<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
and
STATEMENT ON
SCHEDULE 13D
Under the Securities Exchange Act of 1934
INNOVATIVE VALVE TECHNOLOGIES, INC.
(Name of Subject Company)
FORREST ACQUISITION SUB, INC.
FLOWSERVE CORPORATION
(Bidders)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
---------------
45767J106
(CUSIP Number of Class of Securities)
---------------
COPY TO:
Ronald F. Shuff Ford Lacy, P.C.
Flowserve Corporation Akin, Gump, Strauss, Hauer & Feld, L.L.P.
222 W. Las Colinas Blvd., Suite 1500 1700 Pacific Avenue, Suite 4100
Irving, Texas 75039 Dallas, Texas 75201
(972) 443-6543 (214) 969-2800
(Name, Address and Telephone Number
of Persons Authorized to Receive
Notices and Communications on
Behalf of Bidders)
NOVEMBER 18, 1999
(Date of Event Which Requires Filing Statement on Schedule 13D)
CALCULATION OF FILING FEE
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===============================================================================
TRANSACTION VALUATION AMOUNT OF FILING FEE
- -------------------------------------------------------------------------------
<S> <C>
$15,656,590.44* $3,131.32
===============================================================================
</TABLE>
* For purposes of calculating fee only. This amount assumes the purchase of
9,664,562 shares of common stock (including the associated rights to
purchase Series A Junior Participating Preferred Stock) of Innovative Valve
Technologies, Inc. at $1.62 in cash per share. The amount of the filing
fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange
Act of 1934, as amended, equals 1/50 of one percentum of the aggregate
value of cash offered for such shares.
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing. [ ]
Amount Previously Paid: None
Form of Registration No.: N/A
Filing Party: N/A
Date Filed: N/A
<PAGE> 2
CUSIP No. 45767J106 14D-1 and 13D
<TABLE>
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- -------------------------------------------------------------------------------
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Forrest Acquisition Sub, Inc.
IRS ID No.: 75-2846393
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions):
(a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds (See Instructions)
AF
- -------------------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f): [ ]
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Delaware
- -------------------------------------------------------------------------------
Number of (7) Sole Voting Power
Shares -----------------------------------------------------
Beneficially (8) Shared Voting Power 3,125,400*
Owned By -----------------------------------------------------
Each (9) Sole Dispositive Power
Reporting -----------------------------------------------------
Person (10) Shared Dispositive Power 3,125,400*
With
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
3,125,400*
- -------------------------------------------------------------------------------
(12) Check Box if the Aggregate Amount in Row (14) Excludes Certain
Shares ( )
- -------------------------------------------------------------------------------
(13) Percent Of Class Represented by Amount in Row (14)
32.3%**
- -------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
CO
- -------------------------------------------------------------------------------
</TABLE>
* On November 18, 1999, Forrest Acquisition Sub, Inc. ("Purchaser"), a Delaware
corporation and a wholly-owned subsidiary of Flowserve Corporation, a New York
corporation, entered into a Stockholder Agreement (the "Stockholder/Option
Agreement") with certain stockholders (the "Granting Stockholders") of
Innovative Valve Technologies, Inc., a Delaware corporation (the "Company"),
pursuant to which the Granting Stockholders, among other things, (a) granted to
Purchaser an option to purchase an aggregate of 784,684 shares of common stock,
$.001 par value per share (including the associated rights to purchase Series A
Junior Participating Preferred Stock, the "Shares"), of the Company owned by
them, (b) agreed to tender in the Offer and not withdraw all Shares owned by
them and (c) granted Purchaser the power to direct the vote of such Shares and
irrevocably granted to and appointed Purchaser proxy and attorney-in-fact to
vote such Shares with respect to certain matters. In addition, on November 18,
1999, Purchaser entered into Stockholder Agreements (the "Chapter 11 Stockholder
Agreements") with certain stockholders of the Company that have filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code with
the Bankruptcy Court for the District of Delaware (the "Chapter 11
Stockholders"), pursuant to which the Chapter 11 Stockholders, among other
things (a) agreed to tender in the Offer and not withdraw all 2,340,316 Shares
owned by them and (b) granted Purchaser the power to direct the vote of such
Shares and irrevocably granted to and appointed Purchaser proxy and
attorney-in-fact to vote such Shares with respect to certain matters.
** Calculated as the total number of shares deemed beneficially owned
(3,125,400) divided by the number of shares outstanding as of the close of
business on November 17, 1999 (9,664,562).
2
<PAGE> 3
CUSIP No. 45767J106
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- -------------------------------------------------------------------------------
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Flowserve Corporation
31-0267900
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions):
(a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds (See Instructions)
WC
- -------------------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f): [ ]
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Delaware
- -------------------------------------------------------------------------------
Number of (7) Sole Voting Power
Shares -----------------------------------------------------
Beneficially (8) Shared Voting Power 3,125,400*
Owned By -----------------------------------------------------
Each (9) Sole Dispositive Power
Reporting -----------------------------------------------------
Person (10) Shared Dispositive Power 3,125,400*
With
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
3,125,400*
- -------------------------------------------------------------------------------
(12) Check Box if the Aggregate Amount in Row (14) Excludes Certain
Shares ( )
- -------------------------------------------------------------------------------
(13) Percent Of Class Represented by Amount in Row (14)
32.3%**
- -------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
CO
- -------------------------------------------------------------------------------
</TABLE>
* On November 18, 1999, Forrest Acquisition Sub, Inc. ("Purchaser"), a Delaware
corporation and wholly-owned subsidiary of Flowserve Corporation, a New York
corporation, entered into a Stockholder Agreement (the "Stockholder/Option
Agreement") with certain stockholders (the "Granting Stockholders") of
Innovative Valve Technologies, Inc., a Delaware corporation (the "Company"),
pursuant to which the Granting Stockholders, among other things, (a) granted to
Purchaser an option to purchase an aggregate of 784,684 shares of common stock,
$.001 par value per share (including the associated rights to purchase Series A
Junior Participating Preferred Stock, the "Shares"), of the Company owned by
them, (b) agreed to tender in the Offer and not withdraw all Shares owned by
them, and (c) granted Purchaser the power to direct the vote of such Shares and
irrevocably granted to and appointed Purchaser proxy and attorney-in-fact to
vote such Shares with respect to certain matters. In addition, on November 18,
1999, Purchaser entered into Stockholder Agreements (the "Chapter 11 Stockholder
Agreements") with certain stockholders of the Company that have filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code with
the Bankruptcy Court for the District of Delaware (the "Chapter 11
Stockholders"), pursuant to which the Chapter 11 Stockholders, among other
things (a) agreed to tender in the Offer and not withdraw all 2,340,316 Shares
owned by them and (b) granted Purchaser the power to direct the vote of such
Shares and irrevocably granted to and appointed Purchaser proxy and
attorney-in-fact to vote such Shares with respect to certain matters.
** Calculated as the total number of shares deemed beneficially owned
(3,125,400) divided by the number of shares outstanding as of the close of
business on November 17, 1999 (9,664,562).
3
<PAGE> 4
INTRODUCTION
This Tender Offer Statement on Schedule 14D-1 and Statement on
Schedule 13D relates to the offer by Forrest Acquisition Sub, Inc., a Delaware
corporation ("Purchaser"), to purchase any and all outstanding shares of common
stock, par value $.001 per share (the "Common Stock"), including the associated
rights to purchase Series A Junior Participating Preferred Stock (the "Rights,"
and together with the Common Stock, the "Shares"), of Innovative Valve
Technologies, Inc., a Delaware corporation (the "Company"), at a price of $1.62
per Share net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated November 22, 1999 (the
"Offer to Purchase") and in the related Letter of Transmittal (which together
constitute the "Offer"), copies of which are attached hereto as Exhibits
99(a)(1) and 99(a)(2), respectively, and are incorporated herein by reference.
Purchaser is a wholly-owned subsidiary of Flowserve Corporation, a New York
corporation ("Parent").
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Innovative Valve Technologies, Inc.
The Company is a Delaware corporation and it has its principal executive offices
at 2 Northpoint Drive, Suite 300, Houston, Texas 77060.
This Statement relates to the Offer by Purchaser to purchase all
outstanding Shares at a price of $1.62 per Share net to the seller in cash. The
information set forth in the INTRODUCTION and Section 1 ("Terms of the Offer")
of the Offer to Purchase is incorporated herein by reference.
The information set forth in Section 6 ("Price Range of the Shares;
Dividends on the Shares") of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is being filed by Purchaser and Parent.
All of the persons listed on Schedule I of the Offer to Purchase are United
States citizens. The information set forth in the INTRODUCTION, Section 9
("Certain Information Concerning Purchaser and Parent") and Schedule I of the
Offer to Purchase is incorporated herein by reference.
(e) and (f) During the last five years, neither Purchaser nor Parent,
and to the best of their knowledge, none of the persons listed on Schedule I of
the Offer to Purchase, has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
During the last five years, neither Purchaser nor Parent, and to the
best of their knowledge, none of the persons listed on Schedule I of the Offer
to Purchase, was party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgement, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or state securities
laws or finding any violations of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 9 ("Certain
Information Concerning Purchaser and Parent") and Section 11 ("Background of
the Offer") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and
Amount of Funds") of the Offer to Purchase is incorporated herein by reference.
4
<PAGE> 5
(b) and (c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the INTRODUCTION, Section 12
("Purpose of the Offer and the Merger; Plans for the Company; the Merger
Agreement; the Stockholder Agreements; Other Matters") of the Offer to Purchase
is incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the
Offer on the Market for the Shares, Stock Quotation and Exchange Act
Registration") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the INTRODUCTION, Section 9
("Certain Information Concerning Purchaser and Parent") and Section 12
("Purpose of the Offer and the Merger; Plans for the Company; the Merger
Agreement; the Stockholder Agreements; Other Matters") of the Offer to Purchase
is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the INTRODUCTION, Section 9 ("Certain
Information Concerning Purchaser and Parent"), Section 11 ("Background of the
Offer") and Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company; the Merger Agreement; the Stockholder Agreements; Other Matters") of
the Offer to Purchase is incorporated hereby by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the INTRODUCTION, and Section 16 ("Fees
and Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information
Concerning Purchaser and Parent") of the Offer to Purchase is incorporated
herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the INTRODUCTION, Section 11
("Background of the Offer") and Section 12 ("Purpose of the Offer and the
Merger; Plans for the Company; the Merger Agreement; the Stockholder
Agreements; Other Matters") of the Offer to Purchase is incorporated herein by
reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on
the Market for the Shares, Stock Quotation and Exchange Act Registration") of
the Offer to Purchase is incorporated herein by reference.
(e) None.
5
<PAGE> 6
(f) The information set forth in the Offer to Purchase, a copy of which
is attached as Exhibit 99(a)(1) hereto, the Letter of Transmittal, a copy of
which is attached as Exhibit 99(a)(2) hereto, the Merger Agreement, a copy of
which is attached as Exhibit 99(c)(1) hereto, the Stockholder Agreements,
copies of which are attached as Exhibits 99(c)(2), 99(c)(3) 99(c)(4) hereto, and
the Letter Agreement, a copy of which is attached as Exhibit 99(c)(5) hereto,
are incorporated in their entirety herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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99(a)(1) Offer to Purchase dated November 22, 1999.
99(a)(2) Letter of Transmittal.
99(a)(3) Notice of Guaranteed Delivery.
99(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99(a)(5) Letter to Clients from Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
99(a)(6) Text of Press Release dated November 18, 1999.
99(a)(7) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
99(c)(1) Merger Agreement dated November 18, 1999.
99(c)(2) Stockholder Agreement dated November 18, 1999 between
Roger L. Miller, William E. Haynes, Charles F. Schugart,
Douglas R. Harrington, Jr. and Purchaser.
99(c)(3) Stockholder Agreement dated November 18, 1999 between
Philip Industrial Services Group, Inc. and Purchaser.
99(c)(4) Stockholder Agreement dated November 18, 1999 between
Philip Environmental Services, Inc. and Purchaser.
99(c)(5) Letter Agreement dated October 29, 1999 between the
Company and Parent.
99(d)-(f) Not applicable.
</TABLE>
6
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATED: November 22, 1999
FLOWSERVE CORPORATION
By: /s/ RONALD F. SHUFF
----------------------------------
Name: Ronald F. Shuff
Title: Vice President, Secretary
and General Counsel
FORREST ACQUISITION SUB, INC.
By: /s/ RONALD F. SHUFF
----------------------------------
Name: Ronald F. Shuff
Title: Secretary and Treasurer
7
<PAGE> 8
INDEX TO EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
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99(a)(1) Offer to Purchase dated November 22, 1999.
99(a)(2) Letter of Transmittal.
99(a)(3) Notice of Guaranteed Delivery.
99(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
99(a)(5) Letter to Clients from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99(a)(6) Text of Press Release dated November 18, 1999.
99(a)(7) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99(c)(1) Merger Agreement dated November 18, 1999.
99(c)(2) Stockholder Agreement dated November 18, 1999 between Roger L.
Miller, William E. Haynes, Charles F. Schugart, Douglas R.
Harrington, Jr. and Purchaser.
99(c)(3) Stockholder Agreement dated November 18, 1999 between Philip
Industrial Services Group, Inc. and Purchaser.
99(c)(4) Stockholder Agreement dated November 18, 1999 between Philip
Environmental Services Inc. and Purchaser.
99(c)(5) Letter Agreement dated October 29, 1999 between the Company and
Parent.
99(d)-(f) Not applicable.
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
INNOVATIVE VALVE TECHNOLOGIES, INC.
AT
$1.62 NET PER SHARE
BY
FORREST ACQUISITION SUB, INC.
A WHOLLY-OWNED SUBSIDIARY OF
FLOWSERVE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME ON TUESDAY, DECEMBER 21, 1999,
UNLESS THE OFFER IS EXTENDED
---------------------
THE BOARD OF DIRECTORS OF INNOVATIVE VALVE TECHNOLOGIES, INC. (THE "COMPANY")
HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE AND FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, HAS APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
OFFER AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT
THE OFFER AND TENDER THEIR SHARES TO PURCHASER HEREUNDER.
---------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED
AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES OF COMMON
STOCK, PAR VALUE $.001 PER SHARE (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK, COLLECTIVELY, THE "SHARES")
REPRESENTING A MAJORITY OF COMPANY'S OUTSTANDING COMMON STOCK ON A FULLY DILUTED
BASIS ON THE DATE OF PURCHASE. THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER
CONDITIONS, WHICH ARE SET FORTH IN THIS OFFER TO PURCHASE. SEE THE INTRODUCTION
AND SECTIONS 1 AND 14 OF THIS OFFER TO PURCHASE.
---------------------
IMPORTANT
Any stockholder wishing to tender all or a portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
manually signed facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and deliver it with the certificates representing tendered
Shares and any other required documents to the Depositary (as defined herein) or
tender such Shares pursuant to the procedures for book-entry transfer set forth
in Section 3 hereof, or (2) request such stockholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
the stockholder. Any stockholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
that broker, dealer, commercial bank, trust company or other nominee if the
stockholder wishes to tender such Shares.
Any stockholder who wishes to tender Shares and whose certificates
representing those Shares are not immediately available or who cannot comply
with the procedure for book-entry transfer on a timely basis should tender those
Shares by following the procedures for guaranteed delivery set forth in Section
3 hereof.
Questions and requests for assistance may be directed to the Information
Agent (as defined below) at its address and telephone numbers set forth on the
back cover of this Offer to Purchase. Requests for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be directed to the Information Agent or to
brokers, dealers, commercial banks and trust companies.
November 22, 1999
<PAGE> 2
TABLE OF CONTENTS
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PAGE NO.
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INTRODUCTION................................................ 1
1. Terms of the Offer.......................................... 3
2. Acceptance for Payment and Payment for Shares............... 4
3. Procedure for Tendering Shares.............................. 5
4. Withdrawal Rights........................................... 8
5. Certain Federal Income Tax Consequences of the Offer and the
Merger...................................................... 8
6. Price Range of the Shares; Dividends on the Shares.......... 9
7. Effect of the Offer on the Market for the Shares, Stock
Quotation and Exchange Act Registration..................... 10
8. Certain Information Concerning the Company.................. 11
9. Certain Information Concerning Purchaser and Parent......... 12
10. Source and Amount of Funds.................................. 13
11. Background of the Offer..................................... 13
12. Purpose of the Offer and the Merger; Plans for the Company;
the Merger Agreement; the Stockholder Agreements; Other
Matters..................................................... 15
13. Dividends and Distributions................................. 25
14. Certain Conditions of the Offer............................. 26
15. Certain Legal Matters....................................... 28
16. Fees and Expenses........................................... 29
17. Miscellaneous............................................... 29
</TABLE>
Schedule I Directors and Executive Officers of Parent and Purchaser
i
<PAGE> 3
To the Holders of Common Stock of
INNOVATIVE VALVE TECHNOLOGIES, INC.:
INTRODUCTION
Forrest Acquisition Sub, Inc. a Delaware corporation ("Purchaser") and a
wholly-owned subsidiary of FLOWSERVE CORPORATION, a New York corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock
("Common Stock"), $.001 par value per share, of INNOVATIVE VALVE TECHNOLOGIES,
INC. a Delaware corporation (the "Company"), including the associated rights to
purchase Series A Junior Participating Preferred Stock (the "Rights," and
together with the Common Stock, the "Shares"), at a purchase price of $1.62 per
Share (the "Offer Price"), net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). The Rights
were issued pursuant to the Rights Agreement, dated as of September 18, 1997, as
amended by Amendment No. 1 thereto dated as of November 18, 1999 (as so amended,
the "Rights Agreement") between the Company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent, and are currently evidenced by and traded
with certificates evidencing the Common Stock.
Tendering stockholders who have Shares registered in their own name and who
tender directly to the Depositary (as defined below) will not be obligated to
pay brokerage fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to
the Offer. Stockholders who hold their Shares in "street name" or otherwise
through a broker, bank or other nominee should consult with such institution as
to whether there are any fees applicable to a tender of Shares. Purchaser will
pay all charges and expenses of Equiserve, as the depositary (the "Depositary"),
and D.F. King & Co., Inc., as the information agent (the "Information Agent"),
in connection with the Offer.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of November 18, 1999 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, after the
purchase of Shares pursuant to the Offer and subject to the satisfaction or
waiver of certain conditions set forth therein, Purchaser will be merged (the
"Merger") with and into the Company with the Company surviving the Merger as a
direct wholly-owned subsidiary of Parent. Pursuant to the Merger, each
outstanding Share (excluding Shares owned, directly or indirectly, by the
Company, Parent, Purchaser or any other subsidiary of Parent and Shares owned by
holders who shall have properly exercised their appraisal rights under the
Delaware General Corporation Law (the "DGCL") will be converted into the right
to receive the Offer Price, in cash (the "Merger Consideration"), without
interest.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE AND FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES, HAS APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES TO
PURCHASER HEREUNDER.
SIMMONS & COMPANY INTERNATIONAL, THE COMPANY'S FINANCIAL ADVISOR
("SIMMONS"), HAS DELIVERED TO THE COMPANY'S BOARD SUCH FIRM'S OPINION, DATED
NOVEMBER 17, 1999 (THE "OPINION"), TO THE EFFECT THAT, AS OF SUCH DATE AND BASED
ON AND SUBJECT TO CERTAIN MATTERS STATED IN SUCH OPINION, THE $1.62 PER SHARE
CASH CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE MERGER BY STOCKHOLDERS
(OTHER THAN PARENT AND ITS AFFILIATES) IS FAIR, FROM A FINANCIAL POINT OF VIEW,
TO SUCH STOCKHOLDERS. A COPY OF THE OPINION IS CONTAINED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9")
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN
CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING FURNISHED TO STOCKHOLDERS
CONCURRENTLY WITH THIS OFFER TO PURCHASE. STOCKHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN BY SIMMONS.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE AT LEAST THAT NUMBER OF
SHARES THAT WOULD REPRESENT A MAJORITY OF THE SHARES
<PAGE> 4
OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM
CONDITION"). FOR PURPOSES OF THE MINIMUM CONDITION, "FULLY DILUTED BASIS"
EXCLUDES (1) SHARES ISSUABLE UPON EXERCISE OF CERTAIN STOCK OPTIONS ("OPTIONS")
FOR WHICH TERMINATION AGREEMENTS ARE ENTERED INTO PRIOR TO THE EXPIRATION TIME
PURSUANT TO THE TERMS OF THE MERGER AGREEMENT AND (2) SHARES ISSUABLE PURSUANT
TO CERTAIN WARRANTS, CONVERTIBLE NOTES AND ACQUISITION AGREEMENTS (OTHER THAN
THE COLLIER MERGER AGREEMENT (AS DEFINED IN THE MERGER AGREEMENT)) THAT WILL BE
TERMINATED, CANCELLED OR OTHERWISE DISCHARGED PURSUANT TO THE MERGER AGREEMENT.
SEE SECTION 12 BELOW. THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTIONS 1 AND 14 BELOW.
The Company has informed Purchaser that, as of November 17, 1999, 9,664,562
shares were issued and outstanding, 1,650,000 shares were reserved for issuance
upon the exercise of outstanding Options granted under the Company's Stock Plans
(as defined herein), 482,262 shares were reserved for issuance upon the exercise
of outstanding Warrants (as defined herein), 600,769 shares were reserved for
issuance upon conversion of Convertible Notes (as defined herein), 555,555
shares were reserved for issuance in connection with the Company's obligations
under the Collier Merger Agreement, and an indeterminate number of Shares were
reserved for issuance in connection with the Company's obligations under the
Colonial Merger Agreement and the Plant Maintenance Merger Agreement (each, as
defined in the Merger Agreement). Based on the foregoing and assuming that
termination agreements are entered into with respect to all outstanding Options,
Purchaser believes that as of such date, the Minimum Condition will be satisfied
if Purchaser acquires 4,832,282 shares. Parent and Purchaser do not presently
own any Shares.
Concurrently with the execution of the Merger Agreement, Purchaser also
entered into a Stockholder Agreement dated November 18, 1999 (the
"Stockholder/Option Agreement") with Roger L. Miller, William E. Haynes, Charles
F. Schugart and Douglas R. Harrington, Jr. (collectively, the "Granting
Stockholders"), pursuant to which the Granting Stockholders, among other things,
agreed to tender (and not withdraw) their Shares in the Offer, granted an
irrevocable proxy to Purchaser's designees with respect to their Shares and
granted to Purchaser an option to purchase the Shares held by them at the Offer
Price under specified circumstances. In addition, Purchaser entered into a
Stockholder Agreement dated November 18, 1999 (each, a "Chapter 11 Stockholder
Agreement," and together with the Stockholder/Option Agreement, the "Stockholder
Agreements") with each of Philip Industrial Services Group, Inc. and Philip
Environmental Services, Inc. (jointly, the "Chapter 11 Stockholders," and
together with the Granting Stockholders, the "Selling Stockholders"). The
Chapter 11 Stockholders are affiliates of Philip Services Corp. and have filed
voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code with the Bankruptcy Court for the District of Delaware (the "Delaware
Bankruptcy Court"). Each Chapter 11 Stockholder Agreement is similar to the
Stockholder/Option Agreement but (1) does not contain an option to purchase
provision; and (2) is effective upon the earlier to occur of (x) Delaware
Bankruptcy Court approval of such Chapter 11 Stockholder Agreement and the
transactions contemplated thereby and (y) the confirmation by the Delaware
Bankruptcy Court of a plan of reorganization for the Chapter 11 Stockholder
party to such Chapter 11 Stockholder Agreement. The Selling Stockholders
collectively own 3,125,400 shares. Assuming that termination agreements are
entered into with respect to all outstanding Options and that the Selling
Stockholders tender in the Offer, as they have agreed to do, Purchaser believes
that the Minimum Condition will be satisfied if 1,706,882 Shares (approximately
18% of the outstanding Shares) are tendered and not withdrawn by other
stockholders.
The Company has represented in the Merger Agreement that is has taken all
action necessary so that (x) none of Parent, Purchaser or any of their
Affiliates or Associates (as such terms are defined in the Rights Agreement)
shall be or become an "Acquiring Person", and no Stock Acquisition Date,
Distribution Date, Flip-in Event or Flip-Over Event (as such terms are defined
in the Rights Agreement) shall occur, as a result of (i) the execution, delivery
or performance of the Merger Agreement (or any amendments thereto) or the
consummation of the transactions contemplated thereby, including, without
limitation, the Offer and the Merger, (ii) the execution, delivery or
performance of the Stockholder Agreements (as defined below) or any amendments
thereto, or the consummation of the transactions contemplated thereby, (iii) the
announcement, making or commencement of the Offer or the announcement of the
Merger Agreement or the Stockholder Agreements, or (iv) the acquisition of
Beneficial Ownership (as such term is defined in the Rights
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Agreement) of Shares or Rights pursuant to, or in connection with, the Merger
Agreement, the Stockholder Agreements or otherwise as a result of any of the
transactions contemplated by the Merger Agreement or the Stockholder Agreements,
including, without limitation, the Offer and the Merger; and (y) the Rights will
expire pursuant to the terms of the Rights Agreement immediately prior to the
Effective Time.
