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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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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<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION CLASS
- ---- --- -------- --------
<S> <C>
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
</TABLE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------- ------------------------------
SHARES ALL
OTHER ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- ---- -------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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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.
- 4 -
<PAGE>
(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
<TABLE>
<CAPTION>
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%
- ---------------------------------------------------- ---------- ---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- ------------------
(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
- 5 -
<PAGE>
$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:
<TABLE>
<CAPTION>
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
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
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 --
</TABLE>
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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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<PAGE>
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.
- 7 -
<PAGE>
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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
---------------------
NAME NUMBER PERCENT
- ---- --------- ---------
<S> <C> <C>
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
</TABLE>
- ----------
*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 -
<PAGE>
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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<PAGE>
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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EXHIBIT 10.2(b)
October 30, 1998
Innovative Valve Technologies, Inc.
2 Northpoint Drive, Suite 300
Houston, Texas 77060
Attn: Compensation Committee
Re: AMENDED AND RESTATED EMPLOYMENT AGREEMENT OF WILLIAM E. HAYNES
DATED OCTOBER 15, 1997 (THE "EMPLOYMENT AGREEMENT")
Gentlemen:
The purpose of this letter is to evidence our mutual understanding and agreement
as to the following matters:
1. Effective October 12, 1998, I have unilaterally and temporarily reduced
my salary under the Employment Agreement until further notice (as
contemplated below) by one-half to help improve the Company's earnings
and cash flow and to illustrate a leadership position and encourage
other employees of the Company to make commitments to help company
performance. Although I am forever waiving the rights to such salary
reduction that has accrued but been unpaid after such date, such
reduction shall not be deemed a breach of the Employment Agreement by
the Company. This reduction is expected to be a temporary reduction
which shall remain in effect on a quarterly basis until I provide the
Company the notice contemplated in the next sentence. I reserve the
right to prospectively reinstate my full salary at any time and for any
reason by providing the Compensation committee with notice prior to the
commencement of any calendar quarter of my election to reinstate my
full salary.
2. We have mutually agreed that Charles F. Schugart will prospectively be
elected and serve as President of the Company and the first sentence of
Section 2 of the Employment Agreement shall upon such election be
modified to delete the reference to my service as President. Such
reduction in my titles and responsibilities shall in no way be a breach
of the Employment Agreement by me, or trigger any compensation or
payments to me from the Company or result in any right by me to
terminate the Employment Agreement.
3. Except as otherwise expressly set forth above, the Employment Agreement
shall remain in full force and effect and I shall be fully entitled to
any and all compensation, termination payments and any other benefits
whatsoever available to me under the Employment Agreement.
Please evidence the Committee's agreement with the foregoing by executing the
acknowledgment set forth below.
Very truly yours,
William E. Haynes
AGREED AND ACCEPTED THIS 11th DAY OF JANUARY
COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
By:___________________________
Robert M. Chiste, Chairman
EXHIBIT 10.5(c)
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT ("AGREEMENT") is made between Innovative
Valve Technologies, Inc. a Delaware corporation (the "COMPANY") and Douglas R.
Harrington, Jr., an individual (the "EXECUTIVE"). As of the 21st day of August,
1998 with respect to the following facts:
RECITALS:
A. The Executive is a principal officer of the Company and an
integral part of its management.
B. The Company wishes to assure both itself and the Executive of
continuity of management in the event of any actual or
threatened change in control of the Company.
C. This Agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably
expect in the absence of a change in control of the Company
and, accordingly, this Agreement, though taking effect upon
execution thereof, will be operative only upon a change of
control of the Company, as that term is defined herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution by the
parties hereto. Anything in this Agreement to the contrary notwithstanding,
neither this Agreement nor any provision thereof shall be operative unless and
until there has been a "Change in Control" of the Company as defined in SECTION
5 below. Upon such a Change in Control of the Company, this Agreement and all
provisions hereof shall become operative immediately.
2. PURPOSE AND INTENT
The Board of Directors of the Company (the "BOARD") recognizes that the
possibility of a Change in Control of the Company exists and that such
possibility, and the uncertainty and questions which it necessarily raises among
management, may result in the departure or distraction
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of key management personnel to the detriment of the Company and its shareholders
in this period when their undivided attention and commitment to the best
interests of the Company and its shareholders are particularly important.
Accordingly, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control of the Company.
3. TERM OF AGREEMENT
This Agreement shall be effective upon the execution thereof by the
parties, and shall remain in effect until August 31, 2002, at which time it
shall terminate; provided, however, that the term of this Agreement shall be
extended by one day for each day after August 31, 2000 that notice of
termination by either party has not been given to the other, so that at all
times after August 31, 2000, if neither party has given notice of termination
then this Agreement shall have a one (1) year remaining term. Either party may
give notice of termination of this Agreement at any time, with or without cause.
