exceed the Threshold Amount).
(J) SECTION 8.01(b)(i) is hereby amended by inserting at the end thereof
prior to the comma the phrase "for all Stockholders other than Mr. Morency and
Mr. Porter, and two (2) years after the Effective Time for Mr. Morency and Mr.
Porter";
(K) The definition of "Competitive Activities" set forth in SECTION 9.01
shall be revised to add the following sentence at the end of such definition:
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Notwithstanding the foregoing or any other term or provision of the
Agreement and solely with respect to Edward H. Wachs and the Related
Persons described in this sentence, "Competitive Activities" shall not
include (i) the manufacture or distribution by E. H. Wachs Company, of
(x) the low pressure gas distribution, drilling and tapping equipment,
or (y) low pressure repair clamps and pressure vessel components for the
marine and oil and gas pipe line industries, together with any future
improvements or enhancements thereof, (ii) the robotic nuclear marine
positioner and pipeline repair tool business of Ausca Engineering Ltd.,
(iii) in the event that the Company or any of its Subsidiaries cease
marketing the flo-stop equipment or fail or refuse to supply such
equipment to E H. Wachs Company, the manufacture or distribution of such
flo-stop equipment by E. H. Wachs Company, and (iv) the welding and
machining services of the type currently conducted by Wachs Technical
Services, and (v) any services rendered by Mr. Wachs as an officer,
director, engineer, employee or consultant with respect to any of the
activities described in clauses (i)-(iv) of this sentence.
PARAGRAPH 5. REMOVAL OF COMPANY GUARANTY ON PREMISES LEASED FROM
AFFILIATE. Within five business days of closing, the Stockholders shall have
caused the Unlimited Continuing Guaranty dated June 2, 1997 in favor of First
National Bank of Chicago with respect to the premises commonly known as 2424
Wisconsin Avenue, Downers Grove, Illinois, to be fully released (together with
any other guaranty of the Company or any Subsidiaries with respect thereto) .
PARAGRAPH 6. OFFSET. To the extent permitted by applicable law,
and subject to the limits on Damage Claims and on indemnification claims in
SECTION 6.04 and SECTION 7.06 of the Uniform Provisions, all amounts due and
owing to a Stockholder under this Agreement shall be subject to offset by
Invatec to the extent of any damages incurred as a result of any Stockholder's
breach of this Agreement or any document, instrument, or agreement executed by a
Stockholder in connection herewith, commencing on the tenth (10th) day after
Invatec sends written notice to the Stockholders of the alleged breach, unless
Stockholders cure same within such 10-day period. Each Stockholder hereby
acknowledges and agrees that but for the right of offset contained in this
PARAGRAPH 6, Invatec would not have entered into this Agreement or any of the
transactions contemplated herein.
PARAGRAPH 7. SECURITIES LAWS; RESTRICTIONS ON TRANSFER. The
Invatec Common Stock to be issued as part of the Acquisition Consideration or to
the Subsidiary Minority Stockholders (the "Invatec Merger Stock") will not be
registered under the Securities Act of 1933, as amended (the "Securities Act").
Accordingly, the Invatec Merger Stock may not be resold or otherwise transferred
by any holder thereof without compliance with the registration provisions of the
Securities Act (and applicable state securities laws) or applicable exemptions
therefrom, except as provided in the Registration Rights Agreement.
PARAGRAPH 8. MATTERS RE THE SUBSIDIARIES. This Agreement has been
executed by each of the Subsidiaries to evidence that the Subsidiaries are
jointly and severally confirming and
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guaranteeing the accuracy of the representations and warranties and indemnities
of the Company set forth in this Agreement, subject to the terms, conditions and
limitations set forth herein (including, but not limited to, the provisions
regarding limitation of the amount of indemnities and expiration of
representations and warranties). The Parties understand that the Company does
not own all of the capital stock of each of the Subsidiaries as of the date of
this Agreement. Notwithstanding, the Company and the Stockholders hereby
covenant and agree that on or prior to the Closing they shall cause the
Subsidiary Minority Stockholders to enter into the Minority Interest Purchase
Agreements with Invatec for acquisition of such capital stock by Invatec at the
Closing, and that such Subsidiary Minority Interests shall be acquired by
Invatec on the Closing Date (subject only to Invatec's obligation to deliver at
the Closing a portion of the Acquisition Consideration) and that compliance with
such covenant and agreement is material to Invatec and Invatec Sub and that the
obligations of Invatec and Invatec Sub to proceed with the Closing shall be
conditioned upon the Company's full compliance with such covenant and agreement
to cause the Subsidiary Minority Stockholders to enter into the Minority
Interest Purchase Agreements with Invatec.
