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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(Mark one) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 000-23231
INNOVATIVE VALVE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0530346
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2 NORTHPOINT DRIVE, SUITE 300 77060
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (281) 925-0300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
None Not applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $.001 per share
(Title of class)
Rights to Purchase Series A Junior
Participating Preferred Stock
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 29, 1999, there were 9,664,562 shares of common stock, par
value $.001 per share, of the Registrant issued and outstanding, 6,213,381 of
which, having an aggregate market value of $5,048,392, based on the closing
price per share of the common stock of the Registrant reported on the Nasdaq
National Market on that date, were held by non-affiliates of the Registrant. For
purposes of the above statement only, all directors and executive officers of
the Registrant are assumed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
None
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EXPLANATORY NOTE
This Amendment on Form 10-K/A to the Annual Report on Form 10-K of
Innovative Valve Technologies, Inc. ("Invatec" or the "Company") for the year
ended December 31, 1998 is filed solely to include Item 10 (Directors and
Executive Officers of the Registrant), Item 11 (Executive Compensation), Item 12
(Security Ownership of Certain Beneficial Owners and Management) and Item 13
(Certain Relationships and Related Transactions), not previously included in the
Form 10-K, as permitted by General Instruction G(3) of Form 10-K, and to file
certain exhibits under Item 14 (Exhibits, Financial Statement Schedules, and
Reports on Form 8-K).
TABLE OF CONTENTS TO FORM 10-K/A
PAGE
PART III
Item 10. Directors and Executive Officers of the Registrant ................ 1
Item 11. Executive Compensation ............................................ 3
Item 12. Security Ownership of Certain Beneficial Owners and Management .... 8
Item 13. Certain Relationships and Related Transactions .................... 9
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of March
31, 1999, concerning each of the directors and executive officers of Invatec:
DIRECTOR
NAME AGE POSITION CLASS
- ---- --- -------- --------
William E. Haynes 55 Chairman of the Board and Chief Executive Officer I
Charles F. Schugart 39 President and Director II
Pliny L. Olivier 53 Senior Vice President - Operations
Douglas R. Harrington, Jr. 34 Vice President and Chief Financial Officer,
Treasurer and Secretary
Robert M. Chiste 51 Director III
Arthur L. French 58 Director I
Roger L. Miller 58 Director II
Felix Pardo 61 Director II
T. Wayne Wren 50 Director III
Invatec's Board of Directors (the "Board") has three director classes,
each of which, following a transitional period, will have a three-year term,
with one class being elected each year at that year's annual stockholders'
meeting. The second term of the Class I directors will expire at the 2001
meeting, while the initial terms of the Class II directors and the Class III
directors will expire at the 1999 meeting and the 2000 meeting, respectively.
The Board appoints Invatec's executive officers annually to serve for the
ensuing year or until their respective successors have been duly appointed. The
executive officers and directors listed above have had the business experience
indicated below during the last five years.
WILLIAM E. HAYNES has been Chairman of the Board since May 1997 and Chief
Executive Officer since March 1997. He also served as President of Invatec from
March 1997 until October 1998 and as President and Chief Executive Officer of
SSI from November 1996 until March 1997. From July 1992 through December 1995,
Mr. Haynes served as President and Chief Executive Officer of LYONDELL-CITGO
Refining Company Ltd. Mr. Haynes is also a director of Philip Services Corp., an
industrial and environmental services company ("Philip").
CHARLES F. SCHUGART was elected Chief Financial Officer, Secretary and
Treasurer of Invatec in March 1997, Senior Vice President - Corporate
Development in July 1997, and President in October 1998. He previously served
for over 12 years in a variety of capacities with Arthur Andersen LLP, including
most recently as Senior Manager. Mr. Schugart is a Certified Public Accountant.
Mr. Schugart was elected a director of Invatec in February 1999.
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PLINY L. OLIVIER has been Senior Vice President - Operations since March
1998. Prior thereto, Mr. Olivier had been President of GSV, Inc., currently a
subsidiary of Invatec, since November 1985.