If any notice of termination is given on or before August 31, 2000, then this
Agreement shall terminate August 31, 2002. If any notice of termination is given
after August 31, 2000, then this Agreement shall terminate on that date one year
after such notice is given.
4. TERMINATION FOLLOWING CHANGE IN CONTROL
For purposes hereof only, a termination of the Executive's employment
following a Change in Control (" TERMINATION FOLLOWING CHANGE IN CONTROL") shall
be deemed to occur if at any time during the one-year period immediately
following a Change in Control:
(a) there has been an actual termination by the Company of the
Executive's employment, other than "For Cause" as such term is
defined in Section 7;
(b) the Company reduces the Executive's base salary, bonus
computation or title;
(c) the Company substantively reduces the Executive's
responsibilities as in effect prior to the Change in Control
or as the same may be increased from time to time, or there is
a material change in employment conditions deemed by the
Executive to be materially adverse as compared to those in
effect prior to the Change in Control, any of which is not
remedied within 30 days after receipt by the Company of notice
by the Executive, of such reduction in responsibilities or
change in employment conditions;
(d) the Company requires the Executive to be based anywhere other
than Houston, Texas metropolitan area, except for required
travel on the Company's business to an extent substantially
consistent with that prior to the Change in Control;
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(e) the Company fails to obtain the assumption of the performance
of this Agreement by any successor of the Company;
(f) a failure by the Company to comply with any material provision
of the Employment Agreement between the Company and the
Executive which has not been cured within ten (10) days after
notice of such noncompliance has been given by the Executive
to the Company;
(g) the failure by the Company to continue in effect any
compensation plan in which Executive participates unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan in
connection with a Change in Control or the failure of the
Company to continue Executive's participation therein or the
taking of any action by the Company which would materially and
adversely affect Executive's participation in any such plan or
reduce Executive's benefits thereunder;
(h) the failure by the Company to continue to provide Executive
with benefits not less than those enjoyed under any of the
Company's pension, life insurance, medical, health and
accident, or disability plans in which Executive was
participating or entitled to participate at the time of a
Change in Control or the taking of any action by the Company
which would directly or indirectly materially reduce any such
benefits; including, but not limited to, the failure to pay
any premiums with respect to such benefits borne by the
Company (or any increase to the Executive in the premiums or
other amounts borne by the Executive) at the time of the
Change in Control;
(i) the Company takes any action which would deprive the Executive
of any other material fringe benefit enjoyed by the Executive
at the time of the Change in Control, or the Company fails to
provide the Executive with the number of paid vacation days to
which the Executive is then entitled in accordance with the
Company's normal vacation policy in effect on the date of the
Change in Control.
The voluntary termination by the Executive of his employment by the Company
shall in no event constitute a "Termination Following Change in Control."
5. DEFINITION OF CHANGE IN CONTROL
A Change in Control will be deemed to have occurred if:
(a) any "person" or "group" as such terms are used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT"), becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 30% or
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more of the combined voting power of the Company's then
outstanding equity securities;
(b) there is a merger or consolidation of the Company in which the
Company does not survive as an independent public company; or
(c) the business or businesses of the Company for which the
Executive's services are principally performed are disposed of
by the Company pursuant to a partial or complete liquidation
of the Company, a sale of assets (including stock of a
subsidiary) of the Company, or otherwise.
6. COMPENSATION FOLLOWING TERMINATION
(a) Subject to the terms and conditions of this Agreement, upon a
Termination Following Change in Control, as defined in SECTION
4, which occurs during the term of this Agreement, the
Executive shall be entitled to (i) a lump sum payment, within
fifteen (15) days following such termination, in an amount
equal to two times the highest annual level of salary during
the three calendar years ended immediately prior to such
termination, (ii) the immediate vesting of all previously
granted but unvested stock options to acquire securities from
the Company which were outstanding on the date of the
termination, and (iii) continuing health coverage for a period
of twenty-four (24) months, at a level commensurate with that
which the Executive enjoyed with the Company immediately prior
to such Change in Control. Notwithstanding the foregoing, any
lump sum cash payment with respect to salary under subclause
(i) of the second sentence of Section 9 of the Employment
Agreement shall be credited against any lump sum payment under
this Paragraph 6(a) the intention of the Parties being to
limit all severance compensation with respect to salary to two
full years of salary.
(b) The Executive shall not be required to mitigate the amount of
any payment provided for in this SECTION 6 by seeking other
employment or otherwise, nor shall the amount of any payment
or benefit provided for in this SECTION 6 be reduced by any
amounts to which the Executive shall be entitled by law (nor
shall payment hereunder be deemed in lieu of such amounts), by
any compensation earned by the Executive as the result of
employment by another employer or by retirement benefits after
the date of termination or voluntary termination, or
otherwise.