The consummation of the Merger is subject to the satisfaction or waiver of
a number of conditions, including, if required, the approval of the Merger by
the requisite vote or consent of the stockholders. Under the DGCL, the
stockholder vote necessary to approve the Merger will be the affirmative vote of
at least a majority of the outstanding Shares, including Shares held by
Purchaser and its affiliates. If the Minimum Condition is satisfied and
Purchaser purchases at least a majority of the outstanding Shares in the Offer,
Purchaser will be able to effect the Merger without the affirmative vote of any
other stockholder. If at least 90% of the outstanding Shares are acquired in the
Offer, Purchaser will be able to effect the Merger pursuant to Section 253 of
the DGCL without prior notice to, or any action or vote by, any other
stockholder. In that event, Purchaser intends to effect the Merger as promptly
as practicable following the purchase of Shares in the Offer. If at least 90% of
the outstanding Shares are not acquired in the Offer, the Company will furnish
to stockholders a proxy or information statement containing detailed information
concerning the Merger and will call a special meeting to vote on the Merger.
Pursuant to the Merger Agreement, Parent and Purchaser have agreed to vote the
Shares acquired by them pursuant to the Offer in favor of the Merger. See
Section 12 below.
The Merger Agreement and the Stockholder Agreements are more fully
described in Section 12 below. Certain federal income tax consequences of the
sale of Shares pursuant to the Offer and the exchange of Shares for the Merger
Consideration pursuant to the Merger are described in Section 5 below.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for (and thereby
purchase) any and all Shares validly tendered and not withdrawn in accordance
with Section 4 below prior to the Expiration Date. As used in the Offer, the
term "Expiration Date" means 12:00 midnight, New York City time, on Tuesday,
December 21, 1999, unless and until Purchaser, in accordance with the terms of
the Offer and the Merger Agreement, shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date" means
the latest time and date at which the Offer, as so extended, expires. As used in
this Offer to Purchase, "business day" has the meaning set forth in Rule
14d-1(c)(6) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. The Offer also is subject to certain other conditions set
forth in Section 14 below. Pursuant to the terms of the Merger Agreement,
Purchaser expressly reserves the right (but will not be obligated) to waive any
or all of the conditions of the Offer.
Purchaser expressly reserves the right, subject to the terms of the Merger
Agreement and the applicable rules and regulations of the Commission, at any
time or from time to time, and regardless of whether or not any of the events
set forth in Section 14 hereof shall have occurred or shall have been determined
by Purchaser to have occurred, to (i) extend the period of time during which the
Offer is open, and thereby delay acceptance for payment of and payment for, any
Shares; (ii) terminate the Offer if any condition referred to in Section 14 has
not been satisfied prior to the Expiration Date or upon the occurrence of any
event specified in Section 14, and (iii) waive any conditions or otherwise amend
the Offer in any respect, in each case by giving oral or written notice to the
Depositary. Any extension, termination or amendment will be followed as promptly
as practical by public announcement, the announcement in the case of an
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which Purchaser may choose to make any public announcement,
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<PAGE> 6
Purchaser will have no obligation to publish, advertise or otherwise communicate
any such announcement, other than by issuing a release to the Dow Jones News
Service or as otherwise required by law. The reservation by Purchaser of the
right to delay acceptance for payment of, or payment for, Shares is subject to
the provisions of Rule 14e-1(c) under the Exchange Act, which requires that
Purchaser pay the consideration offered or return the Shares deposited by or on
behalf of stockholders promptly after the termination or withdrawal of the Offer
or extend the period of time during which the offer is open and thereby delay
acceptance for payment of and payment for the Shares.
Pursuant to the Merger Agreement, Purchaser expressly reserves the right to
increase the price per Share payable in the Offer or to make any other changes
in the terms and conditions of the Offer, except that without the written
consent of the Company, Purchaser shall not (i) decrease the Offer Price, change
the form of consideration payable in the Offer or decrease the number of Shares
sought, (ii) change the conditions to the Offer (other than to waive any
condition), (iii) impose additional conditions to the Offer, or (iv) amend any
other term of the Offer in any manner adverse to the holders of Shares. The
Merger Agreement provides that Purchaser may, from time to time, in its sole
discretion extend the Expiration Date, (w) to comply with the applicable rules,
regulations, interpretations and positions of the Commission or its staff, (x)
if any of the conditions to the Offer have not been satisfied, for the minimum
period of time necessary to satisfy such condition; (y) regardless of the number
of Shares tendered, on one or more occasions for an aggregate period of not more
than 10 business days beyond the latest Expiration Date permitted by clauses (w)
and (x); and (z) if all of the conditions to the Offer have been satisfied but
fewer than 90% of the Shares of Common Stock outstanding (determined on a fully
diluted basis) have been tendered in the Offer, for the minimum period of time
necessary until 90% of such Shares have been so tendered, but in no event later
than the tenth business day following the latest Expiration Date permitted by
clauses (w), (x) and (y) of this sentence. The Merger Agreement provides that
subject to the prior satisfaction or waiver of the conditions to the Offer,
Purchaser will accept for payment, and pay for, in accordance with the terms of
the Offer, Shares validly tendered and not properly withdrawn pursuant to the
Offer as promptly as practicable after the Expiration Date.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. The staff of the
Commission has stated that an offer should remain open for a minimum of five
business days from the date the material change is first published, sent or
given to stockholders and, if the material changes are made with respect to
information that approaches the significance of price and the percentage of
securities sought, a period of up to ten business days may be required to allow
for adequate dissemination and investor response. The requirement to extend the
Offer will not apply to the extent that the number of business days remaining
between the occurrence of the change and the then-scheduled Expiration Date
equals or exceeds the minimum extension period that would be required because of
such amendment.
The Company has provided Purchaser with its stockholder list and security
position listings for the purpose of disseminating the Offer to stockholders.
This Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's stockholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Merger Agreement and
the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser will accept for
payment and will pay for any and all Shares that are validly tendered on or
prior to the Expiration Date, and not properly withdrawn in accordance with
Section 4 below, as soon as practicable after the
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<PAGE> 7
Expiration Date. All questions as to the satisfaction of such terms and
conditions will be determined by Purchaser in its sole discretion, which
determination will be final and binding. Subject to the applicable rules of the
Commission and the Merger Agreement, Purchaser expressly reserves the right to
delay acceptance for payment of, or payment for, Shares in order to comply, in
whole or in part, with any other applicable law or government regulation. Any
such delays will be effected in compliance with Rule 14e-1(c) under the Exchange
Act (relating to a Purchaser's obligation to pay for or return securities
promptly after the termination or withdrawal of the Offer).
In all cases, Shares accepted for payment pursuant to the Offer will be
paid for only after timely receipt by the Depositary of (i) certificates
evidencing such Shares or timely confirmation ("Book-Entry Confirmation") of the
book-entry transfer of such Shares into the Depositary's account at the
Depositary Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3, (ii) a Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined below), and (iii) any other documents required by
the Letter of Transmittal. See Section 3 below.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming part of a
Book-Entry Confirmation, which states that (i) such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Shares which are the subject of such Book-Entry
Confirmation, (ii) such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and (iii) Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares properly tendered to Purchaser and not
withdrawn, if and when Purchaser gives oral or written notice to the Depositary
of Purchaser's acceptance of such Shares. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to tendering stockholders.
If, for any reason, acceptance for payment of any Shares tendered pursuant
to the Offer is delayed, or Purchaser is unable to accept for payment Shares
tendered pursuant to the Offer, then, without prejudice to Purchaser's rights
under the Offer (but subject to Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn, except to the extent that the tendering
stockholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4 below. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON
THE OFFER PRICE TO BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE
OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not purchased pursuant to the Offer for any
reason or if certificates are submitted for more Shares than are tendered,
certificates for Shares not purchased or tendered will be returned pursuant to
the instructions of the tendering stockholder without expense to the tendering
stockholder (or, in the case of Shares delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3 below, the Shares will be credited to an
account maintained at the Book-Entry Transfer Facility) as promptly as
practicable following the expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay the increased
consideration for all Shares purchased pursuant to the Offer, whether or not
such Shares were tendered prior to the increase in consideration.
3. PROCEDURE FOR TENDERING SHARES
Valid Tenders. For a stockholder validly to tender Shares pursuant to the
Offer, either (i) a Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other
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<PAGE> 8
required documents, must be received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date and either (a) certificates evidencing Shares must be received by the
Depositary at any such address prior to the Expiration Date or (b) the Shares
must be delivered pursuant to the procedures for book-entry transfer set forth
below and a Book-Entry Confirmation must be received by the Depositary prior to
the Expiration Date; or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below. No alternative, conditional or
contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Shares by causing the Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message, and any other required documents,
must, in any case, be transmitted to, and received by, the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF CERTIFICATES EVIDENCING SHARES, THE LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF
THE TENDERING STOCKHOLDERS, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal; or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letter of Transmittal. If the certificates representing Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal or if payment is to be made or certificates for Shares not tendered
or not accepted for payment are to be returned to a person other than the
registered holder of the certificates surrendered, then the tendered
certificates evidencing Shares must be endorsed or accompanied by appropriate
stock powers, in each case signed exactly as the name or names of the registered
holder or owners appear on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above and as provided in
the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer
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<PAGE> 9
cannot be completed on a timely basis or time will not permit all required
documents to reach the Depositary prior to the Expiration Date, such
stockholder's tender may be effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary (as provided below) prior to the Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer (or a Book-Entry Confirmation with respect to all such tendered
Shares) together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile) with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other documents required by the Letter of Transmittal are received
by the Depositary within three Nasdaq National Market trading days after
the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mailed to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision of this Offer to Purchase, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (i) certificates for the Shares or a
timely Book-Entry Confirmation with respect to such Shares, (ii) a Letter of
Transmittal (or a manually signed facsimile), properly completed and duly
executed, with any required signature guarantees or an Agent's Message in
connection with a book-entry delivery of Shares and (iii) any other documents
required by the Letter of Transmittal. Accordingly, tendering stockholders may
be paid at different times depending upon when certificates for Shares or
Book-Entry Confirmations are actually received by the Depositary.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares pursuant to any of the procedures described above will
be determined by Purchaser in its sole discretion, which determination shall be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of Shares determined not to be in proper form or the
acceptance of or payment for which may, in the opinion of Purchaser's counsel,
be unlawful. Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of any Shares of any particular stockholder whether
or not similar defects or irregularities are waived in the case of other
stockholders. Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and its instructions) will be final
and binding on all parties. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of Purchaser, Parent, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
information.
Backup Federal Income Tax Withholding. To prevent backup federal income tax
withholding of 31% of the payments made to stockholders with respect to the
purchase price of Shares purchased pursuant to the Offer or the Merger, a
stockholder must provide the Depositary with his or her correct taxpayer
identification number and certify that he or she is not subject to backup
federal income tax withholding by completing the Substitute Form W-9 included in
the Letter of Transmittal. See Instruction 10 of the Letter of Transmittal. See
Section 5 below.
Appointment as Proxy. By accepting a Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to Shares tendered by such stockholder and purchased by
Purchaser and with respect to any and all other Shares or other securities
issued or issuable in respect of those Shares, on or after the date of the
Offer. All such powers of attorney and proxies will be considered coupled with
an interest in the tendered
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Shares. Such appointment will be effective when, and only to the extent that,
Purchaser accepts for payment Shares tendered by such stockholder as provided
herein. Upon acceptance for payment, all prior powers of attorney, proxies or
consents given by the stockholder with respect to the Shares (and any other
Shares or other securities so issued in respect of such purchased Shares) will
be revoked, without further action, and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective) by the
stockholder. The designees of Purchaser will be empowered to exercise all voting
and other rights of the stockholder with respect to such Shares (and any other
Shares or securities so issued in respect of such purchased Shares) as they in
their sole discretion may deem proper, including, without limitation, in respect
of any annual or special meeting of the stockholders, or any adjournment or
postponement of any such meeting, or in connection with any action by written
consent in lieu of any such meeting or otherwise (including any such meeting or
action by written consent to approve the Merger). Purchaser reserves the right
to require that, in order for Shares to be validly tendered, immediately upon
Purchaser's acceptance for payment of the Shares, Purchaser must be able to
exercise full voting and other rights of a record and beneficial owner with
respect to the Shares, including voting at any meeting of stockholders then
scheduled.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Shares tendered pursuant to the Offer may
be withdrawn pursuant to the procedures set forth below at any time prior to the
Expiration Date and, unless theretofore accepted for payment and paid for by
Purchaser pursuant to the Offer, may also be withdrawn at any time after January
20, 2000.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the persons who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered the Shares.
If certificates evidencing Shares have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such certificates, the
tendering stockholder must also submit to the Depositary the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn, and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3 above, the notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and otherwise comply with such
Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may
not be rescinded, and any Shares properly withdrawn will be deemed not validly
tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered
by again following any of the procedures described in Section 3 above prior to
the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. No withdrawal of
Shares will be deemed to have been properly made until all defects and
irregularities have been cured or waived. None of Parent, Purchaser, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failing to give such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted into the right to receive the Merger
Consideration in the Merger (including any cash amounts received by dissenting
stockholders pursuant to the exercise of appraisal rights). This discussion is
based upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the applicable Treasury Regulations promulgated and proposed
thereunder, judicial authority and administrative rulings and practice.
Legislative, judicial or administrative rulings or interpretations are subject
to change, possibly on a retroactive basis, at any time and therefore could
alter or modify the statements and conclusions set forth below. It is assumed
that the Shares
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are held as "capital assets" within the meaning of Section 1221 of the Code
(i.e., property held for investment). This discussion does not address all
aspects of federal income taxation that may be relevant to a particular
stockholder in light of such stockholder's personal investment circumstances, or
those stockholders subject to special treatment under the federal income tax
laws (for example, life insurance companies, tax-exempt organizations, foreign
corporations and nonresident alien individuals) or to stockholders who acquired
their Shares through the exercise of employee stock options or other
compensation arrangements. In addition, the discussion does not address any
aspect of foreign, state, local or estate and gift taxation that may be
applicable to a stockholder.
Consequences of the Offer and the Merger to Stockholders. The receipt of
the Offer Price or the Merger Consideration, as the case may be (including any
cash amounts received by dissenting stockholders pursuant to the exercise of
appraisal rights), will be a taxable transaction for federal income tax purposes
(and also may be a taxable transaction under applicable state, local and other
income tax laws). In general, for federal income tax purposes, a stockholder
will recognize gain or loss equal to the difference between his adjusted tax
basis in the Shares sold pursuant to the Offer or converted to cash in the
Merger and the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in a
single transaction) sold pursuant to the Offer or converted to cash in the
Merger. Such gain or loss will be capital gain or loss and will be long-term
gain or loss, if, on the date of sale (or, if applicable, the date of the
Merger), the Shares were held for more than one year.
Backup Tax Withholding. Under the Code, a stockholder may be subject, under
certain circumstances, to "backup withholding" at a 31% rate with respect to
payments made in connection with the Offer or the Merger. Backup withholding
generally applies if the stockholder (i) fails to furnish such holder's social
security number or other taxpayer identification number ("TIN"), (ii) furnishes
an incorrect TIN, (iii) fails properly to report interest or dividends or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN provided is such holder's correct
number and that such holder is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons
generally are exempt from backup withholding, including corporations and
financial institutions. Certain penalties apply for failure to furnish correct
information and for failure to include the reportable payments in income. Each
stockholder should consult with such holder's own tax advisor as to such
holder's qualifications for exemption from withholding and the procedure for
obtaining such exemption.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO
ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES, AND FOREIGN CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR RESPECTIVE TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS IN
VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
From October 23, 1997 to May 5, 1999, the Shares were quoted on the Nasdaq
National Market under the symbol IVTC. Since May 5, 1999, the Shares have been
traded on the Nasdaq Over-the-Counter Bulletin Board market (the "OTC Bulletin
Board"). The following table sets forth, for each of the periods indicated,
9
<PAGE> 12
the high and low sales price per Share as reported by the Nasdaq National
Market, and after May 5, 1999, by the OTC Bulletin Board.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ended December 31, 1997
4th Quarter (from October 23, 1997)....................... $20.250 $15.750
Fiscal Year Ended December 31, 1998
1st Quarter............................................... $20.250 $15.000
2nd Quarter............................................... 18.750 7.000
3rd Quarter............................................... 7.440 2.530
4th Quarter............................................... 3.310 1.130
Fiscal Year Ending December 31, 1999
1st Quarter............................................... $ 2.688 $ 0.375
2nd Quarter............................................... 1.688 0.375
3rd Quarter............................................... 0.656 0.125
4th Quarter (through November 19, 1999)................... 1.875 0.219
</TABLE>
On November 18, 1999, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the closing sales price
per Share quoted on the OTC Bulletin Board was $1.25. On November 19, 1999, the
last full trading day prior to the date of this Offer to Purchase, the closing
sales price per Share quoted on the OTC Bulletin Board was $1.50. STOCKHOLDERS
ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
The Company has never declared or paid any cash dividend, and under the
terms of the Merger Agreement, the Company is not permitted to declare or pay
dividends with respect to the Shares without the prior written consent of
Parent.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK QUOTATION AND
EXCHANGE ACT REGISTRATION
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of Shares,
which could adversely affect the liquidity and market value of the remaining
Shares held by stockholders other than Purchaser.
Although the Shares are currently registered under the Exchange Act, that
registration may be terminated upon application of the Company to the Commission
if the Shares are no longer held by 300 or more holders of record. If, as a
result of the purchase of Shares pursuant to the Offer, the Shares are no longer
held by 300 or more holders of record and the Company terminates the
registration of the Shares under the Exchange Act, the Shares will no longer
meet the requirements of the NASD for continued inclusion in the OTC Bulletin
Board. It is possible that the Shares would continue to trade in the local
over-the-counter market and that price quotations would be reported by other
sources, depending upon the interest in maintaining a market in the Shares on
the part of securities firms and other factors. Termination of the registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain of the provisions of the Exchange Act no
longer applicable to the Company. Such provisions include the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement pursuant to Section 14(a) in connection with a stockholders' meeting
and the related requirement of providing an annual report to stockholders and
the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, "affiliates" of the Company and persons
holding "restricted securities" of the Company may be deprived of the ability to
dispose of such securities pursuant to Rule 144 as promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). Purchaser intends to
seek to cause the Company to apply for termination of registration of the Shares
under the Exchange Act as soon after the completion of the Offer as the
requirements for such termination are met. If registration of the Shares is not
terminated prior to the Merger, then the registration of the Shares under the
Exchange Act will be terminated following consummation of the Merger.
10
<PAGE> 13
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a corporation organized and existing under the laws of the
State of Delaware, with its principal executive offices located at 2 Northpoint
Drive, Suite 300, Houston, Texas 77060. The Company provides comprehensive
maintenance, repair, replacement and value-added distribution services for
industrial valves, piping systems and other process-system components.
Selected Consolidated Financial Data. Set forth below is certain selected
financial data with respect to the Company. Most of such data is excerpted or
derived from financial information contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 (the "Company Form 10-K"),
and the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1999 (the "Company Form 10-Q"). More comprehensive financial information is
included in such reports and other documents filed by the Company with the
Commission. The following summary is qualified in its entirety by reference to
such reports and other documents and all financial information (including any
related notes) contained therein. The Company Form 10-K, the Company Form 10-Q
and such other documents should be available for inspection and copies thereof
should be obtainable from the offices of the Commission in the manner set forth
below.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS AT OR FOR THE YEAR
ENDED SEPTEMBER 30, ENDED DECEMBER 31,
------------------------- -------------------
1999 1998 1998 1997
----------- ----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS DATA
Revenues................................... $121,084 $112,753 $154,617 $ 58,621
Net Earnings (Loss)........................ (7,575) (1,489) (1,415) (7,500)
Net Earnings (Loss) Per Common Share....... (0.78) (0.17) (0.16) (2.25)
BALANCE SHEET DATA
Working Capital............................ (37,567) (26,676) 42,545 21,232
Total Assets............................... $174,906 $185,990 $183,700 $105,433
Total Debt................................. 81,510 80,935 83,220 29,527
Stockholders' Equity....................... 65,220 82,905 79,205 59,869
</TABLE>
Other Information. The Company is subject to the information filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be described in
proxy statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at prescribed rates at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of this material may also be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
Except as otherwise provided in this Offer to Purchase, the information
concerning the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon records on file with the
Commission and other publicly available information. Although neither Purchaser
nor Parent has any knowledge that any such information is untrue, neither
Purchaser nor Parent takes any
11
<PAGE> 14
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred or may affect
the significance or accuracy of such information.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser, a Delaware corporation, was organized to acquire all of the
outstanding Shares pursuant to the Offer and the Merger and has not conducted
any unrelated activities since its organization. All of the outstanding capital
stock of Purchaser is owned directly by Parent. The principal executive offices
of Purchaser and Parent are located at 222 W. Las Colinas Blvd., Suite 1500,
Irving, Texas 75039.
Parent is principally engaged in the design, manufacture, distribution and
service of industrial flow management equipment throughout the world. Parent
provides pumps, valves and mechanical seals primarily for the refinery and
pipeline segments of the petroleum industry, the chemical processing industry,
the power generation industry and other industries requiring flow management
products and services. Parent manufactures certain standard products, but
specializes in the development of precision engineered equipment for critical
service applications where high reliability is required. Parent's materials
expertise, design and engineering capabilities and applications know-how have
enabled it to develop product lines that are responsive to customers needs for
manufacturing efficiency, reduced maintenance cost, and avoidance of premature
equipment failure. An important element of Parent's business is its successful
emphasis on providing aftermarket products and services. These consist of
supplying parts, making repairs and providing a variety of technical services
for the upgrade or retrofit of equipment to extend its useful life or improve
its operating characteristics.
Set forth below is certain selected consolidated financial information with
respect to Parent and its consolidated subsidiaries excerpted from Parent's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and from
its Quarterly Reports on Form 10-Q for the fiscal quarters ended September 30,
1999 and September 30, 1998. More comprehensive financial information is
included in such reports and other documents filed by Parent with the
Commission. The following summary is qualified in its entirety by reference to
such reports and other documents and all financial information (including any
related notes) contained therein. Such reports and other documents are available
for inspection and copies are obtainable in the manner set forth in Section 8
above.
FLOWSERVE CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS AT OR FOR THE YEAR
ENDED SEPTEMBER 30, ENDED DECEMBER 31,
------------------------- ------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Sales............................... $798,556 $803,821 $1,083,086 $1,152,196 $1,097,645
Net Earnings........................ 23,735 41,697 48,875 51,566 71,097
Net Earnings Per Common Share....... 0.63 1.03 1.23 1.26 1.72
BALANCE SHEET DATA
Working Capital..................... 278,740 283,862 268,164 284,220 279,972
Total Assets........................ 831,819 862,228 870,197 880,025 829,776
Long-term Debt, including current
portion........................... 215,346 200,589 200,685 141,145 160,574
Stockholders' Equity................ 338,420 349,977 344,764 395,273 388,624
</TABLE>
Parent is subject to the information filing requirements of the Exchange
Act and, in accordance therewith, is required to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning Parent's directors and officers, their remuneration, stock options
granted to them, the principal holders of
12
<PAGE> 15
Parent's securities, any material interest of such persons in transactions with
Parent and other matters is required to be described in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information are available for inspection and
copies are obtainable in the manner set forth in Section 8 above.
Except as described in this Offer to Purchase, during the last five years,
none of Purchaser, Parent or, to the best knowledge of Purchaser or Parent, any
of the persons listed in Schedule I hereto (i) has been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, Federal or state securities laws or finding any violation of such
laws. The name, business address, present principal occupation or employment,
five year employment history and citizenship of each director and executive
officer of Purchaser and Parent are set forth in Schedule I.
Except as described in this Offer to Purchase, (i) none of Purchaser,
Parent or, to the best knowledge of Purchaser or Parent, any of the persons
listed in Schedule I has any contract, arrangement, understanding or
relationship (whether or not legally enforceable) with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies; (ii) there have been no contracts, negotiations or
transactions between Purchaser, Parent or any of their respective subsidiaries
or, to the best knowledge of Purchaser or Parent, any of the persons listed on
Schedule I on the one hand, and the Company or any of its directors, officers or
affiliates, on the other hand, that are required to be disclosed pursuant to the
rules and regulations of the Commission.
10. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned upon any financing arrangements. Purchaser
estimates that the total amounts of funds required to consummate the Offer, to
pay certain indebtedness and other obligations of the Company pursuant to the
Merger Agreement, to consummate the Merger and to pay related fees and expenses
will be approximately $105 million. Purchaser will obtain all such funds from
Parent in the form of capital contributions and/or loans. Parent will in turn
obtain such funds from its working capital.
11. BACKGROUND OF THE OFFER
On June 23, 1999, Rick Johnson, Vice President of Business Development for
Parent, telephoned William E. Haynes, Chairman and Chief Executive Officer of
the Company, stating that he desired to meet with officers of the Company to
explore potential mutual opportunities. Charles F. Schugart, President of the
Company, returned the call on behalf of the Company resulting in Mr. Johnson and
Mr. Schugart agreeing to meet, along with other officers of each company, on
June 30, 1999.
On June 30, 1999, George Shedlarski, Vice President of Parent and
President -- Flow Solutions Division, and Mr. Johnson met with Mr. Schugart and
Pliny L. Olivier, Senior Vice President of Operations of the Company, to discuss
each company's business philosophy and the current operating environment, and to
generally explore any similarities or complementary strengths of their
respective businesses. Following the meeting the parties executed a
confidentiality agreement and agreed to exchange selected information relative
to the Company's current and projected operations. The conversations were
general in nature and did not involve price.