DOUGLAS R. HARRINGTON, JR. has served as Vice President of Invatec since
March 1997, and was elected Treasurer in August 1998, and Secretary and Chief
Financial Officer in October 1998. Mr. Harrington also served as Assistant
Treasurer, Assistant Secretary and Corporate Controller of Invatec from March
1997 until October 1998. Prior to February 1997, he served in various
capacities, including most recently as Controller - U.S. Operations for
Gundle/SLT Environmental, Inc. from March 1992 through May 1995 and from January
1996 until February 1997. From May 1995 through December 1995, Mr. Harrington
served as Senior Manager - Accounting for BSG Consulting, Inc. Mr. Harrington is
a Certified Public Accountant.
ROBERT M. CHISTE has been a director of the Company since October 1997. He
was President, Industrial Services Group, of Philip from July 1997 until May
1998 and has served as Chairman and Chief Executive Officer of TriActive
Technologies, Inc. since that date. He served as Vice Chairman of Allwaste, Inc.
("Allwaste"), a provider of industrial and environmental services, from May 1997
through July 1997, President and Chief Executive Officer of Allwaste from
October 1994 through July 1997 and a director of Allwaste from January 1995
through August 1997. Philip acquired Allwaste in July 1997. Prior to October
1994, Mr. Chiste served as Chief Executive Officer and President of American
National Power, Inc. and as Senior Vice President of Transco Energy Company. Mr.
Chiste is a director of Franklin Credit Management Corp., a New York-based
financial services company, and Pentacon, Inc., a distributor of fasteners and
small parts to original equipment manufacturers.
ARTHUR L. FRENCH has been a director of the Company since October 1997. He
has served as Chairman of the Board, Chief Executive Officer and President of
Metals USA, Inc., a metals processor and manufacturer of metal components, since
December 1996. From 1989 to 1996, Mr. French served as Executive Vice President
and a director of Keystone International, Inc., a manufacturer of industrial
valves and controls, with responsibility for domestic and international
operations.
ROGER L. MILLER founded The Safe Seal Company, Inc. ("SSI") in 1991 and
was its President until December 1996 when he became Chairman of the Board of
SSI. He resigned as an officer and director of SSI immediately prior to
Invatec's initial public offering in October 1997. Mr. Miller engaged in private
investments until January 1999 when he founded and became Chief Executive
Officer of Outsource Management, Inc., a Houston based company organized to
provide outsourcing procurement services for large buyers of precision
manufactured products. Mr. Miller was elected a director of Invatec in November
1998.
FELIX PARDO has been a director of Philip since March 1994 and was the
Chief Operating Officer of Philip from March 1998 until his appointment as
President and Chief Executive Officer in May 1998. Mr. Pardo resigned that
position in November 1998 and is currently serving as
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Chairman of Dyckerhoff, Inc., a cement and building materials company. From May
1992 to March 1998, Mr. Pardo was the President and Chief Executive Officer of
Ruhr-American Coal Corporation. Mr. Pardo was elected a director of the Company
in August 1998 pursuant to the request of Philip, the Company's largest
shareholder, that it have a representative on the board of directors.