(c) Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive
or his estate or beneficiaries shall be subject to the
withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation.
In lieu of withholding such amounts, the
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Company may accept other provisions to the end that it has
sufficient funds to pay all taxes required by law to be
withheld in respect of any or all of such payments.
7. DEFINITION OF "FOR CAUSE"
The Termination of the Executive's employment by the Company shall be
deemed "For Cause" if it results from:
(a) the willful or continued failure by the Executive
substantially to perform his duties hereunder or regular
failure to follow the specific directives of the Chief
Executive Officer, President or Chief Financial Officer, after
demand for substantial performance that specifically
identifies the manner in which the Company believes the
Executive has not substantially performed his duties is
delivered by the Company;
(b) misappropriated funds or property of the Company or otherwise
engaged in acts of dishonesty, fraud, misrepresentation or
other acts of moral turpitude, even if not in connection with
the performance of his duties hereunder, which would result in
serious prejudice to the interests of the Company if he were
retained as an employee or secured any personal profit not
thoroughly disclosed to and approved by the Company in
connection with any transaction entered into on behalf of or
with the Company or any affiliate of the Company;
(c) the Executive's death; or
(d) an accident or illness which renders the Executive unable, for
a period of at least six (6) consecutive months, to perform
the essential functions of his job, notwithstanding the
provision of reasonable accommodation by Company.
For purposes of this section, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding the foregoing,
the Executive shall not be deemed to have been terminated For Cause under
subsection (a)without (i) reasonable notice to the Executive setting forth the
reasons for the Company's intention to terminate For Cause, (ii) an opportunity
for the Executive, together with his counsel, to be heard before the Chief
Executive Officer, President or Chief Financial Officer, and (iii) delivery to
the Executive of a notice of termination from the Chief Executive Officer,
President or Chief Financial Officer finding that, in the good faith opinion of
the Chief Executive Officer, President or the Chief Financial Officer, the
Executive was guilty of conduct set forth above in clause (a) of the preceding
sentence and specifying the particulars thereof in detail.
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8. TAX TREATMENT
It is the intention of the parties that no portion of the payment made
under SECTION 6 hereof (The "TERMINATION PAYMENT") or any other payment under
this Agreement, or payments to or for the Executive's benefit under any other
agreement or plan, be deemed to be an excess parachute payment as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the "CODE"), or
its successors. It is agreed that the present value of the Termination Payment
and any other payment to or for the Executive's benefit in the nature of
compensation, receipt of which is contingent on the Change in Control of the
Company, and to which Section 280G of the Code or any successor provision
thereto applies (in the aggregate "Total Payments") shall not exceed an amount
equal to one dollar less than the maximum amount which the Executive may receive
without becoming subject to the tax imposed by Section 4999 of the Code or any
successor provisions or which the Company may pay without loss of deduction
under Section 280G of the Code or any successor provision. Present value for
purposes of this Agreement shall be calculated in accordance with Section
1274(b)(2) the Code or any successor provision.
Within six (6) days following delivery of written notice by the Company
to the Executive of the Company's belief that there is a payment or benefit due
which will result in an excess parachute payment as defined in Section 280G of
the Code or any successor provision, the Company and the Executive, at the
Company's expense, shall obtain the opinion of legal counsel and certified
public accountants, as the Company and Executive may mutually agree upon, which
opinions need not be unqualified, which sets forth (i) the amount of the
Executive's Base Period Income, as defined in Section 280G of the Code, (ii) the
present value of Total Payments, and (iii) the amount and present value of any
excess parachute payments.
In the event such opinions determine that there would be an excess
parachute payment, the Termination Payment hereunder, or any other payment
determined by such counsel to be includable in Total Payments, shall be reduced
or eliminated in the following order: (i) by the amount of any options to
purchase securities of the Company which have had their vesting rights
accelerated hereunder, and (ii) by the amount of any cash received hereunder, so
that under the bases of calculation set forth in such opinions there will be no
excess parachute payment. The provisions of this Section, including the
calculations, notices and opinions provided herein, shall be based upon the
conclusive presumption that (i) the compensation and benefits provided herein
and (ii) any other compensation, including but not limited to any accrued
benefits, earned by the Executive prior to the Change in Control of the Company
pursuant to the Company's compensation programs, would have been reasonable if
made in the future in any event, even though the timing of such payment is
triggered by the Change in Control of the Company. In the event such legal
counsel so requests in connection with the Section 280G opinion required by this
Section, the Company and Executive shall obtain, at the Company's expense, the
advice of a firm of recognized executive compensation consultants concerning the
reasonableness of any item of compensation to be received by the Executive, on
which advice legal counsel may rely in providing their opinion. In the event
that the provisions of Sections 280G and 4999 of the Code
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or any successor provision are repealed without succession, this Section shall
be of no further force or effect.