On July 22, 1999, Mr. Shedlarski, Mr. Johnson, John Wood, Director of
Corporate Development for Parent, and Ronald F. Shuff, Vice President, Secretary
and General Counsel of Parent, contacted Simmons, and expressed an interest in
further exploring a potential business combination between Parent and the
Company. Following the call, Parent received a detailed information package from
Simmons to assist Parent in analyzing a potential merger with the Company as
well as to arrive at an initial valuation of the Company.
13
<PAGE> 16
On August 3, 1999, Messrs. Schugart, Olivier, Shedlarski and Johnson met to
discuss issues relating to a possible business combination between Parent and
the Company.
On August 10, 1999, Mr. Johnson received a facsimile letter from Simmons
requesting a preliminary indication of Parent's interest in writing, including a
specific value for the Company.
On August 16, 1999, Mr. Johnson sent a letter to Simmons expressing a
strong interest in Parent acquiring the Company on a preliminary "full
enterprise" valuation basis, including the assumption of debt, in a general
valuation range. Mr. Schugart, Douglas R. Harrington, Jr., Chief Financial
Officer for the Company, and Simmons contacted Mr. Shuff to discuss the status
of senior management and the Company's board of directors approval, the impact
of supplier relationships on the valuation and the timing of due diligence.
On August 27, 1999, Messrs. Schugart, Olivier, Harrington, Shedlarski,
Johnson, Shuff and Stephen A. Simone, Vice President Sales and
Operations -- Flow Solutions Division of Parent, met at the Company's offices in
Houston to discuss initial due diligence matters. Mr. Olivier and Mr. Simone
agreed to visit both Parent and the Company operating facilities during the
following two weeks in order to better understand how a business combination
might be effected and what operating synergies may exist between the two
businesses. Mr. Olivier subsequently visited Parent sites in Benecia and Los
Angeles, California, and Mr. Olivier and Mr. Simone jointly visited one Company
site in Sulphur, Louisiana and Company and Parent sites in Tampa, Florida,
Chicago, Illinois and Beaumont and Houston, Texas.
From September 22 through September 24, 1999, Messrs. Schugart, Olivier,
Harrington, Simone, Robert A. Rhodes, Manager Sales and Operations -- Eastern
U.S., John Sawyer, Controller -- Flow Solutions Division, J.P. Easton, Manager
Service Operations -- U.S., and Andrew J. Beall, Vice President Sales -- Flow
Control Division, met in Houston to ascertain the benefits which could be
achieved from a combination of the Company and Parent.
On October 8, 1999, Simmons and Messrs. Schugart, Harrington, Shuff and
Johnson met at Parent's offices in Dallas to discuss an acquisition proposal for
the Company. Parent's representatives indicated that Parent was interested in
pursuing a possible transaction and that, subject to satisfactory completion of
a due diligence review, Parent's valuation of the Company on an overall full
enterprise valuation of the Company, including the assumption of debt and
payment of transaction costs, was $95 million. Parent's representatives also
informed the Company's representatives and Simmons that subject to satisfactory
completion of a due diligence review and certain other conditions, including
negotiation of a definitive merger agreement and stockholder agreements, Parent
would be willing to pay $95 million on this full enterprise valuation basis in
cash for the Company, to be allocated between creditors and equity holders of
the Company based on the Company reaching settlement agreements with its
creditors.
The parties agreed to reconvene, and on October 12, 1999, Messrs. Schugart,
Olivier, Harrington and Simmons met with Messrs. Shuff and Johnson at the
Company's offices in Houston where they discussed the concerns which Parent had
outlined and presented a counterproposal of $110 million on the same full
enterprise basis. Mr. Shuff and Mr. Johnson then spoke on the telephone with C.
Scott Greer, President and Chief Operating Officer of Parent, and ultimately
proposed a valuation of $105 million on this basis, subject to satisfactory
completion of due diligence and other conditions, including negotiation of a
definitive merger agreement. The Company's representatives informed Parent's
representatives that Parent's proposal was acceptable in principle, subject to
board approval.
On October 19, 1999, Mr. Johnson sent a written proposal, via facsimile, to
Simmons confirming the valuation and preliminary terms and conditions of the
proposed merger of the Company and Parent.
During the remainder of October and through mid-November of 1999, Parent,
along with its legal advisors, environmental consultant and independent
accountants, conducted a due diligence review of information provided by the
Company and conducted various interviews with members of the Company's
management.
On October 21, 1999, Parent held a board meeting at which management
presented background information with regard to the Company, the strategic
rationale for the Merger, the status of negotiations, the
14
<PAGE> 17
financial ramifications of the Merger and the proposed terms of the Merger. Upon
review of the information presented by management, Parent's board of directors
authorized management to attempt to negotiate a definitive merger agreement with
the Company on the proposed terms, subject to board approval.
On October 22, 1999, legal counsel for Parent distributed a draft of the
Merger Agreement to the Company and its legal advisors, and on November 3, 1999,
legal counsel for Parent distributed a draft of the Stockholder Agreements to
the Company and its legal advisors. The parties and their legal advisors
continued to negotiate the terms of the Merger Agreement and Stockholder
Agreements from October 22, 1999 through November 17, 1999.
On October 29, 1999, the Company and Parent entered into a letter agreement
pursuant to which the Company agreed to pay Parent the out-of-pocket expenses
incurred by it in connection with the proposed transaction if the Company
accepts a competing offer within six months of such date and the related
transaction is consummated. The letter agreement terminated upon the execution
of the Merger Agreement.
On November 16, 1999, Parent's board of directors authorized the execution,
delivery and performance of the Merger Agreement, the Stockholder Agreements and
the transactions contemplated thereby.
On November 17, 1999, representatives of the Company informed Parent that
the Board of the Company had approved the Offer, the Merger and the Stockholder
Agreements and authorized the execution, delivery and performance of the Merger
Agreement and the transactions contemplated thereby.
On November 18, 1999, representatives of the Company informed Parent that
the Board of the Company had reconvened on the afternoon on November 17, 1999
and again on the morning of November 18, 1999 in order to address concerns
voiced by a stockholder of the Company, at which meetings the Board of the
Company reconfirmed its approval of the Offer, the Merger and the Stockholder
Agreements.
On November 18, 1999, Parent, Purchaser and the Company executed and
delivered the Merger Agreement; Parent, Purchaser and the Selling Stockholders
executed and delivered the Stockholder Agreements; and Parent and the Company
each announced the signing of the definitive Merger Agreement.
On November 22, 1999, pursuant to the terms of the Merger Agreement,
Purchaser commenced the Offer.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT; THE STOCKHOLDER AGREEMENTS; OTHER MATTERS
Purpose of the Offer and the Merger
The purpose of the Offer is for Parent to acquire a majority equity
interest in the Company and acquire control of the Board as a first step in
acquiring the entire equity interest in the Company. The purpose of the Merger
is for Parent to acquire all Shares not purchased pursuant to the Offer. Upon
consummation of the Merger, the Company will become a wholly-owned subsidiary of
Parent. The Offer is being made pursuant to the Merger Agreement.
Under the DGCL, the approval of the Board and the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and adopt
the Merger Agreement and the transactions contemplated thereby, including the
Merger. The Board has unanimously approved and adopted the Merger Agreement and
the transactions contemplated thereby. Thus, the only remaining required
corporate action of the Company is the approval and adoption of the Merger
Agreement and the transactions contemplated thereby by the affirmative vote of
the holders of a majority of the Shares. ACCORDINGLY, IF THE MINIMUM CONDITION
IS SATISFIED, PURCHASER WILL HAVE SUFFICIENT VOTING POWER TO CAUSE THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER. FURTHER, IF AT LEAST 90%
OF THE OUTSTANDING SHARES ARE ACQUIRED IN THE OFFER, PURCHASER WILL BE ABLE TO
EFFECT THE MERGER PURSUANT TO SECTION 253 OF THE DGCL WITHOUT PRIOR NOTICE TO,
OR ANY ACTION OR VOTE BY, ANY OTHER STOCKHOLDER.
15
<PAGE> 18
In the Merger Agreement, the Company has agreed to convene a meeting of
stockholders as promptly as practicable following the consummation of the Offer
for the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby. Parent and Purchaser have agreed that all
Shares owned by them will be voted in favor of the Merger Agreement and the
transactions contemplated thereby.
Plans for the Company
Parent is conducting a detailed review of the Company and its assets,
business, corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what business strategies it may pursue in
the event it acquires control of the Company. Such strategies are expected to
include, among other things, the integration of certain assets or businesses of
the Company with those of Parent and its subsidiaries, as well as the
implementation of industrial and technical savings and synergies created by the
transaction. Parent will make such changes or take such actions concerning the
Company only after it has completed its review and Parent's decisions could be
affected by information hereafter obtained, changes in general economic or
market conditions or in the business of the Company or its subsidiaries and
other factors.
Assuming the Minimum Condition is satisfied and Purchaser purchases Shares
pursuant to the Offer, Parent intends to exercise promptly its rights under the
Merger Agreement to obtain majority representation on, and control of, the Board
of Directors of the Company. See "-- The Merger Agreement -- Board
Representation" below. Parent will exercise such rights by causing the Company
to appoint or elect to the Company Board Bernard G. Rethore, C. Scott Greer,
Hugh K. Coble, Diane C. Harris, Gregory T. Haymaker, Jr., Michael F. Johnson,
Charles M. Rampacek, Renee J. Hornbaker and Ronald F. Shuff. Information with
respect to such directors is contained in Schedule I hereto. Following the
Merger, the Company's entire Board of Directors will initially consist of the
directors of Purchaser, as set forth in Schedule I hereto, and the executive
officers of Purchaser, as set forth in Schedule I hereto, will become the
executive officers of the Company.
The Merger Agreement
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is incorporated by reference and a copy of which
has been filed with the Commission as an exhibit to the Schedule 14D-1. The
Merger Agreement may be examined, and copies obtained, as set forth in Section 8
above.
The Offer. The Merger Agreement provides for the commencement of the Offer
and prescribes conditions to consummation of the Offer. Purchaser has expressly
reserved the right to increase the price per Share payable in the Offer or to
make any other changes in the terms and conditions of the Offer, except that
without the written consent of the Company, Purchaser has agreed that it will
not (i) decrease the Offer Price, change the form of consideration payable in
the Offer or decrease the number of Shares sought, (ii) change the conditions to
the Offer (other than to waive any condition), (iii) impose additional
conditions to the Offer or (iv) amend any other term of the Offer in any manner
adverse to the holders of Shares. The Merger Agreement provides that Purchaser
may, from time to time, in its sole discretion extend the Expiration Date, (w)
to comply with the applicable rules, regulations, interpretations and positions
of the Commission and its staff; (x) if any of the conditions to the Offer have
not been satisfied, for the minimum period of time necessary to satisfy such
condition; (y) regardless of the number of Shares tendered, on one or more
occasions for an aggregate period of not more than 10 business days beyond the
latest Expiration Date permitted by clauses (w) and (y) of this sentence; and
(z) if all of the conditions to the Offer have been satisfied but fewer than 90%
of the shares of Common Stock outstanding (determined on a fully diluted basis)
have been tendered in the Offer, for the minimum period of time necessary until
90% of such shares have been so tendered, but in no event later than the tenth
business day following the latest Expiration Date permitted by clauses (w), (x)
and (y) of this sentence.
16
<PAGE> 19
Board Representation. The Merger Agreement provides that effective upon the
payment by Purchaser for Shares pursuant to the Offer, Purchaser shall be
entitled to designate the number of directors, rounded up to the next whole
number, on the Board that equals the product of (i) the total number of
directors on the Board (giving effect to the election or appointment of any
additional directors pursuant to the terms of the Merger Agreement) and (ii) the
percentage that the number of Shares beneficially owned by Parent and Purchaser
(including Shares accepted for payment) bears to the total number of Shares
outstanding. The Company has agreed that it will take all actions necessary to
cause Purchaser's designees to be elected or appointed to the Board, including,
without limitation, by increasing the size of the Board, amending its Bylaws,
using its best efforts to obtain resignations of incumbent directors, and filing
with the Commission and mailing to stockholders the information required by
Section 14(f) of the Exchange Act and the rules promulgated thereunder. In the
event that Purchaser's designees are elected to the Board, until the Effective
Time, the Board shall have at least two directors who were directors on the date
of execution of the Merger Agreement, and the affirmative vote of a majority of
such directors shall be required to amend or terminate the Agreement by the
Company or exercise or waive any of the Company's rights thereunder.
The Merger. The Merger Agreement provides that the Merger will be effected
at the Effective Time. Upon consummation of the Merger, the separate existence
of Purchaser shall cease and the Company shall continue as the surviving
corporation. The surviving corporation of the Merger is sometimes referred to
herein as the "Surviving Corporation." The Merger will become effective upon the
filing of the Certificate of Merger (the "Certificate of Merger") with the
Delaware Secretary of State or at such time thereafter as is agreed upon by the
parties and specified in the Certificate of Merger.
Consideration to be Paid in the Merger. The Merger Agreement provides that
upon the terms and subject to the conditions in the Merger Agreement and in
accordance with the DGCL, at the Effective Time, by virtue of the Merger, each
Share issued and outstanding immediately prior to the Effective Time (excluding
Shares owned by the Company or by Parent, Purchaser or any other wholly-owned
subsidiary of Parent, and Dissenting Shares (as defined below)) shall be
converted into the right to receive the Offer Price, in cash, without interest.
Each share of common stock of Purchaser issued and outstanding immediately prior
to the Effective Time will, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation. Each Share issued and outstanding immediately prior
to the Effective Time that is owned by the Company, Parent, Purchaser or any
other wholly-owned subsidiary of Parent, automatically will be cancelled and
retired without payment of any consideration therefor and shall cease to exist.
Dissenting Shares. Shares issued and outstanding immediately prior to the
Effective Time held by a holder (if any) who has the right to demand, and who
properly demands, an appraisal of such Shares in accordance with Section 262 of
the DGCL (or any successor provision) ("Dissenting Shares") will not be
converted into the right to receive the Merger Consideration unless such holder
fails to perfect or otherwise loses such holder's right to such appraisal, if
any. If, after the Effective Time, such holder fails to perfect or loses any
such right to appraisal, each such Share of such holder shall be treated as a
Share that had been converted as of the Effective Time into the right to receive
the Merger Consideration in accordance with the terms of the Merger Agreement.
Treatment of Stock Options, Warrants, Convertible Notes and Subsidiary
Acquisition Agreements. The Merger Agreement provides that the Company will use
its best efforts to cause each holder of an outstanding employee or director
stock option to purchase Shares (the "Stock Options") to enter into an Award
Termination Agreement (as defined in the Merger Agreement), pursuant to which
each outstanding Stock Option shall be canceled in exchange for a cash payment
of an amount equal to the excess, if any, of the Offer Price over the exercise
price per share of Common Stock subject to such Stock Option, multiplied by the
number of Shares of Common Stock subject to such Stock Option immediately prior
to its cancellation; provided, however, that the Company will not be in breach
of the Merger Agreement if it fails to secure Award Termination Agreements from
the holders of Stock Options for not more than an aggregate of 200,000 shares
(such Stock Options being the "Converted Options"). If there is no excess of the
Offer Price over the exercise price per share of Common Stock subject to a Stock
Option other than a Converted Option,
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such Stock Option shall be canceled for no consideration. Notwithstanding the
foregoing, at the Effective Time, each Converted Option, whether vested or
unvested, shall be deemed to constitute an option (a "New Parent Option"), to
acquire, on the same terms and conditions as were applicable under such
Converted Option, the number of shares of common stock of Parent (the "Parent
Common Stock") (rounded down to the nearest whole number) equal to the product
of (A) the number of Shares of Common Stock issuable upon exercise of such
Converted Option and (B) the Offer Price divided by the average closing sale
price of the Parent Common Stock on the New York Stock Exchange Composite Tape
(as reported by The Wall Street Journal (Southwestern Edition)) for the ten
consecutive trading days immediately prior to and including the date preceding
the Effective Time (such product being the "Option Exchange Ratio"), at an
exercise price (rounded to the nearest whole cent) equal to (X) the exercise
price per share at which Common Stock shall have been purchasable immediately
prior to the Merger pursuant to such Converted Option divided by (Y) the Option
Exchange Ratio.
The Merger Agreement provides that at any time after payment for Shares
pursuant to the Offer and prior to the Effective Time (but in no event later
than January 31, 2000 if Purchaser has accepted Shares for payment pursuant to
the Offer prior to such date), as determined by Purchaser, the parties shall
take the actions necessary to cause each outstanding warrant to purchase Shares
(the "Warrants") to be surrendered and canceled by the holders thereof and that
Purchaser shall pay, or provide the funds and cause the Company to pay, all
amounts due under the Loan Agreement (as defined in the Merger Agreement)
pursuant to which the Warrants were issued.
The Merger Agreement provides that at any time after payment for Shares
pursuant to the Offer and prior to the Effective Time (but in no event later
than January 31, 2000 if Purchaser has accepted Shares for payment pursuant to
the Offer prior to such date), as determined by Purchaser, Purchaser shall pay,
or provide the funds and cause the Company to pay, the Convertible Notes (as
defined in the Merger Agreement).
The Merger Agreement provides that at any time after payment for Shares
pursuant to the Offer and prior to the Effective Time (but in no event later
than January 31, 2000 if Purchaser has accepted Shares for payment pursuant to
the Offer prior to such date), as determined by Purchaser, Purchaser shall pay,
or provide the funds and cause the Company to pay, the amounts outstanding under
the Collier Merger Agreement, the Colonial Merger Agreement and the Plant
Maintenance Merger Agreement (as such terms are defined in the Merger Agreement)
(collectively, the "Subsidiary Acquisition Agreements").
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations by the Company with respect to (i) organization, good standing
and corporate power, (ii) capitalization, (iii) authority, consents and
noncontravention, (iv) Commission reports, (v) financial statements, (vi)
absence of undisclosed liabilities and absence of certain changes or events,
(vii) employee benefit plans, (viii) tax matters, (ix) compliance with laws and
agreements, (x) intellectual property, (xi) litigation, (xii) environmental
matters, (xiii) contracts, (xiv) assets, (xv) takeover restrictions, (xvi)
absence of finders or brokers' fees, (xvii) agreements with creditors and other
claimants, (xviii) aggregate amounts necessary to pay the Convertible Notes and
to pay the amounts outstanding under the Subsidiary Acquisition Agreements and
(xix) the aggregate amount of the Company's transaction costs.
Parent and Purchaser have also made certain representations and warranties,
including with respect to (i) organization, good standing and corporate power,
(ii) capitalization, (iii) authority, consents and noncontravention, (iv)
absence of finders or brokers' fees and (v) financing. No representations and
warranties made by the Company, Parent or Purchaser will survive beyond the
Effective Time and no covenants made in the Merger Agreement will survive beyond
the Effective Time except for any covenant or agreement which by its terms
contemplates performance after the Effective Time.
Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement and continuing until the time
the designees of Purchaser have been elected to, and shall constitute a majority
of, the Board, the Company shall, and shall cause its subsidiaries to, conduct
their respective operations in the ordinary course consistent with past
practice, and will use commercially reasonable efforts to preserve intact their
business organizations, keep available the services of officers and
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<PAGE> 21
employees and preserve their relationships with customers, suppliers, licensors,
licensees, distributors and others having dealings with them. The Company has
agreed that, during such period it will not, and will not permit any of its
subsidiaries to, without the prior consent of Parent, and except as otherwise
contemplated by the Merger Agreement, (a) amend its certificate of incorporation
or bylaws or comparable organizational documents; (b) (i) declare, set aside or
pay any dividend or other distribution payable in cash, stock or property with
respect to the Company's capital stock or that of its subsidiaries (other than
dividends and distributions by a direct or indirect wholly-owned subsidiary of
the Company to its parent or pursuant to the Rights Agreement); (ii) redeem,
purchase or otherwise acquire directly or indirectly any shares of the capital
stock of the Company or of its subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such shares or other securities;
(iii) authorize for issuance, issue, sell, pledge, deliver or agree to commit to
issue, sell, pledge or deliver (whether through the issuance or granting of any
options, warrants, calls, subscriptions, stock appreciation rights or other
rights or other agreements) or otherwise encumber any shares of capital stock of
any class of the Company or of its subsidiaries or any securities convertible
into or exchangeable for shares of capital stock of any class of the Company or
of its subsidiaries other than Shares issued upon the exercise of Stock Options
outstanding on the date of the Merger Agreement in accordance with the Stock
Plans as in effect on the date of the Merger Agreement; or (iv) split, combine
or reclassify the outstanding capital stock of the Company or of any of its
subsidiaries or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of the capital stock of the Company or of
any of its subsidiaries; (c) acquire or agree to acquire (including, without
limitation, by merger, consolidation or acquisition of stock or assets) any
business, corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof; (d) sell, lease,
license, transfer, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of any assets of the Company or of its subsidiaries other than
(i) sales of inventory in the ordinary course of business, (ii) sales of assets
(other than sales of inventory in the ordinary course of business) having an
aggregate fair market value on the date of the Merger Agreement of less than
$50,000, in each case only if in the ordinary course of business and consistent
with past practice and (iii) encumbrances and liens incurred in the ordinary
course of business and consistent with past practice on assets that are not,
individually or in the aggregate, material to the Company and its subsidiaries,
taken as a whole; (e) except as disclosed in the Disclosure Letter (as defined
in the Merger Agreement), make or agree to make any new capital expenditure or
expenditures in excess of $10,000 each and $50,000 in the aggregate; (f) except
as required to comply with applicable law or agreements, employee benefit plans
or arrangements existing on the date of the Merger Agreement, (i) adopt, enter
into, terminate or amend in any material respect any employment contract,
collective bargaining agreement or employee benefit plan, (ii) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases of cash compensation
or cash bonuses in the ordinary course of business consistent with past
practice), (iii) pay any benefit not provided for under any Company employee
benefit plan, (iv) increase in any manner the severance or termination pay of
any officer or employee, (v) except as permitted in clause (ii), grant any
awards under any employee benefit plan (including the grant of stock options,
stock appreciation rights, stock-based or stock-related awards, performance
units or restricted stock or the removal of existing restrictions in any
employee benefit plans or agreements or awards made thereunder), (vi) take any
action to fund or in any other way secure the payment of compensation or
benefits under any employee agreement, contract or employee benefit plan or
(vii) except pursuant to the Award Termination Agreements, take any action to
accelerate the vesting of, or cash out rights associated with, any Stock
Options; (g) enter into any agreement of a nature that would be required to be
filed as an exhibit to Form 10-K under the Exchange Act, other than contracts
for the sale of the Company's products in the ordinary course of business; (h)
(i) incur or assume any long-term debt, or except in the ordinary course of
business in amounts consistent with past practice, incur or assume any
short-term indebtedness; (ii) issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or of any of its
Subsidiaries; (iii) enter into any "keep well" or other arrangement to maintain
any financial condition of another person; (iv) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; or (v) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly-owned subsidiaries of the Company); (i) make any change in
accounting methods, principles or practices unless required by GAAP (as
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defined in the Merger Agreement); (j) compromise or settle any material claim or
litigation; (k) take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Offer set forth in
the Merger Agreement or any of the conditions to the Merger set forth in the
Merger Agreement not being satisfied, or would make any representation or
warranty of the Company contained in the Merger Agreement inaccurate in any
respect at, or as of any time prior to, the Effective Time, or that would impair
the ability of the Company to consummate the Merger in accordance with the terms
of the Merger Agreement or delay such consummation; (l) make or rescind any tax
election or settle or compromise any tax liability or refund or change in any
material respect any of the methods of reporting income or deductions for
federal income tax purposes; (m) permit any material insurance policy naming it
as a beneficiary or a loss payable payee to be canceled or terminated, except in
the ordinary course of business and consistent with past practice; (n) adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its subsidiaries (other than the Merger); (o) enter into any agreement or
arrangement with any affiliate of the Company or any of its subsidiaries (other
than agreements or arrangements between the Company and wholly-owned
subsidiaries or between wholly-owned subsidiaries) on terms less favorable to
the Company or the subsidiary, as the case may be, than could be reasonably
expected to have been obtained with an unaffiliated third party on an
arm's-length basis; (p) amend, terminate or waive any provisions of the
Subsidiary Acquisition Agreements or the Convertible Notes; or (q) enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
authorize, recommend, propose or announce an intention to do any of the
foregoing.