T. WAYNE WREN, JR. has been a director of the Company since October 1997.
He is currently a financial consultant. He served as Senior Vice President of
PSC Enterprises, Inc., a subsidiary of Philip, from July 1997 to March 1998 and
served as Senior Vice President-Chief Financial Officer and Treasurer of
Allwaste from March 1996 through July 1997, having served as its Vice President
- - Chief Financial Officer since November 1995. From January 1994 to November
1995, Mr. Wren was an independent financial consultant. He also provided
financial consulting services to Allwaste pursuant to a consulting agreement
from January 1994 to June 1994.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons holding more than 10% of a registered class of
the Company's equity securities to file with the SEC initial reports of
ownership, reports of changes in ownership and annual reports of ownership of
Common Stock and other equity securities of the Company. Such directors,
officers and stockholders are also required to furnish the Company with copies
of all such filed reports. Based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during 1998, the Company believes that all Section 16(a)
reporting requirements related to the Company's directors and executive officers
were timely fulfilled during 1998.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation
earned by the Company's Chief Executive Officer, its three other most highly
compensated executive officers whose salary and bonus exceeded $100,000 and two
former executive officers, for services rendered to the Company during 1998 and
1997:
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SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------- ------------------------------
SHARES ALL
OTHER ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- ---- -------- -------- ------------ ---------- ------------
William E. Haynes .......................... 1998 $174,970(1) $ -- $ -- 10,000(2) $ --
Chairman of the Board and 1997 125,000(3) 127,750 724,700(4) 347,966(2)(5) --
Chief Executive Officer
Charles F. Schugart ........................ 1998 179,167 -- -- 128,750(2) --
President 1997 151,042(6) 122,500 150,000(7) 138,608(2)(5) --
Pliny L. Olivier ........................... 1998 170,552 -- 4,000 126,250(2) --
Senior Vice President - 1997 124,694(8) 59,545 -- 100,000(2) --
Operations
Douglas R. Harrington, Jr. ................. 1998 102,887 -- -- 103,750(2) --
Vice President and 1997 72,958(6) 34,000 15,000(9) 61,356(2) --
Chief Financial Officer,
Treasurer and Secretary
Curry B. Walker, Jr. (8) ................... 1998 150,000 -- -- -- --
Former Vice President - 1997 83,785 3,714 5,383 40,000 --
Quality, Safety, and
Engineering
Denny A. Rigas (6) ......................... 1998 134,399 -- 6,800 -- --
Former Senior Vice President- 1997 111,892 25,000 -- 122,710 110,674(10)
Technology and Marketing
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(1) Effective October 1, 1998, Mr. Haynes voluntarily reduced his annual
salary from $200,000 to $100,000, retaining the right to prospectively
reinstate his full salary at a later time.
(2) The 1997 amounts include options granted in 1997 which were surrendered in
1998 as follows: Mr. Haynes - 10,000 options with an exercise price of
$13.00; Mr. Schugart - 50,000 options with an exercise price of $9.00 and
50,000 options with an exercise price of $13.00; Mr. Olivier - 20,000
options with an exercise price of $9.00, 20,000 options with an exercise
price of $13.00, and 60,000 options with an exercise price of $15.75; and
Mr. Harrington - 25,000 options with an exercise price of $9.00 and 25,000
options with an exercise price of $13.00.
(3) Represents salary from May 1997. Mr. Haynes did not receive any salary
prior thereto.
(4) Represents a one-time $300,000 bonus paid on the closing of the IPO in
October 1997 and a January 1997 award of SSI common stock valued at
$424,700 for federal income tax purposes.
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(5) Includes shares subject to options into which previously outstanding
options granted in 1997 to purchase shares of common stock of SSI were
converted in the October 1997 merger pursuant to which SSI became a
subsidiary of the Company as follows: Mr. Haynes - 250,000 and Mr.
Schugart - 100,000.
(6) Represents salary for 1997 from date of employment of February for Messrs.
Schugart and Harrington and June for Mr. Rigas. Mr. Rigas' employment with
the Company terminated September 28, 1998.
(7) Represents a one-time $50,000 bonus and a January 1997 award of SSI common
stock valued at $100,000 for federal income tax purposes.
(8) Salary for 1997 is from post-acquisition date of March 1997 for Mr.
Olivier and June 1997 for Mr. Walker. Mr. Walker resigned as an executive
officer of the Company on February 15, 1999.
(9) Represents a one-time bonus paid on the closing of the IPO.
(10) Represents a one-time advance for moving expenses under Mr. Rigas'
employment agreement.