PARAGRAPH 9. MULTIPLE COUNTERPARTS; FACSIMILE SIGNATURES. This
Agreement may be executed in multiple counterparts, each of which will be an
original, but all of which together will constitute one and the same instrument.
For purposes of the Agreement and all documents, instruments and agreements
executed in connection herewith, facsimile signatures shall be deemed to be
original signatures. In addition, if any Party executes facsimile copies of this
Agreement or any documents, instruments of agreements executed in connection
herewith, such copies shall be deemed originals.
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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:
IPSCO ACQUISITION, INC.
By: /s/ John L. King
Name: John L. King
Title: Vice President
STOCKHOLDERS:
/s/ Edward H. Wachs
------------------------------------
EDWARD H. WACHS
ESTATE OF KURT HOFSTETTER
By:/s/ Dr. Philip Hofstetter
Name: Dr. Philip Hofstetter
Title: Admnistrator
/s/ Herbert Porter
------------------------------------
HERBERT PORTER
THE RESTATED
EDWARD H. WACHS, III FAMILY TRUST
By:/s/ Edward H. Wachs, III
Name: Edward H. Wachs, III
Title: Trustee
THE MAX A. HOFSTETTER
REVOCABLE TRUST
By:/s/ Max A. Hofstetter
Name: Max A. Hofstetter
Title: Trustee
THE COMPANY:
IPS HOLDING, LTD.
By:/s/ E. H. Wachs
Name: E. H. Wachs
Title: Chairman
SUBSIDIARIES:
INTERNATIONAL PIPING
SERVICES COMPANY
By:/s/ Kenneth R. Morency
Name: Kenneth R. Morency
Title: President
IPSCO-FLORIDA, INC.
By:/s/ Kenneth R. Morency
Name: Kenneth R. Morency
Title: President
IPSCO (U.K.) LIMITED
By:/s/ E. H. Wachs
Name: E. H. Wachs
Title:Chairman
MID-AMERICA ENERGIES, CORP.
By: /s/ Kenneth R. Morency
Name: Kenneth R. Morency
Title: President
The undersigned, the spouses of Edward H. Wachs, Kurt Hofstetter
and Herbert Porter, are fully aware of, understand, and fully consent and agree
to the provisions of this Merger Agreement, and its binding effect upon any
community or other property interests that either of them may own in the Company
Capital Stock (or alternatively, in order to confirm that neither of them has
any right, title or interest, legal or beneficial, in the shares of Company
Capital Stock standing in the name of Stockholders), and their awareness,
understanding, consent and agreement are evidenced by her execution hereof.
NAME:/s/ Constance H. Wachs
SPOUSE OF EDWARD H. WACHS
NAME:/s/ Dr. Philip Hofstetter-
Administrator
SPOUSE OF KURT HOFSTETTER
NAME:/s/ NELDA PORTER
SPOUSE OF HERBERT PORTER
Schedule I - Capital Stock Ownership of Stockholders and Subsidiary Minority
Stockholders; Debt to Stockholders and Consideration Deliverable at Closing to
Stockholders, Subsidiary Minority Stockholders and Key Employees
Schedule 3.04 - Capital Stock of Invatec
Schedule 3.05 - Subsidiaries of Invatec
Exhibit A-1 - Porter Employment Agreement
Exhibit A-2 - Morency Employment Agreement
Exhibit B - Initial Financial Statements
Exhibit C - Form of Stock Acquisition Agreement
Exhibit D - Registration Rights Agreement
Exhibit E - Certificate of Merger
Exhibit F - Investor Representation Letter
Exhibit G-1 - Opinion of Counsel for Company and Stockholders
Exhibit G-2 - Opinion of Counsel for Company and Stockholders (U.K.)
Exhibit H - No Withholding Certificates
Exhibit I - Opinion of Counsel for Invatec
Addendum 368 (a)(2)(D)-Special Provisions Relating to
Section 368(a)(2)(D) Reorganizations
SCHEDULE I
CAPITAL STOCK OWNERSHIP OF STOCKHOLDERS AND SUBSIDIARY MINORITY STOCKHOLDERS;
DEBT TO STOCKHOLDERS; AND CONSIDERATION DELIVERABLE AT CLOSING TO STOCKHOLDERS,
SUBSIDIARY MINORITY STOCKHOLDERS AND KEY EMPLOYEES
Addendum (a)(2)(D)
INNOVATIVE VALVE TECHNOLOGIES, INC.