No Solicitation. The Merger Agreement provides that the Company shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or permit
any officer, director or employee of the Company or any of its subsidiaries or
any investment banker, financial advisor, attorney, accountant or other
representative or agent retained by the Company or any subsidiary (collectively,
the "Company Representatives") to, directly or indirectly, (i) solicit, initiate
or knowingly encourage the submission of any Acquisition Proposal (as defined
below) or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any nonpublic information with respect to, or take any
other action designated or reasonably likely to facilitate any inquiries or the
making of any proposal that constitutes an Acquisition Proposal; provided,
however, that the Company may, in response to an unsolicited Acquisition
Proposal received after the date of the Merger Agreement, and subject to
compliance with Section 5.3(c) of the Merger Agreement, participate in
discussions or negotiations with a third party making an Acquisition Proposal
(and may furnish information to such third party pursuant to a customary
confidentiality agreement on terms no less favorable to the Company than the
confidentiality agreement between the Company and Parent) if (x) the Board of
Directors of the Company reasonably determines that the Acquisition Proposal is
a bona fide Superior Proposal (as defined below) and (y) the Board of Directors
determines (after consultation with independent outside counsel) that failing to
take such action could reasonably be determined to constitute a breach of its
fiduciary duties to the Company's stockholders under applicable law. The Merger
Agreement requires the Company to immediately cease and cause to be terminated
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any person conducted prior to the execution of the Merger
Agreement by the Company or any Company Representative with respect to any
Acquisition Proposal existing on the date of the Merger Agreement. The Company
may not release any third party from, or amend or waive any provision of, any
standstill agreement to which it is a party unless the Board of Directors of the
Company determines (after consultation with independent outside counsel) that
failing to take such action could reasonably be determined to constitute a
breach of its fiduciary duties to the Company's stockholders under applicable
law. Any violation of the foregoing restrictions by any Company Representative
shall be deemed to be a breach by the Company. For purposes of the Merger
Agreement, "Acquisition Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Company and its subsidiaries, taken as a
whole (other than the purchase of the Company's products in the ordinary course
of business), or of over 10% of any class of equity securities of the Company or
any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 10% or more of any
class of equity securities of the Company or any of its subsidiaries or any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
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<PAGE> 23
contemplated by the Merger Agreement, or any other transaction the consummation
of which could reasonably be expected to impede, interfere with, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to dilute materially the benefits to Parent of the transactions contemplated by
the Merger Agreement.
Except as set forth in Section 5.3 of the Merger Agreement, neither the
Board of Directors of the Company nor any committee thereof may (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or such committee of the
Offer, the Merger or the Merger Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal or (iii) cause the
Company to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Acquisition Agreement") related
to any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of
acceptance for payment of Shares in the Offer, the Board of Directors of the
Company may (subject to the terms of this and the following sentence) withdraw
or modify its approval or recommendation of the Offer, the Merger Agreement or
the Merger, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the second
business day following Parent's receipt of written notice advising Parent that
the Board of Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal; provided, that the Board
of Directors of the Company shall have determined (and been advised in writing
by independent outside counsel) that the failure to take such action could
reasonably be determined to cause the Board of Directors of the Company to
violate its fiduciary duties to the Company's stockholders under applicable law;
and provided further, that the Company shall not enter into an Acquisition
Agreement with respect to a Superior Proposal unless the Company shall have
furnished Parent with written notice not later than noon (New York City time)
two days in advance of any date that it intends to enter into such agreement and
shall have caused its financial and legal advisors to negotiate with Parent to
make such adjustments in the terms and conditions of the Merger Agreement as
would enable the Company to proceed with the transactions contemplated therein
on such adjusted terms. In addition, if the Company proposes to enter into an
Acquisition Agreement with respect to any Acquisition Proposal, it shall
concurrently with entering into such agreement pay, or cause to be paid, to
Parent the Termination Fee as described below under "-- Fees and Expenses." For
purposes of the Merger Agreement, a "Superior Proposal" means any bona fide
Acquisition Proposal made by a third party (i) that is on terms which the Board
of Directors of the Company determines in its good faith judgment (based on
consultation with the Company's financial advisor) to be more favorable to the
Company's stockholders than the Offer and the Merger and (ii) for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of the Company, is capable of being obtained
by such third party.
In addition to the obligations of the Company set forth above, the Company
shall promptly advise Parent orally and in writing of any request for nonpublic
information or of any Acquisition Proposal known to it, the material terms and
conditions of such request or Acquisition Proposal and the identity of the
person making such request or Acquisition Proposal. The Company will promptly
inform Parent of any material change in the details (including amendments or
proposed amendments) of any such request or Acquisition Proposal.
Releases. The Merger Agreement provides that upon payment of the amounts
required pursuant to the Third Amendment to Loan Agreement (as defined by the
Merger Agreement), the Company shall deliver to Parent evidence of the
termination and release of all liens on any assets of the Company or any
subsidiary of the Company granted in connection with, and executed receipts,
payoff letters or similar documents executed by the Company's lenders under, the
Loan Agreement dated as of July 7, 1998, among the Company, Chase Bank of Texas,
National Association, as Agent, and certain other financial institutions therein
listed, as amended, each in form and substance reasonably satisfactory to Parent
and Parent's lenders (the "Releases").
Fees and Expenses. The Merger Agreement provides that, except as described
below, all expenses incurred in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement will be paid by the party
incurring the expenses. If (x) the Board of Directors of the Company shall
terminate the Merger Agreement pursuant to Section 7.1(c)(ii) thereof (in
connection with entering into a definitive agreement relating to a Superior
Proposal), (y) the Board of Directors of Parent or Purchaser
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shall terminate the Merger Agreement pursuant to Section 7.1(d)(iii) thereof (in
connection with the Board of Directors of the Company or any committee thereof
having withdrawn or modified in a manner adverse to Parent or Purchaser or
resolved to do so, or having approved or recommended any Acquisition Proposal or
the Company having entered into an Acquisition Agreement with respect to
Superior Proposal), or (z) prior to the termination of the Merger Agreement
(other than by the Board of Directors of the Company pursuant to Section
7.1(c)(i)or 7.1(c)(iii) of the Merger Agreement), an Acquisition Proposal shall
have been made and within 12 months of such termination, the same or another
Acquisition Proposal from the same or another party shall be accepted and the
related transaction consummated pursuant to a definitive agreement or otherwise,
the Company shall pay to Parent (concurrently with such termination, in the case
of clauses (x) or (y) above, and not later than two business days after the
Company takes any such action with respect to an Acquisition Proposal, in the
case of clause (z) above) an amount equal to $3.0 million plus an amount equal
to the fees and expenses incurred by Parent and Purchaser in connection with the
Offer, the Merger, the Merger Agreement and the consummation of the transactions
contemplated thereby (the "Termination Fee").
Conditions to the Merger. Pursuant to the Merger Agreement, the obligation
of each party to effect the Merger is subject to the satisfaction or written
waiver on or prior to the closing date of the Merger of the following
conditions: (i) if required by applicable law to effect the Merger, the Merger
Agreement shall have been approved by the holders of a majority of the
outstanding Shares, in accordance with applicable law and the Company's
certificate of incorporation and bylaws; (ii) no law, statute, rule, executive
order, decree, regulation, temporary restraining order or preliminary or
permanent injunction or other order issued by any federal, state or local
government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental Entity")
shall be in effect which declares the Merger Agreement invalid or unenforceable
in any material respect or which prohibits consummation of the Merger, and all
governmental consents, orders and approvals required for the consummation of the
Merger and the other transactions contemplated by the Merger Agreement shall
have been obtained and shall be in effect at the Effective Time; (iii) Parent,
Purchaser or their affiliates shall have purchased Shares pursuant to the Offer;
and (iv) the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated.
Termination. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any stockholder approval of the Merger) (a) by the mutual written consent of the
Board of Directors of Parent or Purchaser and the Board of Directors of the
Company; (b) by either of the Board of Directors of the Company or the Board of
Directors of Parent or Purchaser (i) if the Offer shall have expired without any
Shares being purchased therein; provided, however, that the right to terminate
the Merger Agreement pursuant to clause (b)(i) shall not be available to any
party whose failure to fulfill any obligation under the Merger Agreement has
been the cause of, or resulted in, the failure of Purchaser to purchase Shares
pursuant to the Offer on or prior to the date on which the Offer shall have
expired; or (ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other action
the parties shall use their best efforts to lift), which permanently restrains,
enjoins or otherwise prohibits the acceptance for payment of, or payment for,
Shares pursuant to the Offer or the Merger and such order, decree, ruling or
other action shall have become final and non-appealable; (c) by the Board of
Directors of the Company (i) if Parent, Purchaser or any of their affiliates
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer; provided,
that the Company may not terminate the Merger Agreement pursuant to clause
(c)(i) if the Company is in material breach of the Merger Agreement; (ii) in
connection with entering into a definitive agreement in accordance with Section
5.3(b) of the Merger Agreement (described above under "No Solicitation"),
provided the Company has complied with all provisions thereof, including the
notice provisions therein, and that the Company makes simultaneous payment of
the Termination Fee; or (iii) if Parent or Purchaser shall have breached in any
material respect any of their respective representations, warranties, covenants
or other agreements contained in the Merger Agreement, which breach cannot be or
has not been cured within 30 days after the giving of written notice to Parent
or Purchaser, as applicable, except, in any case, for such breaches which are
not, in Parent's opinion, reasonably likely to affect adversely Parent's or
Purchaser's ability to complete the Offer or the Merger; (d) by
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the Board of Directors of Parent or Purchaser (i) if, due to an occurrence that
if occurring after the commencement of the Offer would result in a failure to
satisfy any of the conditions to the Offer, Parent, Purchaser, or any of their
affiliates shall have failed to commence the Offer on or prior to five business
days following the date of the initial public announcement of the Offer;
provided, that neither Purchaser nor Parent may terminate the Merger Agreement
pursuant to clause (d)(i) if it is in material breach of the Merger Agreement;
(ii) if prior to the purchase of Shares pursuant to the Offer, the Company shall
have breached any representation, warranty, covenant or other agreement
contained in the Merger Agreement which would give rise to the failure of a
condition set forth below in paragraph (f) or (h) of Section 14 -- "Certain
Conditions of the Offer;" or (iii) if either Parent or Purchaser is entitled to
terminate the Offer as a result of the occurrence of any event set forth below
in paragraph (e) of Section 14 -- "Certain Conditions of the Offer."
Indemnification. The Merger Agreement provides that for six years after the
Effective Time, the Surviving Corporation (or any successor to the Surviving
Corporation) shall indemnify, defend and hold harmless the present and former
officers and directors of the Company and its subsidiaries (each an "Indemnified
Party") against all losses, claims, damages, liabilities, fees and expenses
(including reasonable fees and disbursements of counsel and judgments, fines,
losses, claims, liabilities and amounts paid in settlement (provided that any
such settlement is effected with the written consent of Parent or the Surviving
Corporation, which consent will not be unreasonably withheld)) arising out of
actions or omissions occurring at or prior to the Effective Time to the full
extent permitted under Delaware law (provided that such actions or omissions
were in compliance with the standards set forth under Delaware law, the
certificate of incorporation and the bylaws of the Company), subject to the
terms of the certificate of incorporation and the bylaws of the Company, all as
in effect at the date of the Merger Agreement; provided that, in the event any
claim or claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims; provided, further, that nothing therein
shall impair any rights or obligations of any present or former directors or
officers of the Company.
The Merger Agreement provides that Parent or the Surviving Corporation
shall maintain the Company's existing officers' and directors' liability
insurance for a period of not less than six years after the Effective Time;
provided, that the Parent may substitute therefor policies of substantially
similar coverage and amounts containing terms no less favorable to such former
directors or officers; provided, further, that in no event shall the Company be
required to pay aggregate premiums for insurance in excess of 200% of the
aggregate premiums paid by the Company in 1999 on an annualized basis for such
purpose.
The Merger Agreement provides that the foregoing indemnification provisions
are intended to benefit the Company and each of the Indemnified Parties.
Stockholders Meeting. The Merger Agreement provides that if stockholder
approval of the Merger is required by law, the Company will convene a special
meeting of stockholders (the "Stockholders Meeting") as promptly as practicable
after the expiration of the Offer and payment for the Shares for the purpose of
considering and voting upon the Merger Agreement and the transactions
contemplated thereby, including the Merger. The Merger Agreement provides that
the Board of Directors of the Company will recommend that the holders of the
Shares vote in favor of and approve the Merger Agreement and the Merger at the
Stockholders Meeting. At the Stockholders Meeting, Parent and Purchaser shall
vote all Shares beneficially owned by them in favor of the adoption and approval
of the Merger Agreement and the Merger.
Consents and Approvals. The Merger Agreement provides that each of the
parties to the Merger Agreement will use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by the Merger
Agreement, including, without limitation, obtaining any necessary third-party or
governmental consents and approvals. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
the Merger Agreement, the proper officers and directors of each party to the
Merger Agreement will take all such necessary action.
Amendment and Modification. Pursuant to the Merger Agreement, the Merger
Agreement may be amended, modified or supplemented only by written agreement of
Parent, Purchaser and the Company at any time prior to the Effective Time;
provided, however, that, after the Merger Agreement is adopted by the
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Company's stockholders, no such amendment or modification shall reduce the
amount or change the form of the consideration to be paid in the Merger.
The Stockholder Agreements
The following is a summary of the material terms of the Stockholder
Agreements. This summary is not a complete description of the terms and
conditions of the Stockholder Agreements and is qualified in its entirety by
reference to the full text of the Stockholder Agreements, which are incorporated
by reference and copies of which have been filed with the Commission as exhibits
to the Schedule 14D-1. The Stockholder Agreements may be examined, and copies
obtained, as set forth in Section 8 above. Capitalized terms not otherwise
defined herein or in the following summary shall have the meaning set forth in
the Stockholder Agreements.
Concurrently with the execution and delivery of the Merger Agreement, and
in order to induce Parent and Purchaser to enter into the Merger Agreement, each
of the Selling Stockholders, who own in the aggregate approximately 32% of the
outstanding Shares, entered into a Stockholder Agreement with Purchaser.
Pursuant to the Stockholder Agreements, each Selling Stockholder has agreed to
validly tender in the Offer and not withdraw all Shares beneficially owned by
such Stockholder on the date of the Stockholder Agreement or subsequently
acquired by such Stockholder.
Each Granting Stockholder has granted Purchaser an irrevocable option to
purchase all Shares owned by such Stockholder at $1.62 per Share, exercisable at
any time in whole or in part after (i) the occurrence of any event as a result
of which Parent is entitled to receive a Termination Fee under the Merger
Agreement or (ii) such Stockholder shall have breached certain specified
agreements contained in the Stockholder Agreement. Each such option shall be
exercisable until the later of (i) the date that is 90 days after the date such
option became exercisable, and (ii) the date that is ten days after the date
that all waiting periods under the HSR Act required for the purchase of such
Shares have expired or been terminated; provided, that if at the expiration of
such period there shall be in effect any injunction or other order issued by any
governmental entity prohibiting the exercise of such option, the exercise period
shall be extended until ten days after the date that no such injunction or order
is in effect.
Each Selling Stockholder has agreed that at any meeting of the stockholders
of the Company or in connection with any written consent of the stockholders of
the Company, such Selling Stockholder will vote (or cause to be voted) all
Shares held of record or owned by such Selling Stockholder (i) in favor of the
Merger and the Merger Agreement and the Stockholder Agreements and (ii) against
any Acquisition Proposal and against any action or agreement that would impede
or frustrate the Stockholder Agreements or result in a breach in any respect of
any obligation or agreement of the Company under the Merger Agreement or which
would result in any of the conditions described in "The Merger
Agreement -- Conditions to the Merger" above or in Section 14 ("Certain
Conditions of the Offer") not being fulfilled. Each such Stockholder has
irrevocably granted to and appointed Purchaser as such Selling Stockholder's
proxy and attorney-in-fact to vote the Shares owned by such Selling Stockholder,
or grant a consent or approval in respect of such Shares, in the manner
specified above.
Each Selling Stockholder has agreed that, except as provided by the Merger
Agreement and the Stockholder Agreement, such Selling Stockholder will not (i)
offer to transfer, transfer or consent to any transfer, (ii) enter into any
contract, option or other agreement or understanding with respect to any
transfer, (iii) grant any proxy, power-of-attorney or other authorization or
(iv) deposit into a voting trust or enter into a voting agreement or
arrangement, each with respect to any or all Shares owned by such Selling
Stockholder.
Each Selling Stockholder has agreed that such Selling Stockholder shall not
encourage, solicit, initiate or participate in any way in any discussion or
negotiation with, or provide information or otherwise take any action to assist
or facilitate, any person concerning any Acquisition Proposal. Each Selling
Stockholder has agreed to cease any such existing activities and to immediately
communicate to Purchaser the terms of any Acquisition Proposal.
Each Chapter 11 Stockholder has agreed to file, as soon as practicable
following public announcement by Parent of the execution of the Merger
Agreement, a petition with the Delaware Bankruptcy Court requesting
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the approval of its Stockholder Agreement and the transactions contemplated
thereby. In addition, each Chapter 11 Stockholder has agreed to deliver a copy
of its petition to Purchaser's counsel for review prior to filing it with the
Delaware Bankruptcy Court and to notify Purchaser promptly of any action taken
by the Delaware Bankruptcy Court with respect to the approval of its Stockholder
Agreement or the confirmation of a plan or reorganization regarding such Chapter
11 Stockholder.
Each Selling Stockholder has waived any rights of appraisal or rights to
dissent from the Merger.
The Stockholder Agreement with respect to each Selling Stockholder shall
terminate upon the earliest of (i) the Effective Time of the Merger, and (ii)
termination of the Merger Agreement, unless either (A) Parent is or may be
entitled to receive a Termination Fee under the Merger Agreement following such
termination or (B) prior to such termination such Selling Stockholder has
breached certain specified agreements contained in the Stockholder Agreement.
Other Matters
Appraisal Rights. Holders of the Shares do not have appraisal rights in
connection with the Offer. However, if the Merger is consummated, holders of the
Shares at the Effective Time will have certain rights pursuant to the provisions
of Section 262 of the DGCL including the right to dissent and demand appraisal
of, and to receive payment in cash of the fair value of, their Shares. Under
Section 262 of the DGCL, dissenting stockholders of the Company who comply with
the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest thereon, if any. Any such judicial determination of the fair value of
the Shares could be based upon factors other than, or in addition to, the price
per Share to be paid in the Merger or the market value of the Shares. The value
so determined could be more or less than the price per Share to be paid in the
Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE
DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE
FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE
UNDER THE DGCL. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. However, Rule
13e-3 will not be applicable to the Merger or any such other business
combination if (i) the Shares are deregistered under the Exchange Act prior to
the Merger or other business combination or (ii) the Merger or other business
combination is consummated within one year after the purchase of the Shares
pursuant to the Offer and the value of the consideration paid per Share in the
Merger or other business combination (measured at the time of consummation of
the Merger) is at least equal to the amount paid per Share in the Offer. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS
If on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii) issue
or sell any additional securities of the Company or otherwise cause an increase
in the number of outstanding securities of the Company or (iii) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares, then, without prejudice to Purchaser's rights under Sections
1 and 14 hereof, Purchaser in its sole discretion, subject to the
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terms of the Merger Agreement, may make such adjustments as it deems appropriate
in the Offer Price and other terms of the Offer.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any dividend on the Shares or make any distribution (including,
without limitation, cash dividends, the issuance of additional Shares pursuant
to a stock dividend or stock split, the issuance of other securities or the
issuance of rights for the purchase of any securities) with respect to the
Shares that is payable or distributable to Stockholders of record on a date
prior to the transfer to the name of Purchaser or its nominee or transferee on
the Company's stock transfer records of the Shares purchased pursuant to the
Offer, then, without prejudice to Purchaser's rights under Sections 1 and 14
hereof, any such dividend, distribution or right to be received by the tendering
Stockholders will be received and held by the tendering Stockholder and tendered
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all rights and privileges as owner of any
such dividend, distribution or right and may withhold the entire Offer Price or
deduct from the Offer Price the amount or value thereof, as determined by
Purchaser in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two preceding paragraphs, and
nothing in this Offer to Purchase shall constitute a waiver by Purchaser or
Parent of any of its rights under the Merger Agreement or a limitation of
remedies available to Purchaser or Parent for any breach of the Merger
Agreement, including termination of the Merger Agreement.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), to pay for, and may
postpone the acceptance for payment and (subject to the restriction referred to
above) payment for any, Shares tendered, and may terminate or amend the Offer if
(1) the Minimum Condition shall not have been satisfied, (2) any applicable
waiting period under the HSR Act shall not have expired or been terminated prior
to the expiration of the Offer, or (3) at any time on or after the date of the
Merger Agreement and before acceptance for payment of Shares, any of the
following events shall occur:
(a) there shall have been threatened or instituted by any Governmental
Entity any action or proceeding before any court or governmental,
administrative or regulatory authority or agency of competent jurisdiction,
domestic or foreign, (i) challenging or seeking to make illegal, materially
delay or otherwise directly or indirectly restrain or prohibit or make
materially more costly the making of the Offer, the acceptance for payment
of, or payment for, any Shares by Parent, Purchaser or any other affiliate
of Parent, or the consummation of any other transaction contemplated by the
Merger Agreement, or seeking to obtain material damages in connection with
the Offer, the Merger or any such other transaction; (ii) seeking to
prohibit or limit materially the ownership or operation by the Company,
Parent or any of their Subsidiaries of all or any material portion of the
business or assets of the Company, Parent or any of their Subsidiaries, or
to compel the Company, Parent or any of their Subsidiaries to dispose of or
hold separate all or any portion of the business or assets of the Company,
Parent or any of their Subsidiaries, as a result of the Offer, the Merger
or any of the other transactions contemplated by the Merger Agreement;
(iii) seeking to impose or confirm limitations on the ability of Parent,
Purchaser or any other affiliate of Parent to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right
to vote any Shares acquired by Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Company's stockholders, including,
without limitation, the approval and adoption of the Merger Agreement and
the Merger; (iv) seeking to require divestiture by Parent, Purchaser or any
other affiliate of Parent of any Shares; or (v) which otherwise has a
Material Adverse Effect (as defined in the Merger Agreement) on the
Company;
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(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger
of applicable waiting periods under the HSR Act, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the Nasdaq National Market System, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (iii) a commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) any limitation (whether or not
mandatory) by any United States governmental authority on the extension of
credit by banks or other financial institutions, or (v) in the case of any
of the foregoing existing at the time of commencement of the Offer, a
material acceleration or worsening thereof;
(d) there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably
likely to result in any material adverse change) in the consolidated
financial condition, businesses, results of operations or prospects of the
Company and its subsidiaries, taken as a whole, other than any such change
that is the result of cancellation of a distributor agreement or similar
agreement from an original equipment manufacturer or other material
supplier;
(e) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger or the Merger
Agreement or resolved to do so, or shall have approved or recommended any
Acquisition Proposal, or (ii) the Company shall have entered into any
Acquisition Agreement with respect to any Superior Proposal;
(f) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case as of the date of the Merger Agreement and as of the scheduled
Expiration Date of the Offer;
(g) (i) any stockholder of the Company party to a Stockholder
Agreement shall have failed to perform in any material respect any material
obligation or to comply in any material respect with any material agreement
or covenant of such stockholder to be performed or complied with under such
Stockholder Agreement or (ii) either Chapter 11 Stockholder Agreement shall
not have been approved by the Delaware Bankruptcy Court and a plan of
reorganization shall not have been confirmed by the Delaware Bankruptcy
Court with respect to the Chapter 11 Stockholder party to such Chapter 11
Stockholder Agreement;
(h) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or covenant of the Company to be performed or complied
with by it under the Merger Agreement; or
(i) the Merger Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable judgment of Parent or Purchaser, in any such
case and regardless of the circumstances (unless such condition is caused
by the action or inaction of Parent or Purchaser) giving rise to such
condition makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by Parent and Purchaser, in
whole or in part, at any time and from time to time in their sole discretion.
The failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right and may be asserted at any time and from time to
time.
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Purchaser acknowledges that the Commission believes that (i) if Purchaser
is delayed in accepting the Shares it must either extend the Offer or terminate
the Offer and promptly return the Shares and (ii) the circumstances in which a
delay in payment are permitted are limited and do not include unsatisfied
conditions of the Offer, except with respect to most required regulatory
approvals.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, but without any independent
investigation, neither Purchaser nor Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, that might be adversely affected by
Purchaser's acquisition of Shares as contemplated in this Offer to Purchase or
of any approval or other action by any governmental authority that would be
required for the acquisition or ownership of Shares by Purchaser as contemplated
in this Offer to Purchase. Should any such approval or other action be required,
Purchaser and Parent presently contemplate that such approval or other action
will be sought, except as described below under "State Takeover Laws."
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares pursuant to the Offer is subject to these
requirements.
Parent expects to file a Notification and Report Form with respect to the
Offer under the HSR Act as soon as practicable following commencement of the
Offer. The waiting period under the HSR Act with respect to the Offer will
expire at 11:59 p.m., Washington, D.C. time, on the fifteenth day after the date
such form is filed, unless early termination of the waiting period is granted.
In addition, the Antitrust Division or the FTC may extend such waiting period by
requesting additional information or documentary material from Parent. If such
request is made with respect to the Offer, the waiting period related to the
Offer will expire at 11:59 p.m., Washington, D.C. time, on the tenth day after
substantial compliance by Parent with such request. With respect to each
acquisition, the Antitrust Division or the FTC may issue only one request for
additional information. In practice, complying with a request for additional
information or material can take a significant amount of time. Expiration or
termination of applicable waiting periods under the HSR Act is a condition to
Purchaser's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
the Company. At any time before or after Purchaser's purchase of Shares pursuant
to the Offer, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or the
consummation of the Merger or seeking the divestiture of Shares acquired by
Purchaser or the divestiture of substantial assets of Parent or its subsidiaries
or the Company or its subsidiaries. Private parties may also bring legal action
under the antitrust laws under certain circumstances. There can be no assurance
that a challenge to the Offer on antitrust grounds will not be made or, if such
a challenge is made, of the results thereof.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in those states.
In Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify, a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that the laws were applicable
only under certain conditions.
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Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval of either the business combination or the
transaction that resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
approved the Merger Agreement, the Stockholder Agreements and the transactions
contemplated thereby, including the Offer and the Merger, and has taken all
necessary steps to render Section 203 of the DGCL inapplicable to the Merger
Agreement, the Stockholder Agreements and the transactions contemplated thereby,
including the Offer and the Merger.
Neither Parent nor Purchaser has currently complied with any state takeover
statute or regulation. Should any person seek to apply any state takeover law,
Purchaser will take such action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to the Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer, Purchaser
might be required to file certain information with, or receive approvals from,
the relevant state authorities. In addition, if enjoined, Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer and the Merger. In such case,
Purchaser may not be obligated to accept for payment any Shares tendered. See
Section 14.
16. FEES AND EXPENSES
Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent, and Equiserve to act as the Depositary, in connection with the Offer.
Each of the Information Agent and the Depositary will receive reasonable and
customary compensation for its services, will be reimbursed for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expense in connection therewith, including certain liabilities
under the federal securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions
to any broker or dealer or other person for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
will be reimbursed by Purchaser for customary mailing and handling expenses
incurred by them in forwarding the offering materials to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of the jurisdiction. However, Purchaser may,
in its discretion, take such action as it may deem necessary to make the Offer
in any jurisdiction and extend the Offer to holders of Shares in that
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers that are licensed under the laws of the jurisdiction.
Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act containing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments to
the Schedule 14D-1, including exhibits, may be examined and copies may be
obtained from the principal office of the Commission in the manner set forth in
Section 8 above (except that they will not be available at the regional offices
of the Commission).
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THE OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
FORREST ACQUISITION SUB, INC.
November 22, 1999
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER
A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The following table sets forth the name, present principal occupation or
employment and material occupation, positions, offices or employment for the
past five years of each director and executive officer of Parent. Unless
otherwise indicated below, the business address of each such person is c/o
Flowserve Corporation, 222 W. Las Colinas Blvd., Suite 1500, Irving, Texas
75039, and each such person is a citizen of the United States.
Bernard G. Rethore has been Chairman of the Board of Directors and Chief
Executive Officer of Parent since 1997 and also President from November 1998 to
July 1999. Since September 1999, Mr. Rethore has shared the Office of Chief
Executive with C. Scott Greer, Parent's current President and Chief Operating
Officer, who is expected to succeed Mr. Rethore as Chief Executive Officer in
2000. Mr. Rethore was Chairman of the Board of BW/IP, Inc. (prior to its merger
with Parent) in 1997 and served as its President, Chief Executive Officer and a
director from 1995 to 1997. He was Senior Vice President of Phelps Dodge
Corporation and President of Phelps Dodge Industries, its diversified
international manufacturing business, from 1989 to 1995. Previously, Mr. Rethore
had been President and Chief Executive Officer of Microdot Industries, the
diversified manufacturing business of Microdot, Inc. Mr. Rethore is also a
director of Maytag Corporation, a manufacturer of residential and commercial
appliances of wire, cable and cord products for the electronics industry.
C. Scott Greer has been President, Chief Operating Officer and a director
of Parent since July 1999. During the transition in 2000 to Mr. Greer's future
role as Chief Executive Officer when Bernard G. Rethore, Parent's current
Chairman and Chief Executive Officer, is expected to step down, Mr. Greer and
Mr. Rethore will comprise the Office of Chief Executive. From 1997 to July 1999
Mr. Greer was President of UT Automotive, a supplier of electrical, electronic
and interior trim systems and components for the automotive industry. From 1980
to 1997 Mr. Greer held various positions, including President, Chief Operating
Officer and a director, with Echlin, Inc., a global provider of automotive
original equipment and aftermarket products.
Hugh K. Coble has served as a director of Parent since 1994. Mr. Coble is
the Vice Chairman Emeritus of Fluor Corporation, a major engineering and
construction firm. Mr. Coble joined Fluor Corporation in 1966, where he held a
series of increasingly responsible management positions and had been a director
from 1984 until his retirement in 1997. Mr. Coble is also a director of Beckman
Instruments, Inc., a company that sells medical instruments, and a director of
ICO Global Communications, a telecommunications business.
Diane C. Harris has served as a director of Parent since 1993. Ms. Harris
is President of Hypotenuse Enterprises, Inc., a merger and acquisition services
and corporate development outsourcing company. Ms. Harris was Vice President of
Corporate Development for Bausch & Lomb, an optics and health care products
company, from 1981 to 1996. Ms. Harris was a director of the Association for
Corporate Growth from 1993 to 1998 and its President from 1997 to 1998.
George T. Haymaker, Jr. has served as a director of Parent since 1997. Mr.
Haymaker has been Chairman and Chief Executive Officer of Kaiser Aluminum
Corporation since 1994. Before joining Kaiser in 1993 as its President and Chief
Operating Officer, Mr. Haymaker had worked with a private partner in the
acquisition and redirection of several metal fabricating companies. He had also
been Executive Vice President of Alumax and held various positions at Alcoa,
including Vice President and Treasurer and Group Vice President of International
Operations.
Michael F. Johnston has served as a director of Parent since 1997. Mr.
Johnston has been President of Americas Automotive Group of Johnson Controls,
Inc., a company serving the automotive and building services industries, since
1997. He was Vice President and General Manager of ASG Interior Systems Business
of Johnson Controls, Inc. during 1997, Vice President and General Manager of the
Johnson Controls
<PAGE> 34
Battery Group from 1993 to 1997, Vice President and General Manager of SLI
Battery Division from 1991 to 1993 and Vice President and General Manager of the
Specialty Battery Division from 1989 to 1991.
Charles M. Rampacek has served as a director of Parent since 1998. Mr.
Rampacek has been President and Chief Executive Officer of Lyondell-Citgo
Refining L.P., a manufacturer of petroleum products, since 1996. Previously, Mr.
Rampacek was employed by Tenneco, Inc., where he served as President of Tenneco
Gas Transportation Company from 1992 to 1996, and as Executive Vice President of
Tenneco Gas operations from 1989 to 1992.
James O. Rollans has served as a director of Parent since 1997. Mr. Rollans
is Senior Vice President and Chief Financial Officer of Fluor Corporation, a
major engineering and construction firm. Mr. Rollans has been Senior Vice
President of Fluor since 1992 and its Chief Financial Officer since 1998. He was
Fluor's Chief Administrative Officer from 1994 to 1998, and he served as its
Chief Financial Officer from 1992 to 1994 and its Vice President of Corporate
Communications from 1982 to 1992. Mr. Rollans is also a director of Fluor
Corporation and of Inovision, Inc., a pharmaceutical products company.
William C. Rusnack has served as a director of Parent since 1997. Mr.
Rusnack is President, Chief Executive Officer and a director of Clark Refining &
Marketing, Inc., a company which refines crude oil to manufacture petroleum
products for sale. Mr. Rusnack was Senior Vice President of ARCO, an integrated
petroleum company, from 1990 to 1998, and President of ARCO Products Company
from 1993 to 1998. Mr. Rusnack is also a director of Clark U.S.A., Inc.
Kevin E. Sheehan has served as a director of Parent since 1990. Mr. Sheehan
is a general partner of the CID Equity Partners, a venture capital firm that
concentrates on early-stage and high-growth entrepreneurial companies. He was a
Vice President of Cummins Engine Company, a manufacturer of diesel engines and
related components, from 1980 until 1993. He is also a director of the Auburn
Foundry Group.
Mark D. Dailey has served as Vice President, Supply Chain Integration, for
Parent since September 1999. Mr. Dailey was employed by The Black & Decker
Company from 1992 to 1997, last serving as Vice President, Supply Chain for the
North American Power Tools Division.
Renee J. Hornbaker has served as Vice President and Chief Financial Officer
for Parent since December 1997. Ms. Hornbaker was Vice President of Business
Development and Chief Information Officer for Parent during 1997 and prior to
its merger with Parent, had served as Vice President of Finance and Chief
Financial Officer of BW/IP, Inc. in 1997 and Vice President of Business
Development from 1996 to 1997. She was employed by Phelps Dodge Industries from
1991 to 1996, last serving as Director of Business Analysis and Planning.
Rick L. Johnson has served as Vice President of Business Development of
Parent since January 1998 and Controller since November 1998. Mr. Johnson was
Vice President and Controller of Parent's Industrial Products Division from 1995
to 1998. From 1991 to 1995, he was transferred to Parent's Singapore subsidiary,
most recently serving as its President.
Rory E. MacDowell has served as Vice President and Chief Information
Officer of Parent since 1998. From 1993 to 1997, Mr. MacDowell was Chief
Information Officer of Keystone International, Inc., a manufacturer and
distributor of flow control products.
Cheryl D. McNeal has served as Vice President of Human Resources of Parent
since 1996. She was Assistant Vice President of Human Resources and held other
Human Resource management positions at NCR from 1978 to 1996.
George A. Shedlarski has served as a corporate Vice President of Parent
since 1987, President of Parent's Flow Solutions Division since January 1999 and
President of Parent's Flow Control Division since August 1999. He has held
various senior management positions with Parent since 1987, including Division
President positions in Parent's Rotating Equipment Group and Industrial Products
Group.
Ronald F. Shuff has served as a Vice President of Parent since 1990, and
its Secretary and General Counsel since 1989.
2
<PAGE> 35
Howard D. Wynn has served as a corporate Vice President of Parent and as
President of Parent's Rotating Equipment Division of Parent since 1997. He was
previously employed by BW/IP, Inc. in management positions, including senior
positions in its Pump Division from 1993 to 1997.
Michael S. Dunn has served as Acting Treasurer since October 1999 of Parent
and as Assistant Vice President and Director of Tax of Parent since 1997. He
served as Director of Tax and Assistant Treasurer of BW/IP, Inc. from 1995 to
1997, and was previously employed by National Education Corporation as Director
of Tax and Assistant Treasurer from 1992 to 1995.
B. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The directors of Purchaser are Ronald F. Shuff and Renee J. Hornbaker. The
executive officers of Purchaser are C. Scott Greer, President; Ronald F. Shuff,
Secretary/Treasurer; and Renee J. Hornbaker, Vice President. The present
principal occupation or employment and material occupations, positions, offices
or employment for the past five years of such persons are set forth in part A of
this Schedule I. The business address of each such person is c/o Flowserve
Corporation, 222 W. Las Colinas Blvd., Suite 1500, Irving, Texas 75039, and each
such person is a citizen of the United States.
3
<PAGE> 36
Facsimile copies of the Letter of Transmittal properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each stockholder or
his or her broker, dealer, commercial bank, trust company or other nominee to
the Depositary, at one of the addresses set forth below:
The Depositary for the Offer is:
Equiserve
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand:
Equiserve (201) 324-3402 or (201) Equiserve
Corporate Actions 324-3403 c/o Securities Transfer and
Suite 4660 (For Eligible Institutions Reporting Services, Inc.
P.O. Box 2569 Only) Attn: Corporate Actions
Jersey City, NJ 07303-2569 Confirm by Telephone: 100 William Street, Galleria
(201) 222-4707 New York, NY 10038
By Overnight Courier:
Equiserve
Corporate Actions, Suite 4860
14 Wall Street, 8th Floor
New York, NY 10005
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone numbers listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below and will
be furnished promptly at Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
Toll Free (800) 347-4750
Banks and Brokerage Firms, please call collect: (212) 269-5550
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
INNOVATIVE VALVE TECHNOLOGIES, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 22, 1999
BY
FORREST ACQUISITION SUB, INC.
A WHOLLY-OWNED SUBSIDIARY OF
FLOWSERVE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, DECEMBER 21, 1999,
UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
Equiserve
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand:
Equiserve (For Eligible Institutions Equiserve
Corporate Actions Only) c/o Securities Transfer and
Suite 4660 (201) 324-3402 or (201) Reporting Services, Inc.
P.O. Box 2569 324-3403 Attn: Corporate Actions
Jersey City, NJ 07303-2569 100 William Street, Galleria
Confirm by Telephone New York, NY 10038
(201) 222-4707
By Overnight Courier:
Equiserve
Corporate Actions, Suite 4860
14 Wall Street, 8th Floor
New York, NY 10005
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE NUMBER OF SHARES NUMBER OF
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATES REPRESENTED BY SHARES
APPEAR(S) ON THE CERTIFICATE(S)) NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------------
(1) Need not be completed by stockholders delivering Shares by Book-Entry Transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares represented by Certificates delivered
to the Depositary are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of Innovative Valve Technologies, Inc. either if certificates
evidencing Shares ("Certificates") are to be forwarded with this Letter of
Transmittal or, unless an Agent's Message (as defined in the Offer to Purchase)
is utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by Equiserve (the "Depositary") at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in Section 3 of the Offer to Purchase (as defined below).
Stockholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as defined
in Section 2 of the Offer to Purchase) with respect to, their Shares and all
other required documents to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) may tender their Shares according
to the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. See Instruction 2 hereof. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS
IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY
TRANSFER).
Name of Tendering Institution:
---------------------------------------------
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED
DELIVERY.
Name(s) of Registered Holder(s):
-------------------------------------------
Window Ticket Number (if any):
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Name of Institution Which Guaranteed Delivery:
-----------------------------
If delivered by book-entry transfer at the Book-Entry Transfer Facility:
Name of Tendering Institution:
---------------------------------------------
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
2
<PAGE> 3
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Forrest Acquisition Sub, Inc., a Delaware
corporation and wholly-owned subsidiary of Flowserve Corporation, the
above-described shares of common stock, $.001 par value per share (the "Common
Stock"), including the associated rights to purchase Series A Junior
Participating Preferred Stock (the "Rights," and together with the Common Stock,
the "Shares"), of Innovative Valve Technologies, Inc., a Delaware corporation
(the "Company"), for $1.62 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated November 22, 1999 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which, together
with any amendments or supplements thereto, constitute the "Offer").
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, Shares
tendered with this Letter of Transmittal in accordance with the terms of the
Offer, the undersigned hereby sells, assigns and transfers to, or upon the order
of, Purchaser all right, title and interest in and to all of the Shares that are
being tendered hereby (and any and all non-cash dividends, distributions,
rights, other Shares or other securities issued or issuable in respect of such
Shares on or after November 22, 1999 (collectively, "Distributions"), and
irrevocably constitutes and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and all
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Certificates evidencing such Shares (and any and all Distributions)), or
transfer ownership of such Shares (and any and all Distributions) on the account
books maintained by the Book-Entry Transfer Facility, together, in any such
case, with all accompanying evidences of transfer and authenticity, to or upon
the order of Purchaser, upon receipt by the Depositary as the undersigned's
agent, of the purchase price with respect to such Shares; (ii) present such
Shares (and any and all Distributions) for transfer on the books of the Company;
and (iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any and all Distributions), all in accordance with
the terms of the Offer.
The undersigned hereby irrevocably appoints the designees of Purchaser, and
each of them, as the attorney-in-fact and proxy of the undersigned, each with
full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to all Shares tendered hereby and accepted for
payment and paid for by Purchaser (and any Distributions), including, without
limitation, the right to vote such Shares (and any Distributions) in such manner
as each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper. All such powers of attorney and proxies, being deemed to be
irrevocable, shall be considered coupled with an interest in the Shares tendered
with this Letter of Transmittal. Such appointment will be effective if, when,
and only to the extent that, Purchaser accepts such Shares for payment pursuant
to the Offer. Upon such acceptance for payment, all prior powers of attorney,
proxies and consents given by the undersigned with respect to such Shares (and
any Distributions) will be revoked, without further action, and no subsequent
powers of attorneys and proxies may be given with respect thereto (and, if
given, will be deemed ineffective). The designees of Purchaser will, with
respect to the Shares (and any Distributions) for which such appointment is
effective, be empowered to exercise all voting and other rights of the
undersigned with respect to such Shares (and any Distributions) as they in their
sole discretion may deem proper. Purchaser reserves the absolute right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the acceptance for payment of such Shares, Purchaser or its designees are
able to exercise full voting rights with respect to such Shares (and any
Distributions), including voting at any meeting of stockholders then scheduled.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
3
<PAGE> 4
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distributions), and that, when the Shares are accepted
for payment by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto (and to any Distributions), free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned, upon request, will execute and deliver any additional
documents deemed by the Depositary or Purchaser to be necessary to complete the
sale, assignment and transfer of Shares tendered hereby (and any Distributions).
In addition, the undersigned shall promptly remit and transfer to the Depositary
for the account of Purchaser any and all Distributions issued to the undersigned
on or after November 22, 1999, in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of any such Distributions and may
withhold the entire purchase price or deduct from the purchase price the amount
of value thereof, as determined by Purchaser in its sole discretion.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
instructions to this Letter of Transmittal will constitute a binding agreement
between the undersigned and Purchaser with respect to such Shares, upon the
terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, Purchaser may not be required to accept for payment any
of the Shares tendered hereby.
Unless otherwise indicated in this Letter of Transmittal under "Special
Payment Instructions," please issue the check for the purchase price of any
Shares purchased and return any Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the undersigned (and, in the case of Shares
tendered by book-entry transfer, by credit to the account at the Book-Entry
Transfer Facility designated above). Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail the check for the purchase price of
all Shares purchased and return any Certificates evidencing Shares not tendered
or not purchased (and accompanying documents, as appropriate) to the undersigned
at the address appearing under "Designation of Shares Tendered." In the event
that both the "Special Payment Instructions" and the "Special Delivery
Instructions" are completed, please issue the check for the purchase price of
all Shares purchased and return any such Certificates evidencing Shares not
tendered or not purchased (and accompanying documents, as appropriate) in the
name(s) of, and deliver such check and return such Certificates (and
accompanying documents, as appropriate) to the person(s) so indicated. The
undersigned recognizes that Purchaser has no obligation pursuant to the "Special
Payment Instructions" to transfer any Shares from the name of the registered
holder(s) if Purchaser does not accept for payment any of the Shares tendered
hereby.
4
<PAGE> 5
[ ] CHECK HERE IF ANY OF THE CERTIFICATES EVIDENCING SHARES THAT YOU OWN HAVE
BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Shares represented by the lost or destroyed certificates:
- ------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased
(less the amount of any withholding tax required to be withheld) or Certificates
for Shares not tendered or not purchased are to be issued in the name of someone
other than the undersigned.
Issue
[ ] Check
[ ] Certificate(s) to:
Name:
----------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address: ----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(ALSO COMPLETE SUBSTITUTE FORM W-9)
Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry
Transfer Facility account set forth below:
- --------------------------------------------------------------------------
(DTC ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased
(less the amount of any withholding tax required to be withheld) or Certificates
for Shares not tendered or not purchased are to sent to someone other than the
undersigned or to the undersigned at an address other than that shown above.
Mail
[ ] Check
[ ] Certificate(s) to:
Name: ----------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address: ----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(RECIPIENT'S TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
5
<PAGE> 6
IMPORTANT
STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE
FORM W-9
, '
------------------------------------------------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S))
, '
------------------------------------------------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated:
--------------------, ----
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Certificate or on a security position listing or by person(s) authorized to
become registered holder(s) by Certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers or corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 5.)
Name(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity (Full Title):
----------------------------------------------------------
(SEE INSTRUCTION 5)
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone Number:
------------------------------------------
(NAME)
------------------------------------------
(BUSINESS)
Tax Identification or Social Security No.:
--------------------------------------
(Complete Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE(S)
- --------------------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ADDRESS INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER)
Dated:
--------------------, ----
6
<PAGE> 7
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: [ ]
- ---------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN PART II -- Social Security Number
THE BOX AT RIGHT AND CERTIFY BY OR Employee Identification Number
FORM W-9 SIGNING AND DATING BELOW.
DEPARTMENT OF THE TREASURY ------------------------------------
INTERNAL REVENUE SERVICE (If awaiting TIN write
"Applied for")
------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN) PART III -- For Payees exempt from backup withholding, see the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 and complete as instructed therein.
- ---------------------------------------------------------------------------------------------------------------------
CERTIFICATIONS -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be
issued to me); and
(2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or
the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you are subject to backup withholding, you receive another notification from the IRS
that you were no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the
enclosed guidelines.)
- ---------------------------------------------------------------------------------------------------------------------
SIGNATURE ________________________________________ DATE
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN
THE BOX IN PART III OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a Taxpayer Identification Number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number by the time of payment, 31%
of all payments of the purchase price pursuant to the Offer made to me
thereafter will be withheld until I provide a number.
SIGNATURE ________________________________________ DATE
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, no
signature guarantee is required on this Letter of Transmittal (a) if this Letter
of Transmittal is signed by the registered holder(s) (which term, for the
purposes of this document, includes any participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of the
Shares) of Shares tendered herewith and such registered holder has not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on this Letter of Transmittal or (b) if such
Shares are tendered for the account of a financial institution (including most
commercial banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5. If the Certificates are registered in the name
of a person other than the signer of this Letter of Transmittal, or if payment
is to be made or delivered to, or Certificates evidencing unpurchased Shares are
to be issued or returned to, a person other than the registered owner, then the
tendered Certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the Certificates, with the signatures on the
Certificates or stock powers guaranteed by an Eligible Institution as provided
in this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of Transmittal
is to be used either if Certificates evidencing Shares are to be forwarded with
this Letter of Transmittal or, unless an Agent's Message is utilized, if
delivery of Shares is to be made pursuant to the procedures for book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
electronically, as well as a properly completed and duly executed Letter of
Transmittal with any required signature guarantees (or facsimile thereof or, in
the case of a book-entry transfer, an Agent's Message) and any other documents
required by this Letter of Transmittal must be received by the Depositary at one
of its addresses set forth in this Letter of Transmittal on or prior to the
Expiration Date (as defined in the Offer to Purchase).
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary or
complete the procedures for book-entry transfer on or prior to the Expiration
Date may nevertheless tender their Shares by properly completing and duly
executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure: (i) tender must be made by or through an Eligible Institution, (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Expiration Date, and (iii) Certificates for all
physically delivered Shares or a Book-Entry Confirmation with respect to all
Shares delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees (or, in the case of book-entry delivery, an Agent's
Message) and any other documents required by this Letter of Transmittal, must be
received by the Depositary within three Nasdaq National Market trading days
after the date of such Notice of Guaranteed Delivery. If Certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile) must accompany each
delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
8
<PAGE> 9
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile), waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided in this Letter of Transmittal is
inadequate, the information required under "Description of Shares Tendered"
should be listed on a separate signed schedule attached to this Letter of
Transmittal.
4. PARTIAL TENDERS (NOT APPLICABLE TO DELIVERY BY BOOK-ENTRY TRANSFER). If
fewer than all of the Shares represented by any Certificates delivered to the
Depositary with this Letter of Transmittal are to be tendered, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such cases, a new Certificate for the remainder of the Shares that
were evidenced by the old Certificate(s) will be sent, without expense, to the
person(s) signing this Letter of Transmittal, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
expiration or termination of the Offer. All Shares represented by Certificate(s)
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on the Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificates must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Certificate(s). Signatures on
the Certificate(s) or instruments of transfer must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Certificates or instruments of
transfer are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, that person should so indicate when signing, and
proper evidence satisfactory to Purchaser of that person's authority to so act
must be submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price of any Shares purchased is to be made to,
or (in the circumstances permitted hereby) if Certificates for Shares not
tendered or not purchased are to be registered in the name of, any person other
than the registered holder(s), or if a transfer tax is imposed for any reason
other than the sale or transfer of Shares to Purchaser pursuant to the Offer,
then the amount of any transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such other person will be deducted from the purchase price of such Shares
purchased, unless evidence satisfactory to Purchaser of the payment of such
taxes, or exemption therefrom, is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or a Certificate evidencing
Shares not tendered or not purchased is to be issued in the
9
<PAGE> 10
name of a person other than the person(s) signing this Letter of Transmittal or
if such check or any such Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown on page 1, the
appropriate boxes on this Letter of Transmittal must be completed. Stockholders
tendering Shares by book-entry transfer may request that Shares not purchased be
credited to such account at the Book-Entry Transfer Facility as such stockholder
may designate under "Special Payment Instructions." If no such instructions are
given, any such Shares not purchased will be returned by crediting the account
at the Book-Entry Transfer Facility designated above.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Information Agent (as defined below) at its
address or telephone number set forth below and requests for additional copies
of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed
Delivery and the Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 may be directed to the Information Agent or brokers,
dealers, commercial banks and trust companies, and such materials will be
furnished at Purchaser's expense.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
Purchaser, in whole or in part, at any time or from time to time, in Purchaser's
sole discretion.
10. BACKUP WITHHOLDING TAX. Under the federal income tax laws, the
Depositary will be required to withhold 31% of the amount of any payments made
to certain stockholders pursuant to the Offer. In order to avoid such backup
withholding, each tendering stockholder, and, if applicable, each other payee,
must provide the Depositary with such stockholder's or payee's correct taxpayer
identification number and certify that such stockholder or payee is not subject
to such backup withholding by completing the Substitute Form W-9 set forth on
page 7. In general, if a stockholder or payee is an individual, the taxpayer
identification number is the Social Security Number of such individual. If the
Depositary is not provided with the correct taxpayer identification number, the
shareholder or payee may be subject to a $50 penalty imposed by the Internal
Revenue Service. Certain stockholders or payees (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order to satisfy the Depositary that
a foreign individual qualifies as an exempt recipient, such stockholder or payee
must submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status. Such statements can be obtained from the Depositary.