OPTION GRANTS
The following table sets forth information regarding the options granted
during 1998 to the executive officers named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (2)
OPTIONS EMPLOYEES EXERCISE EXPIRATION ----------------------
NAME GRANTED (1) IN 1998 PRICE DATE 5% 10%
- ---------------------------------------------------- ---------- ---------- ---------- ------------ ---------- ---------
William E. Haynes .................................. 10,000 2% $ 2.75 August 2005 $ 11,195 $ 26,090
Charles F. Schugart ................................ 10,000 2% 2.75 August 2005 11,195 26,090
118,750 27% 2.00 October 2004 96,686 225,320
Pliny L. Olivier ................................... 70,000 16% 2.75 August 2005 78,367 182,628
56,250 13% 2.00 October 2004 45,799 106,731
Douglas R. Harrington, Jr .......................... 10,000 2% 2.75 August 2005 11,195 26,090
93,750 21% 2.00 October 2004 76,331 177,884
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(1) During 1998, the executive officers name above surrendered options granted
in 1997 as follows: Mr. Haynes - 10,000 options with an exercise price of
$13.00; Mr. Schugart - 50,000 options with an exercise price of $9.00 and
50,000 options with an exercise price of $13.00; Mr. Olivier - 20,000
options with an exercise price of $9.00, 20,000 options with an exercise
price of
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$13.00, and 60,000 options with an exercise price of $15.75; and Mr.
Harrington - 25,000 options with an exercise price of $9.00 and 25,000
options with an exercise price of $13.00.
(2) Calculated on the basis of the indicated rate of appreciation in the value
of the Common Stock, compounded annually from the assumed fair market
value on the date of grant to the end of the option term.
AGGREGATE OPTION HOLDINGS AND YEAR-END VALUES
No options to purchase Common Stock were exercised during 1998
by any of the named executive officers. The following table presents information
regarding the value of options outstanding at December 31, 1998 for each of the
executive officers named in the Summary Compensation Table:
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR END (1)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
William E. Haynes ............. 221,299 126,667 $ 153,121 $ --
Charles F. Schugart ........... 101,316 66,042 93,772 33,428
Pliny L. Olivier .............. 51,456 74,794 15,834 15,834
Douglas R. Harrington, Jr ..... 61,564 53,542 44,140 26,391
Curry B. Walker, Jr ........... 20,000 20,000 -- --
Denny A. Rigas ................ 22,710 -- 35,496 --
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(1) The closing price for the Common Stock on the Nasdaq National Market was
$2.56 per share on December 31, 1998. Value is calculated on the basis of
the difference between the option exercise price and $2.56.
DIRECTORS' REMUNERATION
The Company pays each director who is not a Company employee (a
"Nonemployee Director") fees of $1,000 for each Board meeting attended and each
Board committee meeting attended (except for committee meetings held on the same
day as Board meetings), and on the date of the annual meeting of stockholders in
1998 the Company awarded to each Nonemployee Director options to purchase 10,000
shares of Common Stock pursuant to the Company's 1997 Incentive Plan (the
"Incentive Plan"). Each of the directors elected to the Board after the annual
meeting of stockholders automatically received on the date of his election
options to purchase that portion of 10,000 shares represented by the portion of
the year remaining from his election until the next annual meeting of
stockholders. In addition, in August 1998, Nonemployee Directors received an
award of 10,000 options and Nonemployee Directors who served on the Special
Committee of the Board received an additional award of 5,000 options (the
"August Options"). Options granted to Nonemployee Directors have a seven year
term, are granted at an exercise price equal to the fair market value of a share
of Common Stock on the date of the grant and vest in annual increments of
one-third beginning on the first anniversary of the date of the grant, except
for the August Options which begin to vest one-third on the date of grant. The
Company will not pay any additional compensation to its employees for serving as
directors, but will reimburse all directors for out-of-pocket expenses they
incur in connection with attending Board or Board committee meetings or
otherwise in their capacity as directors.
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EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Haynes, Schugart,
Olivier and Harrington. Mr. Rigas' employment was terminated pursuant to his
Employment Agreement with the Company on September 28, 1998. Each of the
agreements with the Company's current executive officers provides for an annual
minimum base salary and entitles the employee to participate in all of the
Company's compensation plans (as defined) in which executive officers of the
Company participate. Mr Haynes' agreement has a continuous term of three years,
Mr. Schugart's agreement has a continuous term of two years, and Messrs. Olivier
and Harrington's agreements have two year terms, in each case subject to the
right of either party to terminate the employee's employment at any time.