9. MISCELLANEOUS
(a) INTENT. This Agreement is made by the Company in order to induce
the Executive to remain in the Company's employ, with the Company's
acknowledgment and intent that it will be relied upon by the Executive, and in
consideration of the services to be performed by the Executive from time to time
hereafter. However, this Agreement is not an agreement to employ the Executive
for any period of time or at all, and the terms and conditions of the
Executive's employment, other than those expressly addressed herein, shall be
subject to and governed by a separate agreement of employment between the
Company and the Executive. This Agreement is intended only as an agreement to
provide the Executive with a specified compensation and benefits if he is
terminated following a Change in Control.
(b) ARBITRATION. Any and all disputes or controversies whether of law
or fact and of any nature whatsoever arising from or respecting this Agreement
shall be decided by arbitration by the American Arbitration Association in
accordance with its Commercial Rules except as modified herein.
(i) The arbitrator shall be elected as follows: in the event
the Company and the Executive agree on one arbitrator, the arbitration
shall be conducted by such arbitrator. In the event the Company and the
Executive do not so agree, the Company and the Executive shall each
select one independent, qualified arbitrator and the two arbitrators so
selected shall select the third arbitrator (the arbitrator(s) are
herein referred to as the "Panel"). The Company reserves the right to
object to any individual arbitrator who shall be employed by or
affiliated with a competing organization.
(ii) Arbitration shall take place at Houston, Texas, or any
other location mutually agreeable to the Parties. At the request of
either Party, arbitration proceedings will be conducted in the utmost
secrecy; in such case all documents, testimony and records shall be
received, heard and maintained by the arbitrators in secrecy, available
for inspection only by the Company or the Executive and their
respective attorneys and their respective experts who shall agree in
advance and in writing to receive all such information in secrecy until
such information shall become generally known. The Panel shall be able
to award any and all relief, including relief of an equitable nature,
provided that punitive damages shall not be awarded. The award rendered
by the Panel may be enforceable in any court having jurisdiction
thereof.
(iii) Reasonable notice of the time and place of arbitration
shall be given to all Parties and any interested persons as shall be
required by law.
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(c) ATTORNEY'S FEES. If any action at law or in equity is commenced to
enforce any of the provisions or rights under this Agreement, the unsuccessful
party to such litigation, as determined by the court in a final judgment or
decree, shall pay the successful party all costs, expenses and reasonable
attorneys' fees incurred by the successful party or parties (including, without
limitation, costs, expenses and fees on any appeals), and if the successful
party recovers judgment in any such action or proceeding, such costs, expenses
and attorneys' fees shall be included as part of the judgment.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Texas.
(e) SUCCESSORS AND ASSIGNS.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree in writing to perform this Agreement.
Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this
Agreement and shall require the Company to pay to the Executive
compensation from the Company in the same amount and on the same terms
as the Executive would be entitled hereunder in the event of a
Termination Following Change in Control of the Company, except that for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed to be the date on which
the Executive shall receive such compensation from the Company. As used
in this Agreement, "Company" shall mean the Company as herein above
defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation or law
or otherwise.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees. If the Executive should die while any amount would still
be payable to the Executive hereunder if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no such designee, to
Executive's estate.
(f) NOTICES. Except as otherwise expressly provided herein, any notice,
demand or payment required or permitted to be given or paid shall be deemed duly
given or paid only if personally delivered or sent by United States mail and
shall be deemed to have been given when personally delivered or two (2) days
after having been deposited in the United States mail, certified mail, return
receipt requested, properly addressed with postage prepaid. All notices or
demands shall be effective only if given in writing. For the purpose hereof, the
addresses of the parties hereto (until notice of a change thereof is given as
provided in this Section 9(e)), shall be as follows:
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The Company: Innovative Valve Technologies, Inc.
2 Northpoint Drive, Suite 300
Houston, Texas 77060
Attn: President
Executive: Douglas R. Harrington, Jr.
2 Northpoint Drive, Suite 300
Houston, Texas 77060
(g) SEVERABILITY. In the event any provision in this Agreement
shall be invalid, illegal or unenforceable, such provision shall be severed from
the rest of this Agreement and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
(h) ENTIRETY. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and supersedes any
prior or contemporaneous agreement or understandings relating to the subject
matter hereof.
(i) AMENDMENT. This Agreement may be amended only by a written
instrument signed by the parties hereto, which makes specific reference to this
Agreement.
(j) SETOFF. There shall be no right of setoff or counterclaim,
in respect of any claim, debt or obligation, against any payments to the
Executive, his dependents, beneficiaries or estate provided for in this
Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
THE COMPANY: INNOVATIVE VALVE TECHNOLOGIES, INC.
By:_______________________________________
William E. Haynes, President
EXECUTIVE: __________________________________________
Douglas R. Harrington
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