For further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Shares are held in more than one name), consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidity tendered, but may require the Depositary to
withhold 31% of the amount of any payments made pursuant to the Offer. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained provided that the required information is furnished to
the Internal Revenue Service. NOTE: FAILURE TO COMPLETE AND RETURN THE
SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE
TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATE OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary by checking the box immediately preceding the special
payment/special delivery instructions and indicating the number of Shares lost.
The Stockholders will then be instructed as to the steps that must be taken in
order to replace the Certificate(s). This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost or
destroyed Certificates have been followed.
10
<PAGE> 11
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be directed
to the Information Agent as set forth below:
D. F. King & Co., Inc.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 347-4750
11
<PAGE> 1
EXHIBIT 99(a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
INNOVATIVE VALVE TECHNOLOGIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, DECEMBER 21, 1999,
UNLESS THE OFFER IS EXTENDED.
This Notice of Guaranteed Delivery or a notice substantially equivalent
hereto must be used to accept the Offer (as defined below) if certificates
representing the shares of common stock, $.001 par value per share (the "Common
Stock"), including the associated rights to purchase Series A Junior
Participating Preferred Stock (the "Rights," and together with the Common Stock,
the "Shares"), of Innovative Valve Technologies, Inc., a Delaware corporation,
are not immediately available or the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach Equiserve (the "Depositary") prior to the Expiration Date (as defined in
the Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by
hand or transmitted by facsimile transmission or mail to the Depositary. See
Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
Equiserve
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand:
Equiserve (For Eligible Institutions Equiserve
Corporate Actions Only) c/o Securities Transfer and
Suite 4660 (201) 324-3402 or (201) Reporting Services, Inc.
P.O. Box 2569 324-3403 Attn: Corporate Actions
Jersey City, NJ 07303-2569 100 William Street, Galleria
Confirm by Telephone New York, NY 10038
(201) 222-4707
By Overnight Courier:
Equiserve
Corporate Actions, Suite 4860
14 Wall Street, 8th Floor
New York, NY 10005
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURE. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to the Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Forrest Acquisition Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Flowserve Corporation, a New York
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated November 22, 1999 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, constitute the "Offer"), receipt of each of which is hereby
acknowledged, the number of Shares indicated below pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
Number of Shares:
---------------------------------------------------------------
Certificate Nos. (if applicable):
- --------------------------------------------------------------------------------
Complete if Shares will be delivered by book-entry transfer at The Depository
Trust Company
Account Number:
-----------------------------------------------------------------
at the Depository Trust Company
Date:
---------------------------------------------------------------------------
Name(s) of Record Holder(s):
----------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ZIP CODE)
Area Code and Tel. No.:
---------------------------------------------------------
Signature(s):
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as such term is defined in
Section 3 of the Offer to Purchase), hereby guarantees that either the
certificates evidencing the Shares tendered hereby, in proper form for transfer,
or a timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in and
pursuant to the procedures set forth in Section 3 of the Offer to Purchase),
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) with any required signature guarantees (or in
the case of a book-entry transfer, an Agent's Message (as defined in Section 2
of the Offer to Purchase)), and any other documents required by the Letter of
Transmittal, will be received by the Depositary at one of its addresses set
forth above within three Nasdaq National Market trading days after the date
hereof.
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ZIP CODE)
Area Code and Tel. No.:
---------------------------------------------------------
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Name:
---------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
--------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES EVIDENCING SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD ONLY BE SENT TOGETHER WITH YOUR
LETTER OF TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 99(a)(4)
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
INNOVATIVE VALVE TECHNOLOGIES, INC.
AT
$1.62 NET PER SHARE
BY
FORREST ACQUISITION SUB, INC.
A WHOLLY-OWNED SUBSIDIARY OF
FLOWSERVE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, DECEMBER 21, 1999,
UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Forrest Acquisition Sub, Inc. ("Purchaser"), a Delaware corporation and
wholly-owned subsidiary of Flowserve Corporation, a New York corporation, is
offering to purchase all outstanding shares of common stock, $.001 par value per
share (the "Common Stock"), of Innovative Valve Technologies, Inc., a Delaware
corporation (the "Company"), including the associated rights to purchase Series
A Junior Participating Preferred Stock (the "Rights, and together with the
Common Stock, the "Shares") at a purchase price of $1.62 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated November 22, 1999 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, together constitute the "Offer") enclosed
herewith.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated November 22, 1999.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signature) may be used to tender Shares.
3. The Notice of Guaranteed Delivery to be used to accept the Offer in
the circumstances described below.
4. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such client's instructions
with regard to the Offer.
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to Equiserve, the Depositary.
YOUR PROMPT ACTION IS REQUESTED, WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL
<PAGE> 2
RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
DECEMBER 21, 1999, UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The Offer Price is $1.62 per Share, net to the seller in cash
without interest thereon.
2. The Offer is being made for all outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, December 21, 1999, unless the Offer is
extended.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn that number of Shares representing a
majority of the Company's outstanding Common Stock on a fully diluted basis
on the date of purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer.
In all cases, payment for Shares accepted for purchase pursuant to the
Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares or timely confirmation of the book-entry transfer
of such Shares into the Depositary's account at the Book-Entry Transfer Facility
(as defined in the Offer to Purchase), pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or facsimile
thereof) properly completed and duly executed with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase), and (c) any other documents required by the
Letter of Transmittal.
If a stockholder desires to tender Shares pursuant to the Offer, and if (a)
certificates representing the Shares to be tendered for purchase and payment are
not lost but are not immediately available, (b) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date or (c) time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such stockholder may tender Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to brokers, dealers or other
persons (other than the Information Agent and Depositary, as described in the
Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer.
Purchaser will, however, upon request, reimburse you for customary clerical and
mailing expenses incurred by you in forwarding any of the enclosed materials to
your clients. Purchaser will pay or cause to be paid any transfer taxes payable
on the transfer of Shares to it, except as otherwise provided in Instruction 6
of the Letter of Transmittal.
Questions and requests for assistance with respect to the Offer or for
copies of the Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may be directed to the Information Agent at the address and
telephone number set forth on the outside back cover page of the Offer to
Purchase.
Very truly yours,
Forrest Acquisition Sub, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF PURCHASER, THE DEPOSITARY, THE INFORMATION AGENT
OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE
ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
2
<PAGE> 1
EXHIBIT 99(a)(5)
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
INNOVATIVE VALVE TECHNOLOGIES, INC.
AT
$1.62 NET PER SHARE
BY
FORREST ACQUISITION SUB, INC.
A WHOLLY-OWNED SUBSIDIARY OF
FLOWSERVE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, DECEMBER 21, 1999,
UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated November
22, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, together constitute
the "Offer"), relating to an offer by Forrest Acquisition Sub, Inc.
("Purchaser"), a Delaware corporation and wholly-owned subsidiary of Flowserve
Corporation, a New York corporation, to purchase all outstanding shares of the
common stock, par value $.001 per share (the "Common Stock"), including the
associated rights to purchase Series A Junior Participating Preferred Stock (the
"Rights," and together with the Common Stock, the "Shares") of Innovative Valve
Technologies, Inc., a Delaware corporation (the "Company"), at a purchase price
of $1.62 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer. This material is being
forwarded to you as the beneficial owner of Shares carried by us in your account
but not registered in your name.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any
or all of the Shares held by us for your account, upon the terms and conditions
set forth in the Offer.
1. The tender price is $1.62 per Share, net to you in cash.
2. The Offer is being made for all Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, December 21, 1999, unless the Offer is
extended.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn that number of Shares representing a
majority of the Company's outstanding Common Stock on a fully diluted basis
on the date of purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer.
<PAGE> 2
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase, dated November 22, 1999 and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, together constitute
the "Offer") relating to the Offer by Forrest Acquisition Sub, Inc., a Delaware
corporation and wholly-owned subsidiary of Flowserve Corporation, a New York
corporation, to purchase all outstanding shares of common stock, $.001 par value
per share (the "Common Stock"), including the associated preferred share
purchase rights (the "Rights," and together with the Common Stock, the
"Shares"), of Innovative Valve Technologies, Inc., a Delaware corporation.
You are instructed to tender the number of Shares indicated below (or, if
no number is indicated below, all Shares) that are held by you for the account
of the undersigned, upon the terms and subject to the conditions set forth in
the Offer.
Number of Shares to be Tendered:
- ------------------------ shares
Account Number:
- ------------------------------------------------------
Date:
- ------------------,
- ------
SIGN HERE
SIGNATURE(S):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINT NAME(S):
- --------------------------------------------------------------------------------
PRINT ADDRESS(ES):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NO.
-------------------------------------------------------------------------
TAXPAYER ID NO. OR SOCIAL SECURITY NO.:
---------------------------------------------------------------
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN IN A SIGNED SCHEDULE ATTACHED
HERETO, YOUR SIGNATURE(S) HEREON SHALL CONSTITUTE AN INSTRUCTION TO US TO TENDER
ALL OF YOUR SHARES.
2
<PAGE> 1
[FLOWSERVE LETTERHEAD]
NEWS RELEASE
November 18, 1999
NEWS FROM: FLOWSERVE CORPORATION
SUBJECT: FLOWSERVE SIGNS AGREEMENT TO ACQUIRE
INVATEC FOR ABOUT $100 MILLION
FOR INFORMATION: Crystal C. Bell (972) 443-6557
DALLAS, TEXAS - Flowserve Corporation announces today that the Company
has signed a definitive agreement with Innovative Valve Technologies, Inc.
(Invatec) (NASDAQ: IVTC.OB) to acquire Invatec for about $100 million, including
the combined cost of purchased equity and assumed debt. It is expected that the
transaction will close in early January 2000.
Under the agreement, Flowserve will issue a cash tender offer to
acquire the outstanding 9.7 million shares of the common stock of Invatec at a
price of $1.62 per share, or about $15.7 million. In addition, Flowserve will
assume Invatec's projected debt and related obligations of about $84.0 million,
plus certain transaction-related expenses.
With reported 1998 revenues of $154.6 million, Invatec is engaged
principally in providing comprehensive maintenance, repair, replacement and
value-added distribution services for valves, piping systems, instrumentation
and other process-
<PAGE> 2
PAGE 2 - FLOWSERVE SIGNS AGREEMENT TO ACQUIRE
INVATEC FOR ABOUT $100 MILLION
system components for its industrial customers. Based in Houston, Invatec has 63
operating locations in the United States, 2 in Europe and 1 in the Middle East.
"When we formed Flowserve about two years ago, we stated that a key
strategy for the new enterprise was to expand our service and repair
capabilities for our process-industry customers," said Bernard G. Rethore,
Flowserve Chairman and Chief Executive Officer. "The acquisition of Invatec will
represent a major step in achieving that vision. And, this transaction will
provide important synergies with our existing related operations - 90 service
and quick response centers around the world."
"Invatec is an excellent strategic fit for Flowserve," said C. Scott
Greer, Flowserve President and Chief Operating Officer. "Through this
acquisition, we will significantly expand our technical service and repair
capabilities, as well as local facility presence for our customers. Importantly,
we expect that the addition of Invatec to Flowserve's operations will be
accretive in 2000. This acquisition will be a platform to significantly increase
our existing service business going forward."
The agreement is subject to certain conditions, including the valid
tender of at least a majority of the shares of Invatec common stock without
withdrawal prior to the expiration of the tender offer, the expiration of
applicable waiting periods under federal antitrust law and the absence of a
material adverse change in Invatec's business conditions. Flowserve currently
expects these conditions to be satisfied.
In related action, shareholders representing about 30 percent of the
outstanding Invatec common stock, including both the Chairman and the President
of Invatec, executed agreements with Flowserve to tender their shares in
response to
<PAGE> 3
PAGE 3 - FLOWSERVE SIGNS AGREEMENT TO ACQUIRE
INVATEC FOR ABOUT $100 MILLION
the forthcoming Flowserve tender offer, assuming certain expected approvals for
two corporate shareholders.
Flowserve Corporation (NYSE: FLS) is one of the world's leading
providers of industrial flow management services. Operating in 29 countries,
with 1998 sales of $1.1 billion and about 7,000 employees, the Company produces
engineered pumps for the process industries, precision mechanical seals,
automated and manual quarter-turn valves, control valves and valve actuators,
and provides a range of related flow management services.
More information about Flowserve Corporation can be obtained by
visiting the Company's web site at www.flowserve.com.
# # #
SAFE HARBOR STATEMENT: This news release contains various forward-looking
statements and includes assumptions about Flowserve's future market conditions,
operations and results. These statements are based on current expectations and
are subject to significant risks and uncertainties. They are made pursuant to
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Among the many factors that could cause actual results to differ materially from
the forward-looking statements are: further changes in the already competitive
environment for the Company's products or competitors' responses to Flowserve's
strategies; the Company's ability to integrate Invatec into its management and
operations; political risks or trade embargoes affecting important country
markets; the health of the petroleum, chemical and power industries; economic
turmoil in areas outside the United States; continued economic growth within the
United States; unanticipated difficulties or costs or reduction in benefits
associated with the implementation of the Company's "Flowserver" business
process improvement initiative, including software; the impact of the "Year
2000" computer issue; and the recognition of significant expenses associated
with adjustments to realign the combined Company's facilities and other
capabilities with its strategies and business conditions.
<PAGE> 1
EXHIBIT 99(a)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
- ---------------------------------------------------------
---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL
SECURITY
NUMBER OF --
- ---------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF --
- ---------------------------------------------------------
<C> <S> <C>
1. An individual's account. The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also trustee)
b So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account in The partnership
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>
- ---------------------------------------------------------
---------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees/Payments specifically exempted from backup withholding include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1) of the Code.
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see section 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N of the Code and their regulations.
PRIVACY ACT NOTICE. -- Section 6109 of the Code requires most recipients of
dividends, interest, or other payments to give taxpayer identification numbers
to payers who must report the payments to the IRS. IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
a tax return. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
AMONG
FLOWSERVE CORPORATION,
FORREST ACQUISITION SUB, INC.,
AND
INNOVATIVE VALVE TECHNOLOGIES, INC.
DATED AS OF NOVEMBER 18, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. THE TENDER OFFER................................................ 1
Section 1.1 The Tender Offer............................................ 1
Section 1.2 Company Actions............................................. 3
Section 1.3 Board of Directors.......................................... 4
ARTICLE II. THE MERGER..................................................... 5
Section 2.1 The Merger.................................................. 5
Section 2.2 Closing..................................................... 5
Section 2.3 Effective Time.............................................. 5
Section 2.4 Effects of the Merger....................................... 5
Section 2.5 Certificate of Incorporation and Bylaws..................... 5
Section 2.6 Directors................................................... 5
Section 2.7 Officers.................................................... 5
Section 2.8 Effect on Capital Stock..................................... 5
Section 2.9 Exchange of Certificates.................................... 6
Section 2.10 Stock Options............................................... 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 8
Section 3.1 Organization and Qualification.............................. 8
Section 3.2 Capitalization.............................................. 9
Section 3.3 Authority................................................... 10
Section 3.4 Consents and Approvals; No Violations....................... 10
Section 3.5 SEC Reports................................................. 11
Section 3.6 Financial Statements........................................ 11
Section 3.7 Absence of Undisclosed Liabilities.......................... 11
Section 3.8 Absence of Certain Changes or Events........................ 11
Section 3.9 Compliance with Applicable Law.............................. 11
Section 3.10 Litigation.................................................. 12
Section 3.11 Taxes....................................................... 12
Section 3.12 Employee Benefit Plans; Labor Matters....................... 12
Section 3.13 Environmental Matters....................................... 14
Section 3.14 Contracts................................................... 16
Section 3.15 Certain Agreements.......................................... 16
Section 3.16 Intellectual Property....................................... 16
Section 3.17 Title to Properties......................................... 16
Section 3.18 Information in Proxy Statement.............................. 17
Section 3.19 Takeover Restrictions; Rights Agreement..................... 17
Section 3.20 Brokers..................................................... 17
Section 3.21 Agreements with Creditors and Other Claimants............... 18
Section 3.22 Payments Pursuant to Sections 5.10 and 5.11................. 18
Section 3.23 Company Transaction Costs................................... 18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER.........
18
Section 4.1 Organization and Qualification.............................. 18
Section 4.2 Authority................................................... 18
Section 4.3 Consents and Approvals; No Conflicts........................ 19
Section 4.4 Interim Operations of Purchaser............................. 19
Section 4.5 Brokers..................................................... 19
Section 4.6 Financing................................................... 19
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE V. COVENANTS....................................................... 20
Section 5.1 Interim Operations of the Company........................... 20
Section 5.2 Access to Information, Confidentiality...................... 21
Section 5.3 No Solicitation............................................. 22
Section 5.4 Stockholder Approval; Preparation of Proxy Statement........ 23
Section 5.5 Reasonable Efforts.......................................... 23
Section 5.6 Notification of Certain Matters............................. 24
Section 5.7 Public Announcements........................................ 24
Section 5.8 Directors' and Officers' Indemnification and Insurance...... 24
Section 5.9 Warrants.................................................... 25
Section 5.10 Convertible Notes........................................... 25
Section 5.11 Subsidiary Acquisition Agreements........................... 25
Section 5.12 Releases under Loan Agreement............................... 26
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER....................... 26
ARTICLE VII. TERMINATION................................................... 26
Section 7.1 Termination................................................. 26
Section 7.2 Effect of Termination....................................... 27
ARTICLE VIII. MISCELLANEOUS................................................ 27
Section 8.1 Fees and Expenses........................................... 27
Section 8.2 Amendment and Modification.................................. 28
Section 8.3 Nonsurvival of Representations and Warranties............... 28
Section 8.4 Notices..................................................... 28
Section 8.5 Counterparts................................................ 29
Section 8.6 Entire Agreement; No Third Party Beneficiaries.............. 29
Section 8.7 Severability................................................ 29
Section 8.8 Governing Law............................................... 29
Section 8.9 Assignment.................................................. 29
ARTICLE IX. DEFINITIONS.................................................... 29
Section 9.1 Defined Terms............................................... 29
Section 9.2 Additional Definitions...................................... 30
Section 9.3 Other Definitional Provisions............................... 32
ANNEX A..................................................................... A-1
SCHEDULE A List of Stockholders Executing Stockholder/Option Agreement
SCHEDULE B List of Chapter 11 Stockholders
EXHIBIT A Form of Stockholder/Option Agreement
EXHIBIT B Form of Chapter 11 Stockholder Agreement
</TABLE>
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of November
18, 1999, by and between Flowserve Corporation, a New York corporation
("PARENT"), FORREST ACQUISITION SUB, INC., a Delaware corporation and a
wholly-owned subsidiary of Parent ("PURCHASER"), and Innovative Valve
Technologies, Inc., a Delaware corporation (the "COMPANY").
PRELIMINARY STATEMENTS
A. The Boards of Directors of Parent, Purchaser and the Company have each
determined that it is advisable and in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein.
B. It is proposed that Purchaser shall make a cash tender offer (the
"OFFER") for all of the outstanding shares of common stock, par value $0.001 per
share, of the Company (the "COMMON STOCK") (such shares of Common Stock,together
with the Rights (as defined herein) associated with such shares, being
hereinafter referred to as the "SHARES") and that following consummation of the
Offer, Purchaser shall be merged (the "MERGER") with and into the Company, all
upon the terms and subject to the conditions set forth herein.
C. As a condition and inducement to Parent's willingness to enter into this
Agreement, Purchaser and those stockholders of the Company listed on Schedule A
hereto are entering into a stockholder agreement dated as of the date of this
Agreement (the "STOCKHOLDER/OPTION AGREEMENT"), a form of which is attached
hereto as Exhibit A, pursuant to which each such stockholder, among other
things, agrees to tender in the Offer and not withdraw all Shares owned by such
stockholder, grants an irrevocable proxy to Purchaser's designees to vote all
Shares owned by such stockholder with respect to certain matters, and grants to
Purchaser an option to purchase all Shares owned by such stockholder at the
Offer Price under specified circumstances. In addition, those stockholders of
the Company listed on Schedule B hereto that have filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code (the "CHAPTER 11
STOCKHOLDERS") are entering into stockholders agreements dated as of the date of
this Agreement (each, a "CHAPTER 11 STOCKHOLDER AGREEMENT," and together with
the Stockholder/Option Agreement, the "STOCKHOLDER AGREEMENTS"). The Chapter 11
Stockholder Agreements are similar to the Stockholder/Option Agreement but do
not contain an option provision and are subject to the earlier to occur of
approval of such Chapter 11 Stockholder Agreements by the Bankruptcy Court for
the District of Delaware (the "DELAWARE BANKRUPTCY COURT") or the confirmation
by the Delaware Bankruptcy Court of a plan of reorganization for the Chapter 11
Stockholder party thereto.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I.
THE TENDER OFFER
SECTION 1.1 The Tender Offer. (a) Provided that this Agreement has not
been terminated in accordance with Article VII and none of the events referred
to in Annex A has occurred or is existing, as promptly as practicable, but in no
event later than five business days after the public announcement of the
execution of this Agreement by Parent and the Company, Purchaser shall, and
Parent shall cause Purchaser, to commence the Offer for all outstanding Shares
at a purchase price of $1.62 per Share (such amount, or any greater amount per
Share paid pursuant to the Offer, being the "OFFER PRICE"), net to the seller in
cash, without interest thereon. The Offer initially shall expire at 12:00
midnight New York City time on the twentieth business day following the date of
commencement of the Offer (such date and time, as extended in accordance with
the terms hereof, the "EXPIRATION DATE"). The obligation of Purchaser to accept
for payment, purchase, and pay for any Shares validly tendered and not withdrawn
pursuant to the Offer shall be subject only to the conditions set forth in Annex
A hereto (the "OFFER CONDITIONS") (any of which may be
1
<PAGE> 5
waived in whole or in part by Purchaser in its sole discretion, provided that,
without the prior written consent of the Company, Purchaser shall not waive the
Minimum Condition (as defined in Annex A)). Purchaser specifically reserves the
right to increase the Offer Price and to make any other changes in the terms and
conditions of the Offer; provided that, unless previously approved by the
Company in writing, no change may be made that (i) decreases the Offer Price,
(ii) changes the form of consideration to be paid in the Offer, (iii) reduces
the maximum number of Shares to be purchased in the Offer, (iv) amends or adds
to the Offer Conditions, (v) except as provided in the next sentence, extends
the Offer or (vi) amends any other term of the Offer in any manner adverse to
the holders of the Shares. Notwithstanding the foregoing, Purchaser may, without
the consent of the Company, (A) extend the Offer, if at the then scheduled or
extended Expiration Date any of the Offer Conditions shall not be satisfied or
waived, until such time as such conditions are satisfied or waived, (B) extend
the Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer, (C) extend the Offer on one or more occasions
for an aggregate period of not more than 10 business days beyond the latest
Expiration Date that would otherwise be permitted under clause (A) or (B) of
this sentence, and (D) extend the Offer on one or more occasions for an
aggregate period of not more than 10 business days beyond the latest Expiration
Date that would otherwise be permitted under clause (A), (B) or (C) of this
sentence, if on such Expiration Date there shall not have been tendered at least
90% of the outstanding Shares. Subject to the terms and conditions of the Offer
and this Agreement, Purchaser shall, and Parent shall cause Purchaser to, accept
for payment, and pay for, all Shares validly tendered and not withdrawn pursuant
to the Offer that Purchaser becomes obligated to accept for payment, and pay
for, pursuant to the Offer as promptly as practicable after the expiration of
the Offer. The parties agree that the conditions set forth in Annex A are for
the sole benefit of Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by Purchaser or Parent) or may be waived by Purchaser, in whole or in
part, at any time and from time to time, in its sole discretion. The failure by
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
other facts or circumstances, and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time. Any determination
(which will be made in good faith) by Purchaser with respect to any of the
foregoing conditions (including, without limitation, the satisfaction of such
conditions) shall be final and binding on all parties. The Offer Price will be
paid net to the seller in cash, less any required withholding taxes, on the
terms and subject to the conditions of the Offer.
(b) On the date of commencement of the Offer, Parent and Purchaser shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE
14D-1") with respect to the Offer, which shall contain an offer to purchase and
a related letter of transmittal and summary advertisement (such Schedule 14D-1
and the documents included therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the "OFFER DOCUMENTS").
Parent and Purchaser agree that the Offer Documents shall comply as to form in
all material respects with the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations promulgated thereunder. The Offer
Documents, on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is made by
Parent or Purchaser with respect to information supplied by the Company or any
of its stockholders specifically for inclusion or incorporation by reference in
the Offer Documents. Each of Parent, Purchaser and the Company agrees promptly
to correct any information provided by it for use in the Offer Documents if and
to the extent that such information shall have become false or misleading in any
material respect, and Parent and Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to the
Company's stockholders, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given an
opportunity to review and comment upon the Offer Documents prior to their filing
with the SEC or dissemination to the stockholders of the Company. Parent and
Purchaser agree to provide the Company and its counsel any comments Parent,
2
<PAGE> 6
Purchaser or their counsel may receive from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments.