SPECIAL PROVISIONS RELATING TO
SECTION 368(a)(2)(D) REORGANIZATIONS
(STOCK PURCHASE/MERGER)
A. DEFINED TERMS. Words and terms used in this Addendum which
are defined elsewhere in the Agreement in which this Addendum is incorporated by
reference are used herein as defined therein.
B. REPRESENTATION AND WARRANTY OF THE COMPANY AND THE
STOCKHOLDERS. The Company and each Stockholder jointly and severally represents
and warrants to Invatec that the following representations and warranties of the
Company and each Stockholder in this Section B will, as of the Effective Time,
be true and correct:
(1) That after taking into account any extraordinary
distributions from the Company or any Subsidiaries to such
Stockholder, in excess of fifty percent of the aggregate
consideration received by such Stockholder in connection
with the Merger will consist of shares of Invatec Common
Stock.
(2) Neither the Company nor any Stockholder has within the
two-year period ending on the Effective Date adopted any
plan of liquidation respecting the Company (whether or not
that plan of liquidation was revoked).
(3) In the Merger, Invatec Sub will acquire "substantially all
of the properties" of the Company within the meaning of
Section 368(a)(2)(D) of the Code (that is, in the Merger,
Invatec Sub will acquire at least 90% of the fair market
value of the net assets and at least 70% of the gross
assets held by the Company immediately prior to the
Effective Time). For purposes of the preceding sentence,
amounts paid by the Company to dissenters, amounts paid by
the Company who receive cash or other property and the
Company assets used to pay its reorganization expenses and
all redemptions and distributions (except for regular,
normal dividends) made by the Company immediately
preceding the Effective Time, pursuant to this Agreement
or otherwise as part of the plan of the Merger provided
for herein, will be included as assets of the Company held
immediately prior to the Merger.
(4) At the Effective Time, the sum of the adjusted basis of
each of the assets of the Company which is transferred to
Invatec Sub in the Merger will equal or exceed the sum of
(a) the liabilities of the Company assumed by Invatec Sub
in the Merger and (b) the liabilities of the Company to
which the assets of the Company are subject at the
Effective Time.
For purposes of Section 6.03 of the Uniform Provisions the representation and
warranty made in this Section B shall be deemed to be included in Article II.
C. REPRESENTATION AND WARRANTY OF INVATEC. Invatec represents
and warrants to each Stockholder that all the following representations and
warranties of Invatec in this Section C will, as of the Effective Time, be true
and correct:
(1) At the Effective Time, Invatec will own all the stock of
Invatec Sub. Invatec Sub will not issue any of its Capital Stock
in the Merger.
(2) At the Effective Time, Invatec will have no plan or
intention to lose control, within the meaning of Section 368(c)
of the Code, of Invatec Sub after the Merger occurs.
(3) At the Effective Time, Invatec will have no plan or
intention (a) to liquidate Invatec Sub, (b) to merge Invatec Sub
with or into another corporation, (c) to sell or otherwise
dispose of the stock of Invatec Sub, (d) to cause Invatec Sub to
sell or otherwise dispose of any of its assets, except for
dispositions in the ordinary course of business and transfers
described in Section 368(a)(2)(C) of the Code, or (e) to
reacquire any Invatec Common Stock issued in the Merger.
(4) At the Effective Time, Invatec will intend that Invatec Sub
will either continue the historic business of the Company or use
a significant portion of the Company's historic business assets
in a business, in each case within the meaning of Treas. Reg. ss.
1.368-1(d)(2). If the Company is a holding company, then the
representation in the preceding sentence shall be true so long as
the Merger is intended to readjust continuing interests in
property under modified corporate form, within the meaning of
Treas. Reg. ss. 1.368-1(d)(2).
(5) At the Effective Time, Invatec will not be an investment
company, within the meaning of Section 368(a)(2)(F)(iii) of the
Code (that is, Invatec will not be either a regulated investment
company, a real estate investment trust or a corporation 50% or
more of the value of whose total assets are stock and securities
and 80% or more of the value of whose total assets are assets
held for investment after applying the conventions set out in
such Section 368(a)(2)(F)).
For purposes of Section 6.03, the representations and warranties made in this
Section C shall be deemed to be included in Article III.
End of Addendum