If the employment of Messrs. Haynes or Schugart is terminated by reason of
that employee's death or disability (as defined), by the Company without cause
(as defined) or by the employee for good cause (as defined), the employee or his
estate will be entitled to a lump-sum payment equal to a multiple (three for Mr.
Haynes and two for Mr. Schugart) of his highest annual salary and incentive
bonuses. If a change of control (as defined) of the Company occurs, each of Mr.
Haynes and Mr. Schugart may terminate his employment at any time during the
730-day period beginning 270 days following that event and receive the same
lump-sum payment together with such amount as may be necessary to hold him
harmless from the consequences of any resulting excise or other similar purpose
tax relating to "parachute payments" under the Internal Revenue Code of 1986, as
amended. If the employment of Messrs. Harrington or Olivier is terminated by the
Company without cause, the employee will be entitled to a lump sum payment equal
to his salary for the longer of (i) the remaining term of his agreement or (ii)
twelve months in the case of Mr. Harrington and six months in the case of Mr.
Olivier. Under a separate Termination Agreement with the Company, Mr. Harrington
is entitled to receive a lump sum payment equal to two times his highest annual
salary during the three years ended immediately prior to his termination
following a change in control (as defined), but only to the extent that amount
exceeds the lump sum payment due under his employment agreement.
Each agreement contains a covenant limiting competition with the Company
for two years following termination of employment, except for Mr. Harrington's
agreement which contains a one year covenant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1998 the Compensation Committee consisted of Michael A. Baker and
Messrs. Chiste and Knight. Since February 1999, the Compensation Committee has
consisted of Messrs. Chiste and Pardo. Mr. Chiste was the chief executive
officer of Allwaste prior to its acquisition by Philip in July 1997, and
President, Industrial Services Group, of Philip from July 1997 until May 1998.
Mr. Pardo was the President of Philip until November, 1998 and currently serves
as a director of that company. Mr. Haynes, the Chairman of the Board and Chief
Executive Officer of Invatec, also serves on the Board of Philip.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, the "beneficial
ownership" (as defined by the SEC) of the Common Stock of (i) each person known
to the Company to beneficially own more than 5% of its outstanding shares of
Common Stock, (ii) each of the Company's directors, (iii) the executive officers
of the Company named in the Summary Compensation Table and (iv) all executive
officers and directors of the Company as a group. All persons listed have sole
voting and investment power with respect to their shares unless otherwise
indicated.
SHARES BENEFICIALLY
OWNED (1)
---------------------
NAME NUMBER PERCENT
- ---- --------- ---------
Philip Services Corp. (2) .................................. 2,340,716 22.4%
100 King Street,
P.O. Box 2440, LCD 1
Hamilton, Ontario Canada L8N 4J6
Robert Alpert .............................................. 1,269,700 12.1
The Alpert Companies
Three Allen Center
333 Clay, Suite 4150
Houston, Texas 77002
Wellington Management Company, LLP (3) ..................... 925,000 8.9
75 State Street
Boston, Massachusetts 02109
Roger L. Miller (4) ........................................ 563,219 5.4
P.O. Box 572843
Houston, Texas 77257
William E. Haynes .......................................... 367,964 3.4
Charles F. Schugart ........................................ 159,116 1.5
Pliny L. Olivier ........................................... 51,456 *
Douglas R. Harrington, Jr .................................. 78,564 *
Curry B. Walker, Jr. (5) ................................... 199,171 1.9
Denny A. Rigas ............................................. 56,710 *
Robert M. Chiste ........................................... 48,333 *
Arthur L. French ........................................... 6,666 *
Felix Pardo ................................................ -- *
T. Wayne Wren, Jr .......................................... 13,333 *
Executive officers and directors as a group (11 persons) ... 1,544,532 14.8
- ----------
*Less than 1%
(1) Shares shown include shares subject to currently exercisable options, as
follows: Mr. Haynes - 221,299; Mr. Schugart - 101,316; Mr. Olivier -
51,456; Mr. Harrington - 61,564; Mr. Walker - 20,000; Mr. Rigas - 22,710;
Mr. French - 6,666; Mr. Wren - 8,333; Mr. Chiste - 8,333; and all
executive officers and directors as a group - 501,677.