SECTION 1.2 Company Actions. (a) The Company hereby represents and
warrants that the Board of Directors of the Company (the "BOARD OF DIRECTORS"),
at a meeting duly called and held at which all directors were present, duly and
unanimously: (i) determined that the Offer and the Merger, taken together, are
fair to, and in the best interests of, the holders of the Shares; (ii) approved
the Offer and the Merger; (iii) approved the Stockholder Agreements, Purchaser
entering into such Stockholder Agreements, the acquisition of shares by
Purchaser pursuant thereto and the other transactions contemplated thereby; (iv)
resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares pursuant to the Offer and approve the Merger, if such
approval is required; and (v) approved and adopted this Agreement and approved
the acquisition of Shares by Purchaser pursuant to the Offer and the other
transactions contemplated by this Agreement. The Company also represents and
warrants that its Board of Directors has received the written opinion of Simmons
& Company International (the "FINANCIAL ADVISOR") that, as of the date hereof,
the proposed consideration to be offered to the Company's stockholders pursuant
to the Offer and the Merger is fair to the Company's stockholders from a
financial point of view. The Company further represents and warrants that it has
been authorized by the Financial Advisor to permit, subject to prior review and
consent by the Financial Advisor (such consent not to be unreasonably withheld),
the inclusion of such fairness opinion (or a reference thereto) in the Offer
Documents and in the Schedule 14D-9 referred to below. The Company hereby
consents to the inclusion in the Offer Documents of the recommendations of the
Company's Board of Directors described in this Section 1.2(a) (subject to the
right of the Board of Directors to modify or withdraw such recommendation in
accordance with Section 5.3(b)).
(b) The Company shall file with the SEC and shall mail to its stockholders
a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
schedules, amendments and supplements, the "SCHEDULE 14D-9") containing the
recommendations of the Board of Directors of the Company and the opinion of the
Financial Advisor referred to in Section 1.2(a). The Schedule 14D-9 shall comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is made by
the Company with respect to information supplied by Parent or Purchaser
specifically for inclusion in the Schedule 14D-9. Each of the Company, Parent
and Purchaser agrees promptly to correct any information provided by it for use
in the Schedule 14D-9 if and to the extent that such information shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be filed with the
SEC and disseminated to the Company's stockholders, in each case as and to the
extent required by applicable federal securities laws. Parent and its counsel
shall be given an opportunity to review and comment upon the Schedule 14D-9
prior to its filing with the SEC or dissemination to stockholders of the
Company. The Company agrees to provide Parent and its counsel any comments the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall cause
its transfer agent to furnish Purchaser promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Purchaser such information
and assistance (including updated lists of stockholders, security position
listings and computer files) as Parent may reasonably request in communicating
the Offer to the Company's stockholders. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent and Purchaser and their agents shall hold in confidence the information
contained in any such labels, listings and files, and will use such information
only in connection with the Offer and the Merger.
3
<PAGE> 7
SECTION 1.3 Board of Directors. (a) Effective upon the payment by
Purchaser for Shares pursuant to the Offer, Purchaser shall be entitled to
designate that number of directors of the Company, rounded up to the next whole
number, that equals the product of (x) the total number of directors on the
Board of Directors (giving effect to the election or appointment of any
additional directors pursuant to this Section 1.3) and (y) the percentage that
the number of Shares owned by Parent and Purchaser (including Shares accepted
for payment) bears to the total number of Shares then outstanding. The Company
shall take all action necessary to cause the designees of Purchaser to be
elected to or appointed by the Board of Directors, including, without
limitation, increasing the number of directors, amending its bylaws, or using
its best efforts to obtain resignations of incumbent directors. Upon written
request by Purchaser, the Company shall use its best efforts to cause the
designees of Purchaser to constitute the same percentage of representation as is
on the Board of Directors after giving effect to this Section 1.3 on (i) each
committee of the Board of Directors; (ii) the board of directors of each
Subsidiary (as defined in Section 9.1) of the Company; and (iii) each committee
of each such board. The provisions of this Section 1.3 are in addition to and
shall not limit any rights that Purchaser, Parent or any of their affiliates may
have as a holder or beneficial owner of Shares as a matter of law with respect
to the election of directors or otherwise.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under Section 1.3(a), including mailing to
stockholders together with the Schedule 14D-9 the information required by such
Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be
elected to the Company's Board of Directors (the "14F-1 INFORMATION STATEMENT").
Parent or Purchaser shall supply the Company and be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
14f-1 Information Statement, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by the Company
with respect to information supplied by Parent or Purchaser specifically for
inclusion in the 14f-1 Information Statement.
(c) In the event that Purchaser's designees are elected to the Company's
Board of Directors, until the Effective Time (as defined below), the Company's
Board of Directors shall have at least two directors who are directors on the
date hereof (the "INDEPENDENT DIRECTORS"), provided that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there be only one remaining) shall be entitled to designate persons to fill such
vacancies who shall be deemed to be Independent Directors for purposes of this
Agreement or, if no Independent Director then remains, the other directors shall
designate two persons to fill such vacancies who shall not be stockholders,
affiliates or associates of Parent or Purchaser and such persons shall be deemed
to be Independent Directors for purposes of this Agreement. Notwithstanding
anything in this Agreement to the contrary, in the event that Purchaser's
designees are elected to the Company's Board, after the acceptance for payment
of Shares pursuant to the Offer and prior to the Effective Time, the affirmative
vote of a majority of the Independent Directors shall be required to (a) amend
or terminate this Agreement by the Company or (b) exercise or waive any of the
Company's rights, benefits or remedies hereunder.
4
<PAGE> 8
ARTICLE II.
THE MERGER
SECTION 2.1 The Merger. Subject to the last two sentences of this Section
2.1, upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Purchaser shall be merged with and into the Company at the Effective
Time. Following the Effective Time, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION") and shall succeed to and assume all
the rights and obligations of Purchaser in accordance with the DGCL. At the
election of Parent, to the extent that any such action would not cause a failure
of a condition to the Offer or the Merger, (i) any direct or indirect
wholly-owned subsidiary of Parent may be substituted for and assume all of the
rights and obligations of Purchaser as a constituent corporation in the Merger
or (ii) the Company may be merged with and into Purchaser with Purchaser
continuing as the Surviving Corporation with the effects set forth above and in
Section 2.4. In either such event, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect the foregoing.
SECTION 2.2 Closing. The closing of the Merger will take place at 10:00
a.m. (Dallas, Texas time) on a date to be specified by Parent or Purchaser,
which shall be no later than the second Business Day after satisfaction or
waiver of the conditions set forth in Article VI (the "CLOSING DATE"), at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1700 Pacific Avenue, Suite
4100, Dallas, Texas 75201, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 2.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"CERTIFICATE OF MERGER") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Delaware Secretary of State, or at such other time as
Purchaser and the Company shall agree should be specified in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "EFFECTIVE TIME").
SECTION 2.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 2.5 Certificate of Incorporation and Bylaws. (a) The Certificate
of Incorporation of the Company (the "CERTIFICATE OF INCORPORATION") as in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, until thereafter changed or amended,
as provided therein or by applicable law.
(b) The Bylaws of the Company as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended, as provided therein or by applicable law.
SECTION 2.6 Directors. The directors of Purchaser immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or their respective successors are duly
elected and qualified, as the case may be.
SECTION 2.7 Officers. The officers of Purchaser immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or their respective successors are duly
elected and qualified, as the case may be.
SECTION 2.8 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any Shares or
any shares of capital stock of Purchaser:
(a) Capital Stock of Purchaser. Each issued and outstanding share of
capital stock of Purchaser shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each Share that
is owned by the Company or by any wholly-owned Subsidiary of the Company and
each Share that is owned by Parent,
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Purchaser or any other wholly-owned Subsidiary of Parent shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 2.8(d), each issued and
outstanding Share (other than Shares to be canceled in accordance with Section
2.8(b)) shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, the Offer Price (the "MERGER
CONSIDERATION"). As of the Effective Time, all such Shares shall no longer be
outstanding and shall be automatically canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Shares held by a person (a
"DISSENTING STOCKHOLDER") who objects to the Merger and complies with all the
provisions of DGCL concerning the right of holders of Shares to dissent from the
Merger and require appraisal of their Shares ("DISSENTING SHARES") shall not be
converted as described in Section 2.8(c), but shall be converted into the right
to receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the DGCL. If, after the Effective Time, such Dissenting
Stockholder withdraws its demand for appraisal or fails to perfect or otherwise
loses its right to appraisal, in any case pursuant to the DGCL, such Dissenting
Stockholder's Shares shall be deemed to be converted as of the Effective Time
into the right to receive the Merger Consideration. The Company shall give
Parent (i) prompt notice of any demands for appraisal of Shares received by the
Company and (ii) the opportunity to participate in and direct all negotiations
and proceedings with respect to any such demands. The Company shall not, without
the prior written consent of Parent, make any payment with respect to, or
settle, offer to settle or otherwise negotiate, any such demands.
SECTION 2.9 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as agent for the holders of the Shares in
connection with the Merger (the "PAYING AGENT") to receive in trust the funds to
which holders of the Shares shall become entitled pursuant to Section 2.8(c).
From time to time, Parent shall make available, or cause the Surviving
Corporation to make available, to the Paying Agent cash in amounts and at times
necessary for the prompt payment of the Merger Consideration upon surrender of
certificates representing Shares as provided herein. All interest earned on such
funds shall be paid to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "CERTIFICATES"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the Shares theretofore
represented by such Certificate shall have been converted pursuant to Section
2.8, and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.9, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.8. No interest will be paid or will accrue on the cash payable upon
the surrender of any Certificate.
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(c) No Further Ownership Rights in Shares; Transfer Books. All cash paid
upon the surrender of Certificates in accordance with the terms of this Article
II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates. At the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following six months
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including any interest received
with respect thereto) which had been made available to the Paying Agent and
which have not been disbursed to holders of Certificates, and thereafter such
holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
none of Parent, Purchaser, the Company or the Paying Agent shall be liable to
any person in respect of any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered immediately prior to such date on which any payment
pursuant to this Article II would otherwise escheat to or become the property of
any Governmental Entity (as defined in Section 3.4), the cash payment in respect
of such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled thereto.
(e) Lost, Stolen or Destroyed Certificates. In the event any Certificates
evidencing Shares shall have been lost, stolen or destroyed, the Paying Agent
shall pay to such holder the Merger Consideration required pursuant to Section
2.8, in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof with such assurances
as the Paying Agent, in its discretion and as a condition precedent to the
payment of the Merger Consideration, may reasonably require of the holder of
such lost, stolen or destroyed Certificates.
(f) Withholding Taxes. Parent and Purchaser shall be entitled to deduct and
withhold, or cause the Paying Agent to deduct and withhold, from the
consideration otherwise payable to a holder of Shares pursuant to the Offer or
the Merger any stock transfer taxes and such amounts as are required under the
Internal Revenue Code of 1986, as amended (the "CODE"), or any applicable
provisions of state, local or foreign tax law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding were made.
SECTION 2.10 Stock Options.
(a) The Company shall (i) use its best efforts to cause each holder of an
outstanding employee or director stock option to purchase Shares (the "STOCK
OPTIONS") granted under the 1997 Incentive Plan of the Company, as amended (the
"STOCK PLAN"), whether or not then exercisable or vested, to enter into an Award
Termination Agreement in the form furnished to Purchaser (individually referred
to as an "AWARD TERMINATION AGREEMENT" and collectively as "AWARD TERMINATION
AGREEMENTS"), under which each such Stock Option shall be canceled effective as
of the Effective Time and (ii) in consideration of such cancellation, and except
to the extent that Parent or Purchaser and the holder of any such Stock Option
otherwise agree, cause the Company (or, at Parent's option, Purchaser) to pay to
each holder of a Stock Option, within five business days after the Effective
Time, an amount in respect thereof equal to the product of (A) the excess, if
any, of the Offer Price over the exercise price of such Stock Option and (B) the
number of Shares previously subject to such Stock Option immediately prior to
its cancellation (such payment to be net of withholding taxes). The Company
shall take all actions necessary to cause the Company's employees and directors
to consent, to the extent required, to the transactions contemplated by this
Section 2.10(a) no later than immediately prior to the time Purchaser accepts
Shares for payment pursuant to the Offer; provided, however, that the failure to
obtain the consent of the holders of Stock Options for not more than an
aggregate
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of 200,000 shares (such Stock Options for which consent has not been so obtained
being herein referred to as the "CONVERTED OPTIONS") shall not be deemed to be a
breach of this Section 2.10. Notwithstanding the foregoing, at the Effective
Time, each Converted Option, whether vested or unvested, shall be deemed to
constitute an option (a "NEW PARENT OPTION") to acquire, on the same terms and
conditions as were applicable under such Converted Options, the number of shares
of common stock of Parent ("PARENT COMMON STOCK") (rounded down to the nearest
whole number) equal to the product of (A) the number of Shares of Common Stock
issuable upon exercise of such Converted Option and (B) the Offer Price divided
by the average closing sale price of the Parent Common Stock on the New York
Stock Exchange Composite Tape (as reported by The Wall Street Journal
(Southwestern Edition)) for the ten consecutive trading days immediately prior
to and including the date preceding the Effective Time (such product being the
"OPTION EXCHANGE RATIO"), at an exercise price (rounded to the nearest whole
cent) equal to (X) the exercise price per share at which Common Stock shall have
been purchasable under the Stock Plan immediately prior to the Merger divided by
(Y) the Option Exchange Ratio.
(b) Except as may be otherwise agreed to by Parent or Purchaser and the
Company, as of the Effective Time, (i) the Company's Stock Plan shall terminate,
(ii) the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of its Subsidiaries shall be deleted and (iii) no holder of Stock
Options or any participant in the Stock Plan or any other plans, programs or
arrangements shall have any rights thereunder to acquire any equity securities
of the Company, the Surviving Corporation or any subsidiary thereof. The Company
shall take all actions necessary to cause the Company's employees and directors
to consent, to the extent required, to the transactions contemplated by this
Section 2.10(b) no later than immediately prior to the time Purchaser accepts
Shares for payment pursuant to the Offer.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth with reasonable specificity in a corresponding numbered
section of the Disclosure Letter delivered by the Company to Parent and
Purchaser prior to the execution of this Agreement (the "DISCLOSURE LETTER"),
the Company represents and warrants to Parent and Purchaser as follows:
SECTION 3.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or the nature of its business makes such qualification necessary, except in
jurisdictions, if any, where the failure to be so qualified would not,
individually or in the aggregate, result in a Material Adverse Effect (as
defined in Section 9.1) on the Company. The Company has all requisite corporate
power and authority to own, use or lease its properties and to carry on its
business as it is now being conducted. The Company has made available to Parent
a complete and correct copy of its Certificate of Incorporation and Bylaws, each
as amended to date, and the Company's Certificate of Incorporation and Bylaws as
so delivered are in full force and effect. The Company is not in default in the
performance, observation or fulfillment of any provision of its Certificate of
Incorporation or Bylaws.
(b) Section 3.1(b) of the Disclosure Letter lists the name and jurisdiction
of organization of each Subsidiary (as defined in Section 9.1) of the Company
and the jurisdictions in which each such Subsidiary is qualified or holds
licenses to do business as a foreign corporation or other organization as of the
date hereof. Each of the Company's Subsidiaries is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, is duly qualified to do business as a foreign entity and is in
good standing in the jurisdictions set forth in Section 3.1(b) of the Disclosure
Letter, which includes each jurisdiction in which the character of such
Subsidiary's properties owned or leased by it or the nature of its business
makes such qualification necessary, except in jurisdictions, if any, where the
failure to be so qualified would not, individually or in the aggregate, result
in a Material Adverse Effect on the Company. Each of the Company's
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Subsidiaries has all requisite corporate (or other organizational) power and
authority to own, use or lease its properties and to carry on its business as it
is now being conducted. The Company has made available to Parent a complete and
correct copy of the certificate of incorporation and bylaws (or similar
organizational documents) of each of the Company's Subsidiaries, each as amended
to date, and the certificate of incorporation and bylaws (or similar
organizational documents) as so delivered are in full force and effect. No
Subsidiary of the Company is in default in any material respect in the
performance, observation or fulfillment of any provision of its certificate of
incorporation or bylaws (or similar organizational documents). Other than its
Subsidiaries, the Company does not beneficially own or control, directly or
indirectly, any class of equity or similar securities of any corporation or
other organization, whether incorporated or unincorporated.
SECTION 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 30,000,000
shares of Common Stock, of which as of the close of business on November 17,
1999, (A) 9,664,562 shares were issued and outstanding, (B) none were held as
treasury shares, (C) 1,650,000 shares were reserved for issuance upon exercise
of options under the Stock Plan, (D) 482,262 shares were reserved for issuance
upon exercise of the Warrants, (E) 600,769 shares were reserved for issuance
upon conversion of the Convertible Notes, (F) 555,555 shares (the "NEW COLLIER
SHARES") were reserved for issuance in connection with the obligations of the
Company under the Collier Merger Agreement (as defined in Annex A to the
Disclosure Letter), and (G) an indeterminate number of shares were reserved for
issuance in connection with the obligations of the Company under the Colonial
Merger Agreement and the Plant Maintenance Merger Agreement (as such terms are
defined in Annex A to the Disclosure Letter), such agreements, together with the
Collier Merger Agreement, being collectively referred to as the "SUBSIDIARY
ACQUISITION AGREEMENTS"); and (ii) 5,000,000 shares of preferred stock, par
value $.001 per share, of which as of the close of business on November 17,
1999, there were reserved for issuance in connection with that certain Rights
Agreement dated September 18, 1997 by and between the Company and Chase Mellon
Shareholder Services, L.L.C. (the "RIGHTS AGREEMENT") the number of shares of
Series A Junior Participating Preferred Stock, par value $.001 per share (the
"SERIES A PREFERRED STOCK"), sufficient to permit the exercise in full of all
outstanding rights under the Rights Agreement. Except as set forth above, at the
close of business on November 17, 1999, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and all
shares that may be issued pursuant to the Stock Plan will be, when issued in
accordance with the terms thereof, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except for the Stock Options, the
Warrants, the Convertible Notes, the Subsidiary Acquisition Agreements and
rights (the "RIGHTS") to purchase shares of Series A Preferred Stock pursuant to
the Rights Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party, or by which the Company is bound, obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or obligating
the Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Neither
the Company nor any of its Subsidiaries is a party to any voting agreement with
respect to the voting of any of the securities of the Company or any of its
Subsidiaries. There are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company.
(b) Set forth in Section 3.2(b) of the Disclosure Letter is a complete and
accurate list showing, as of the date hereof, as to each Subsidiary of the
Company, the number of shares of each class of capital stock, or other equity
interests authorized, and the number outstanding and the percentage of the
outstanding shares or other equity interests of each such class owned (directly
or indirectly) by the Company. All of the outstanding shares of capital stock
of, or other equity interests in, each Subsidiary of the Company have been
validly issued and are fully paid and nonassessable, and all of such shares or
other equity interests owned directly or indirectly by the Company are owned
free and clear of all liens, pledges, mortgages, security interests,
encumbrances, claims or charges of any kind or nature whatsoever (collectively,
"LIENS") and free of any
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other restriction (including any restriction on the right to vote, sell,
hypothecate or otherwise dispose of such capital stock or other equity
interests). There are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its Subsidiaries is a party, or by which the Company or any of
its Subsidiaries is bound, obligating the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other securities of any Subsidiary of the Company or
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of any Subsidiary of the Company.
SECTION 3.3 Authority. The Company has the requisite corporate power and
authority to enter into this Agreement and, subject to, if required by law,
approval of the Merger by an affirmative vote of the holders of a majority of
the Shares (the "COMPANY STOCKHOLDER APPROVAL"), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
by this Agreement have been duly and validly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to the Company Stockholder Approval if such approval is required by law. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
SECTION 3.4 Consents and Approvals; No Violations. The execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated by this Agreement and compliance with
the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien in or upon any of the properties or assets of the Company or any of
its Subsidiaries under any provision of (i) the Certificate of Incorporation or
Bylaws of the Company or the comparable organizational documents of any
Subsidiary of the Company, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its Subsidiaries or any
of their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any (A)
statute, law, ordinance, rule or regulation or (B) judgment, order or decree
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights or Liens that individually or in
the aggregate would not (x) have a Material Adverse Effect on the Company, (y)
impair in any material respect the ability of the Company to perform its
obligations under this Agreement or (z) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any federal, state or local government or any court, administrative
agency or commission or other governmental authority or agency, domestic or
foreign (a "GOVERNMENTAL ENTITY"), is required by or with respect to the Company
or any of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the Merger or the
transactions contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended the ("HSR
ACT"), (2) the filing with the SEC of (A) the Schedule 14D-9, (B) a proxy or
information statement (as selected by Purchaser) relating to the Company
Stockholder Approval, if such approval is required by law (as amended or
supplemented from time to time, the "PROXY STATEMENT") and (C) such reports
under Section 13(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (3) the
filing of the Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business and (4) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
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SECTION 3.5 SEC Reports. The Company has filed with the SEC, and has
heretofore made available to Parent, true and complete copies of, each form,
registration statement, report, schedule, proxy or information statement and
other document (including exhibits and amendments thereto), which the Company
was required to file with the SEC since January 1, 1997, and prior to or on the
date of this Agreement under the Securities Act of 1933, as amended (the
"SECURITIES ACT") or the Exchange Act (collectively, the "SEC REPORTS"). As of
the respective dates such SEC Reports were filed or, if any such SEC Reports
were amended, as of the date the last such amendment was filed, each of the SEC
Reports, including without limitation any financial statements or schedules
included therein, (a) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder, and (b) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the Company's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
SECTION 3.6 Financial Statements. Each of the audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company (including any related notes and schedules) included (or
incorporated by reference) in the SEC Reports (collectively, the "COMPANY
FINANCIAL STATEMENTS") have been prepared from, and are in accordance with, the
books and records of the Company and its consolidated Subsidiaries, comply in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as may be indicated in
the notes thereto and subject, in the case of quarterly financial statements, to
normal and recurring year-end adjustments) and fairly present, in conformity
with GAAP applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of the Company and its
consolidated Subsidiaries as of the date thereof and the consolidated results of
operations and cash flows (and changes in financial position, if any) of the
Company and its consolidated Subsidiaries for the periods presented therein
(subject to normal year-end adjustments, none of which, individually or in the
aggregate, are material in amount, and the absence of financial footnotes in the
case of any unaudited interim financial statements).
SECTION 3.7 Absence of Undisclosed Liabilities. Except (a) for liabilities
incurred in the ordinary course of business consistent with past practice, (b)
for transaction expenses incurred in connection with this Agreement, (c) for
liabilities which individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the Company, (d) for liabilities
set forth on any balance sheet (including the notes thereto) included in the
Company's financial statements included in the SEC Reports filed with the SEC
since June 30, 1999 (the "CURRENT SEC REPORTS"), or (e) as set forth in Section
3.7 of the Disclosure Letter, since June 30, 1999, neither the Company nor any
of its Subsidiaries has incurred any liabilities that would be required to be
reflected or reserved against in a consolidated balance sheet of the Company and
its Subsidiaries prepared in accordance with GAAP as applied in preparing the
consolidated balance sheet of the Company and its Subsidiaries as of December
31, 1998 contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
SECTION 3.8 Absence of Certain Changes or Events. Except as disclosed in
Section 3.8 of the Disclosure Letter, and except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, since
June 30, 1999, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course and (i) there have not occurred
any events or changes (including the incurrence of any liabilities of any
nature, whether or not accrued, contingent or otherwise) having or reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
the Company and (ii) the Company has not taken any action which would have been
prohibited under Section 5.1 hereof had such action been taken after the date
hereof.
SECTION 3.9 Compliance with Applicable Law. Each of the Company and its
Subsidiaries are and have been in compliance with all applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any
Governmental Entity (collectively, "LEGAL PROVISIONS") applicable to their
business or operations, except for instances of possible noncompliance that
individually or in the aggregate would not have
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a Material Adverse Effect on the Company or prevent or materially delay the
consummation of the transactions contemplated by this Agreement. Each of the
Company and its Subsidiaries has in effect all Federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("PERMITS") necessary for it to own, lease
or operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under, or violation of, any such
Permit, except for the lack of Permits and for defaults under, or violations of,
Permits, which individually or in the aggregate would not have a Material
Adverse Effect on the Company.
SECTION 3.10 Litigation. There is no suit, action or proceeding pending
or, to the knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries as to which there is a reasonable likelihood of an
adverse determination that individually or in the aggregate would have a
Material Adverse Effect on the Company or would prevent or delay the
consummation of the transactions contemplated by this Agreement, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against, or, to the knowledge of the Company,
investigation by any Government Entity involving, the Company or any of its
Subsidiaries that individually or in the aggregate would have a Material Adverse
Effect on the Company or would prevent or delay the consummation of the
transactions contemplated by this Agreement.