(2) Shares shown are directly owned by wholly owned subsidiaries of Philip, as
follows: Philip Industrial Services Group, Inc. - 2,185,758 shares; and
Philip Environmental Services, Inc. - 154,958 shares. The address of both
Philip subsidiaries is 5151 San Felipe, Suite 1600, Houston, Texas 77056.
Allen Fracassi, the interim chief executive officer of Philip, has sole
voting and
- 8 -
investment power respecting the shares of which Philip is the beneficial
owner, subject to the direction of that corporation's board of directors.
Mr. Fracassi disclaims beneficial ownership of those shares.
(3) Wellington Management Company, LLP is a registered investment adviser that
shares the voting and investment power over the shares held in its name.
(4) Mr. Miller is the direct beneficial owner of 425,400 shares and, as the
owner of Computerized Accounting and Tax Services, Inc., is the beneficial
owner of the 137,819 shares it owns.
(5) Shares shown include 179,171 shares issuable on the conversion of a
convertible subordinated note at an initial conversion price of $16.90 per
share.
CHANGE IN CONTROL
In 1998, Invatec acquired three businesses pursuant to acquisition
agreements which contained provisions requiring the Company to pay a Makeup
Amount to the former shareholders of each acquired business on the first
anniversary of that acquisition if the price of Invatec Common Stock on that
anniversary date is below a certain level. As described in "Businesses Acquired
in 1998" in Item 1 of this Report, a portion of the Makeup Amount must be paid
in Invatec Common Stock and the remainder may be paid in cash or stock at the
option of the Company.
If the market price of Invatec Common Stock on the anniversary dates of
the acquisitions were the same as its market price of $.8125 on March 29, 1999,
and Invatec paid the maximum of $4,971,251 of the Makeup Amount payable in cash,
an additional 1,901,358 shares, or approximately 20% of its shares currently
issued and outstanding, would be due the former shareholders of those acquired
businesses. If the Company is unable to pay the maximum cash portion of the
Makeup Amount in cash and is required to pay a larger portion of the Makeup
Amount by delivery of additional shares, the former shareholders of two of those
acquired businesses, either Plant Maintenance, Inc. ("PMI") or Collier Equipment
Corporation ("Collier") might, individually or collectively, have beneficial
ownership of Invatec stock that would exceed the beneficial ownership of any
current shareholder. A potential change in control of the Company might result.
The Company is unable to predict what the ultimate cash portion of the Makeup
Amount will be or the market price of the Company's Common Stock at the
respective anniversary dates of such acquisitions, and, therefore, the ultimate
number of shares issuable to the former shareholders of PMI or Collier.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOANS TO EXECUTIVE OFFICERS
At March 31, 1999, Invatec had outstanding an interest-free loan to Mr.
Haynes made pursuant to his employment agreement in the principal amount of
$174,338 to enable him to pay the federal income taxes attributable to the stock
awards made to him in 1997 and reflected in the Summary Compensation Table above
under "Other Annual Compensation." The loan, which is evidenced by a promissory
note, may be repaid, at Mr. Haynes' option, in cash or shares of Common Stock
valued at its market value at the time of payment. The Company believes the
terms of this loan are more favorable to Mr. Haynes than the terms available
from disinterested third parties.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (3) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------------------------------------------------------------
*10.2(b) -- Letter Agreement dated October 30, 1998 between the Company and
William E. Haynes.
*10.5(c) -- Termination Agreement dated August 21, 1998 between the Company
and Douglas R. Harrington, Jr.
- ------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(c) of this Form 10-K/A.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INNOVATIVE VALVE TECHNOLOGIES, INC.
Date: April 30, 1999 By:/s/WILLIAM E. HAYNES
WILLIAM E. HAYNES
CHIEF EXECUTIVE OFFICER
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