SECTION 3.11 Taxes. All federal, state, local and foreign Tax Returns
required to be filed by or on behalf of the Company, each of its Subsidiaries,
and each affiliated, combined, consolidated or unitary group of which the
Company or any of its Subsidiaries is or was a member (a "COMPANY GROUP") have
been timely filed or requests for extensions to file such returns or reports
have been timely filed and granted and have not expired, and all returns filed
are complete and accurate except to the extent any failure to file or any
inaccuracies in filed returns would not, individually or in the aggregate, have
a Material Adverse Effect on the Company. All Taxes due and owing by the
Company, any Subsidiary of the Company or any Company Group have been paid, or
adequately reserved for, except to the extent any failure to pay or reserve
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. There is no audit examination, deficiency, refund litigation,
proposed adjustment or matter in controversy with respect to any Taxes due and
owing by the Company, any Subsidiary of the Company or any Company Group nor has
the Company or any Subsidiary filed any waiver of the statute of limitations
applicable to the assessment or collection of any Tax, in each case, which
would, individually or in the aggregate, have a Material Adverse Effect on the
Company. All assessments for Taxes due and owing by the Company, any Subsidiary
of the Company or any Company Group with respect to completed and settled
examinations or concluded litigation have been paid. Neither the Company nor any
Subsidiary is a party to any tax indemnity agreement, tax sharing agreement or
other agreement under which the Company or any Subsidiary could become liable to
another person as a result of the imposition of a Tax upon any person, or the
assessment or collection of a Tax, except for such agreements as would not in
the aggregate have a Material Adverse Effect on the Company. The Company has
provided or made available to Parent information relating to (i) the taxable
years of the Company for which the statutes of limitations with respect to
federal income Taxes have not expired, and (ii) with respect to federal income
Taxes, those years for which examinations have been completed, those years for
which examinations are presently being conducted, and those years for which
examinations have not yet been initiated. The Company and each of its
Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except to the extent any such
failure to comply would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
SECTION 3.12 Employee Benefit Plans; Labor Matters.
(a) As used herein:
(i) "PLAN" means any bonus, deferred compensation, incentive
compensation, stock purchase, restricted stock, stock option, severance,
hospitalization or other medical, life or other insurance, employee
welfare, supplemental unemployment benefit, profit-sharing, pension or
retirement plan, program, agreement or arrangement or any other employee
benefit plan, program, agreement or arrangement, including any such plan,
program, agreement or arrangement covering retirees or former employees and
including without limitation any "employee pension benefit plan" and any
"employee
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welfare benefit plan" as those terms are defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(ii) "COMPANY PLANS" means all Plans maintained by or contributed to
by Company or any of its Subsidiaries with respect to employees, former
employees, retirees, directors or independent contractors of Company or any
of its Subsidiaries;
(iii) "COMPANY CONTROLLED GROUP PLAN" means a Company Plan and any
other Plan maintained by or contributed to, at any time within six years
prior to the date of this Agreement by any Company Controlled Group Member;
and
(iv) "COMPANY CONTROLLED GROUP MEMBER" means a member of a group of
entities or trades or businesses that is aggregated with and includes
Company or any of its Subsidiaries under Code Section 414(b), (c), (m) or
(o) and the Treasury Regulations thereunder or under Section 4001 of ERISA.
(b) Each of the Company Plans is, and has been, adopted and operated in
material compliance with its terms and all applicable laws, rules and
regulations (including, where applicable, ERISA and the Code).
(c) Section 3.12(c) of the Disclosure Letter contains an accurate and
complete list of (i) all Company Plans, including a complete and accurate
description of all Company Plans that are not in writing and (ii) all Company
Controlled Group Plans that are subject to Code Section 412 or Title IV or
Section 302 of ERISA. Neither the Company nor any of its Subsidiaries has made
any commitment, whether formal or informal, and whether legally binding or not,
to create or have liability under any additional Plan, policy or arrangement, or
to modify any existing Company Plan or Company Controlled Group Plan. Neither
the Company nor any of its Subsidiaries has adopted or sponsored any Plan for
any employees leased from, or co-employed by, Administaff Companies, Inc. or any
other entity.
(d) With respect to each Company Plan and Company Controlled Group Plan,
the Company has heretofore delivered or made available to Parent, or will
deliver to Parent prior to the Closing Date, true, correct and complete copies
of (i) each such Plan, (including any amendments to any such Plans, any related
trusts, ancillary documents, summary plan descriptions, written descriptions of
any such Plans that are not in writing, insurance policies, investment
management agreements or annuity contracts, and any rules or regulations created
for use with any such Plans); (ii) the most recent IRS determination letter, if
any, with respect to each of such Plans; (iii) the Form 5500 (including all
schedules and attachments), if any, filed with respect to each of such Plans for
the most recent two (2) years; (iv) the most recent actuarial reports, if any,
filed with respect to each of the Company Plans and Company Controlled Group
Plan; (v) each collective bargaining agreement or other contract relating to
each Company Plan and Company Controlled Group Plan; and (vi) each co-employment
agreement and each employee leasing agreement (as described in Code Section
414(n)) to which the Company or any of its Subsidiaries is a party.
(e) None of the Company Plans or any trusts relating thereto have engaged
in any transaction in connection with which Company or any of its Subsidiaries
or any fiduciaries of any Company Plans or related trusts is or could be subject
either to a civil penalty or other liability under Sections 502(i), 406 or 409
of ERISA or a tax imposed by Section 4975 of the Code, and no event has occurred
and no condition exists with respect to the Company Plans that could subject
Company or any of its Subsidiaries to any other tax or penalty under the Code or
civil penalty or other liability under ERISA or other laws.
(f) No litigation or administrative or other proceeding, audit, claim,
investigation or other matter (other than routine claims for benefits) is
pending or threatened involving any Company Plan.
(g) All payments (including, without limitation, contributions and
premiums) required to have been made to or in connection with Company Plans, by
their terms or under ERISA or the Code, have been timely made in full,
determined by using the applicable actuarial and funding assumptions, if any.
(h) To the extent applicable, each Company Plan or related trust which is
intended to meet the requirements of Section 401(a) or 501(a) of the Code meets
such requirements. With respect to each
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Company Plan which is intended to meet the requirements of Section 401(a) of the
Code, a favorable determination letter has been received from the IRS as to its
qualification under such Code Section (including the amendments to the Code made
by the Tax Reform Act of 1986 and all subsequent legislation on which
determination letter may be obtained), and each such letter is current and is in
full force and effect.
(i) No Company Plan is subject to Title IV of ERISA or is a defined benefit
plan.
(j) Except as provided by Section 4980B of the Code or Part 6 of Title I of
ERISA, there are no health, medical or other welfare benefits or insurance under
the Company Plans for current or future retirees or other former employees.
(k) With respect to each Company Controlled Group Plan, (i) no liability
arising under Title IV of ERISA is pending, has been incurred by or is
threatened against any Company Controlled Group Member, which liability has not
been satisfied; (ii) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code, has been
incurred; and (iii) all contributions (including installments) to each said
Company Plan required by Section 302 of ERISA and Section 412 of the Code have
been timely made. Neither the Company nor any of its Subsidiaries has any
current or future liability with respect to any Company Controlled Group Plan
other than the Company Plans. No Company Controlled Group Plan is a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(l) The assets of the Company Plans do not include any "employer
securities" or "employer real property" as such terms are defined in Section 407
of ERISA. No debt has been incurred by any of the Company Plans, other than
liabilities for the payment of benefits or insurance premiums.
(m) Except as set forth in Section 3.12 of the Disclosure Letter and except
as expressly provided in Section 2.10(a) of this Agreement, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any current
or former employee, officer, director or independent contractor of Company or
any of its Subsidiaries to severance pay, unemployment compensation or any other
payment; (ii) accelerate the time of payment or vesting, or increase the amount
of compensation due any such person; (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available; or (iv) in any way result in any additional
liability with respect to any Company Plan.
(n) Neither the Company nor any Subsidiary has incurred any liability
under, and the Company and its Subsidiaries have complied in all respects with,
the Worker Adjustment Retraining Notification Act and the regulations
promulgated thereunder and do not reasonably expect to incur any such liability
as a result of actions taken or not taken prior to the Effective Time.
(o) (i) There are no claims or actions pending or, to the knowledge of the
Company, threatened between the Company or any Subsidiary and any of their
respective employees, which controversies could have a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary, nor, to the knowledge of the Company,
are there any activities or proceedings of any labor union to organize any such
employees; (iii) neither the Company nor any Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or contract
and there are no grievances outstanding against the Company or any Subsidiary
before the National Labor Relations Board or any current union representation
questions involving employees of the Company or any Subsidiary, and (v) there is
no strike, slowdown, work stoppage or lockout, or, to the knowledge of the
Company, threat thereof, by or with respect to any employees of the Company or
any Subsidiary.
SECTION 3.13 Environmental Matters.
(i) Except as disclosed in the Current SEC Reports or as set forth in
Section 3.13 of the Disclosure Letter, (A) the Company and each of its
Subsidiaries have conducted their respective businesses in compliance with
all applicable Environmental Laws (as defined below) and are currently in
compliance with all such laws, including, without limitation, having all
permits, licenses and other approvals and authorizations necessary for the
operation of their respective businesses as presently conducted, (B) none
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of the properties currently or formerly owned or operated by the Company or
any of its Subsidiaries contains any Hazardous Substance (as defined below)
except in compliance with applicable Environmental Laws nor has there been
a release of Hazardous Substances at properties currently or formerly owned
or operated by the Company or any of its Subsidiaries, (C) neither the
Company nor any of its Subsidiaries has received any notices, demand
letters or requests for information from any Governmental Entity or third
party indicating that the Company or any of its Subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, including, without limitation,
liability relating to sites not owned or operated by the Company or any of
its Subsidiaries, (D) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or proceedings,
pending or threatened, against the Company or any of its Subsidiaries
relating to any violation of or liability under, or alleged violation of or
liability under, any Environmental Law, including claims for damages
alleged to result from use, handling or exposure to or injury from any
Hazardous Substance, (E) all reports that are required to be filed by the
Company or any of its Subsidiaries concerning the release of any Hazardous
Substance or the threatened or actual violation of any Environmental Law
have been so filed, (F) no Hazardous Substance has been disposed of,
released or transported in violation of or under circumstances that could
create liability under any applicable Environmental Law from any properties
owned by the Company or any of its Subsidiaries as a result of any activity
of the Company or any of its Subsidiaries during the time such properties
were owned, leased or operated by the Company or any of its Subsidiaries,
(G) there are no underground storage tanks or polychlorinated biphenyls
located at any of the properties currently or formerly owned or operated by
the Company or any of its Subsidiaries, (H) neither the Company, any of its
Subsidiaries nor any of their respective properties are subject to any
material liabilities or expenditures (fixed or contingent) relating to any
suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental
Law, except for violations of the foregoing clauses (A) through (H) that,
singly or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company, and (I) the Company has provided
Parent with each environmental audit, test or analysis performed within the
last three years of any property currently or formerly owned or operated by
the Company or any of its Subsidiaries (x) which involves any environmental
condition which would give rise to a Material Adverse Effect on the Company
and (y) of which the Company has knowledge.
(ii) As used herein, "ENVIRONMENTAL LAW" means any United States
Federal, territorial, state, local or foreign law, statute, ordinance,
rule, regulation, code, license, permit, authorization, approval, consent,
legal doctrine, order, judgment, decree, injunction, requirement or
agreement with any Governmental Entity relating to (x) the protection,
preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety or (y) the exposure to, or
the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Substances. The term "ENVIRONMENTAL LAW" includes, without
limitation, (i) the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid
Waste Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substance Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of
1970, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of,
the presence of, effects of or exposure to any Hazardous Substance.
(iii) As used herein, "HAZARDOUS SUBSTANCE" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, under
any Environmental Law. Hazardous Substance includes any substance to which
exposure is regulated by any Governmental Entity or any Environmental Law
including, without limitation, any toxic
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waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
SECTION 3.14 Contracts. Except as disclosed in the SEC Reports, there are
no contracts or agreements to which the Company or any of its Subsidiaries is a
party that are of a nature required to be filed as an exhibit under the Exchange
Act and the rules and regulations promulgated thereunder. Neither the Company
nor any of its Subsidiaries is in violation of nor in default under (nor does
there exist any condition which upon the passage of time or the giving of notice
or both would cause such a violation of or default under) any lease, permit,
concession, franchise, license or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that individually or in the
aggregate would not have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries is bound by any contract, agreement,
arrangement or understanding with any affiliate of the Company other than
agreements that are (i) disclosed in the SEC Reports or (ii) not of a nature
required to be disclosed in the SEC Reports. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any agreement or covenant not
to compete or by any agreement or covenant restricting in any material respect
the development, marketing or distribution of the products and services of the
Company and its Subsidiaries.
SECTION 3.15 Certain Agreements. Except as set forth in Section 3.15 of
the Disclosure Letter, neither the Company nor any of its Subsidiaries is a
party to any (a) employment, severance, or collective bargaining agreement not
terminable without liability or obligation on 60 days' or less notice; (b)
agreement with any director, executive officer, or other key employee, agent, or
contractor of the Company or any Subsidiary of the Company (i) the benefits of
which are contingent, or the terms of which are materially altered, on the
occurrence of a transaction involving the Company or any of its Subsidiaries of
the nature of any of the transactions contemplated by this Agreement or relating
to an actual or potential change in control of the Company or any of its
Subsidiaries or (ii) providing any term of employment or other compensation
guarantee or extending severance benefits or other benefits after termination
not comparable to benefits available to employees, agents, or contractors
generally; (c) agreement, plan, or arrangement under which any person may
receive payments that may be subject to the tax imposed by sec. 4999 of the Code
or included in the determination of such person's "parachute payment" under
sec. 280G of the Code; or (d) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan, or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
SECTION 3.16 Intellectual Property. The Company and its Subsidiaries own,
or are validly licensed or otherwise have the right to use, all patents, patent
rights, trademarks, trade secrets, trademark rights, trade names, trade name
rights, service marks, service mark rights, copyrights and other proprietary
intellectual property rights and computer programs which are material to the
conduct of the business of the Company and its Subsidiaries taken as a whole
(collectively, "INTELLECTUAL PROPERTY RIGHTS"). Except as would not have a
Material Adverse Effect on the Company, the Company and its Subsidiaries will
continue to own or be licensed to use the Intellectual Property Rights after
consummation of the Offer and the Merger. Except as would not have a Material
Adverse Effect on the Company, no claim of any infringement of any Intellectual
Property Rights of any third party has been made or asserted against the Company
or any of its Subsidiaries in respect of the operation of the business of the
Company or any of its Subsidiaries. To the knowledge of the Company, no person
is infringing the rights of the Company or any of its Subsidiaries with respect
to any Intellectual Property Right that individually or in the aggregate would
have a Material Adverse Effect on the Company. Neither the Company nor any of
its Subsidiaries has licensed, or otherwise granted, to any third party, any
material rights in or to any Intellectual Property Rights.
SECTION 3.17 Title to Properties. The Company and its Subsidiaries have
good, valid and marketable title to the properties and assets reflected on the
most recent consolidated balance sheet included in the
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Current SEC Reports (other than properties and assets disposed of in the
ordinary course of business since the date of such balance sheet), and all such
properties and assets are free and clear of any Liens, except as described in
the Current SEC Reports and the financial statements included therein or in
Section 3.17 of the Disclosure Letter and other than Liens for current taxes not
yet due and other Liens or title imperfections that do not have, and are not
reasonably likely to have, a Material Adverse Effect on the Company.
SECTION 3.18 Information in Proxy Statement. The Proxy Statement, if any
(or any amendment thereof or supplement thereto), including any information
incorporated by reference therein, will, at the date mailed to the stockholders
of the Company and at the time of the meeting of the stockholders of the
Company, not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by the Company with
respect to statements made therein based on information supplied by Parent or
Purchaser for inclusion in the Proxy Statement. The Proxy Statement will comply
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
SECTION 3.19 Takeover Restrictions; Rights Agreement.
(a) Other than Section 203 of the DGCL, no state takeover statute or
similar statute or regulation of any state or other jurisdiction applies, or to
the knowledge of the Company purports to apply, to this Agreement, the
Stockholder Agreements or any of the transactions contemplated herein or
therein, including the Merger. Assuming Parent and its "associates" and
"affiliates" (as defined in Section 203 of the DGCL) collectively beneficially
own, and have beneficially owned at all times during the three year period prior
to the date hereof, less than fifteen percent (15%) of the Common Stock
outstanding, the action of the Board of Directors of the Company in approving
the Offer (including the purchase of Shares pursuant to the Offer), the Merger,
this Agreement, the Stockholder Agreements and the transactions contemplated by
this Agreement and the Stockholder Agreements is sufficient to render
inapplicable to the Offer, the Merger, this Agreement and the Stockholder
Agreements the provisions of Section 203 of the DGCL.
(b) No provision of the Certificate of Incorporation or Bylaws of the
Company or comparable organizational documents of any of the Company's
Subsidiaries would, directly or indirectly, restrict or impair the ability of
Purchaser or its affiliates to vote, or otherwise to exercise the rights of a
shareholder with respect to, securities of the Company or any Subsidiary that
may be acquired or controlled by Purchaser or its affiliates pursuant to this
Agreement or the Stockholder Agreements or permit any shareholder to acquire
securities of the Company on a basis not available to Purchaser in the event
that Purchaser were to acquire securities of the Company.
(c) The Company has made available to Parent a complete and correct copy of
the Rights Agreement, including all amendments and exhibits thereto. The Company
and the Board of Directors of the Company have taken, and will maintain in
effect during the term of this Agreement, all action necessary to ensure that
(x) none of Parent, Purchaser or any of their Affiliates or Associates (as such
terms are defined in the Rights Agreement) shall be or become an "Acquiring
Person", and no Stock Acquisition Date, Distribution Date, Flip-in Event or
Flip-Over Event (as such terms are defined in the Rights Agreement) shall occur,
as a result of (i) the execution, delivery or performance of this Agreement (or
any amendments hereto) or the consummation of the transactions contemplated
hereby, including, without limitation, the Offer and the Merger, (ii) the
execution, delivery or performance of the Stockholder Agreements or any
amendments thereto, or the consummation of the transactions contemplated
thereby, (iii) the announcement, making or commencement of the Offer or the
announcement of this Agreement or the Stockholder Agreements, (iv) the
acquisition of Beneficial Ownership (as such term is defined in the Rights
Agreement) of Shares or Rights pursuant to, or in connection with, this
Agreement, the Stockholder Agreements or otherwise as a result of any of the
transactions contemplated by this Agreement or the Stockholder Agreements,
including, without limitation, the Offer and the Merger; and (y) the Rights will
expire pursuant to the terms of the Rights Agreement immediately prior to the
Effective Time.
SECTION 3.20 Brokers. No broker, investment banker, financial advisor or
other person, other than the Financial Advisor, the fees and expenses of which
will be paid by the Company, is entitled to any broker's,
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finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has furnished to Parent true
and complete copies of all agreements under which any such fees or expenses are
payable and all indemnification and other agreements related to the engagement
of the persons to whom such fees are payable.
SECTION 3.21 Agreements with Creditors and Other Claimants. Section
3.21(a) of the Disclosure Letter lists all of the agreements which the Company
has entered into with any creditor and claimant of the Company in contemplation
of this Agreement and the amount to be paid to such creditor and claimant
pursuant to such agreement. The Company has forwarded true and complete copies
of all of the agreements listed in Section 3.21(a) of the Disclosure Letter. All
of such agreements are valid, in full force and effect and enforceable by the
Company in accordance with their terms. Neither the Company nor any of its
subsidiaries is in violation of or in default under (nor does there exist any
condition which with the lapse of time or the giving of notice or both would
cause such a violation of or default under) any such agreement. Except in
connection with liabilities permitted by Sections 3.7 and 3.8 (including,
without limitation, the liabilities set forth in Sections 3.7 and 3.8 of the
Disclosure Letter), there are no creditors or claimants of the Company owed or
claiming more than $10,000 which have not entered into agreements with the
Company in contemplation of this Agreement fixing the amount to be paid to them
by the Company.
SECTION 3.22 Payments Pursuant to Sections 5.10 and 5.11. The aggregate
amounts payable pursuant to Sections 5.10 and 5.11 of this Agreement do not
exceed $7,870,454, and $4,346,006, respectively.
SECTION 3.23 Company Transaction Costs. The aggregate amount of all fees,
costs and expenses of the Company and its subsidiaries actually incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation the Offer, the Merger, and
the agreements and actions contemplated in Article 5 hereof, including any
investment banking, accounting, advisory, brokers, finders, printers or legal
fees or fees paid to any Government Entity or other third party (but excluding
the costs set forth in Section 3.23 of the Disclosure Letter that are deemed not
to be transaction costs for purposes of this Section 3.23), do not, and will not
as of the Expiration Date, exceed $1,550,000.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Each of Parent and Purchaser represents and warrants to the Company as
follows:
SECTION 4.1 Organization and Qualification. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York. Each of Parent and
Purchaser is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or the nature of its business makes such qualification
necessary, except in jurisdictions, if any, where the failure to be so qualified
would not, individually or in the aggregate, result in a Material Adverse Effect
on Parent or Purchaser. Each of Parent and Purchaser has all requisite corporate
power and authority to own, use or lease its properties and to carry on its
business as it is now being conducted.
SECTION 4.2 Authority. Each of Parent and Purchaser has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Parent and Purchaser. This Agreement has been duly and
validly executed and delivered by Parent and Purchaser and constitutes a valid
and binding obligation of each such party, enforceable against each such party
in accordance with its terms.
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SECTION 4.3 Consents and Approvals; No Conflicts. The execution and
delivery of this Agreement by Parent and Purchaser do not, and the consummation
by Parent and Purchaser of the transactions contemplated by this Agreement and
compliance by Parent and Purchaser with the provisions of this Agreement will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien in or upon any of the properties or
assets of Parent or Purchaser under any provision of (i) the certificate of
incorporation or bylaws of Parent or Purchaser, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or
Purchaser or any of their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any (A) statute, law, ordinance, rule or regulation or (B) judgment,
order or decree applicable to Parent or Purchaser or any of their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights or Liens that individually or in
the aggregate would not (x) have a Material Adverse Effect on Parent, (y) impair
in any material respect the ability of Parent or Purchaser to perform its
respective obligations under this Agreement or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to Parent
or Purchaser in connection with the execution and delivery of this Agreement by
Parent or Purchaser or the consummation by Parent or Purchaser of the
transactions contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form under the HSR Act, (2) the filing with
the SEC of the Offer Documents and such reports under Sections 13(a), 13(d) and
16(a) of the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (3) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business and (4) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on Parent or prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
SECTION 4.4 Interim Operations of Purchaser. Purchaser was formed solely
for the purpose of engaging in the transactions contemplated hereby, and has
engaged in no other business activities.
SECTION 4.5 Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or
Purchaser.
SECTION 4.6 Financing. Parent has funds or commitments to provide funds in
an amount adequate to purchase the Shares pursuant to the Offer and to pay the
Merger Consideration. Parent will have, and shall provide Purchaser with, the
funds necessary to consummate the Offer and the Merger and the transactions
contemplated hereby in accordance with the terms hereof.
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ARTICLE V.
COVENANTS
SECTION 5.1 Interim Operations of the Company. Except as expressly
contemplated by this Agreement or as set forth in Section 5.1 of the Disclosure
Letter, from the date hereof until the time the directors of Purchaser have been
elected to, and shall constitute a majority of, the Board of Directors of the
Company pursuant to Section 1.3 hereof (the "INTERIM PERIOD"), the Company
shall, and shall cause its Subsidiaries to, carry on their respective businesses
in the ordinary course consistent with the manner as heretofore conducted and,
to the extent consistent therewith, use commercially reasonable efforts to (x)
preserve intact their current business organization, (y) keep available the
services of their current officers and employees and (z) preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them. Without limiting the generality of
the foregoing, during the Interim Period, other than as set forth in Section 5.1
of the Disclosure Letter or as otherwise contemplated by this Agreement, the
Company shall not, and shall not permit any of its Subsidiaries to, without
Parent's prior written consent:
(a) amend its Certificate of Incorporation or Bylaws or comparable
organizational documents;
(b) (i) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to the Company's capital stock
or that of its Subsidiaries (other than dividends and distributions by a direct
or indirect wholly-owned Subsidiary of the Company to its parent or pursuant to
the Rights Agreement), (ii) redeem, purchase or otherwise acquire directly or
indirectly any shares of the capital stock of the Company or of its Subsidiaries
or any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities; (iii) authorize for issuance, issue, sell,
pledge, deliver or agree to commit to issue, sell, pledge or deliver (whether
through the issuance or granting of any options, warrants, calls, subscriptions,
stock appreciation rights or other rights or other agreements) or otherwise
encumber any shares of capital stock of any class of the Company or of its
Subsidiaries or any securities convertible into or exchangeable for shares of
capital stock of any class of the Company or of its Subsidiaries other than
Shares issued upon the exercise of Stock Options outstanding on the date hereof
in accordance with the Stock Plan as in effect on the date hereof; or (iv)
split, combine or reclassify the outstanding capital stock of the Company or of
any of its Subsidiaries or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of the capital stock of the
Company or of any of its Subsidiaries;
(c) acquire or agree to acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any business, corporation,
partnership, limited liability company, joint venture, association or other
business organization or division thereof;
(d) sell, lease, license, transfer, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any assets of the Company or of its
Subsidiaries other than (i) sales of inventory in the ordinary course of
business, (ii) sales and dispositions of assets (other than sales of inventory
in the ordinary course of business) having an aggregate fair market value on the
date of this Agreement of less than $50,000, in each case only if in the
ordinary course of business and consistent with past practice, and (iii)
encumbrances and Liens incurred in the ordinary course of business and
consistent with past practice on assets that are not, individually or in
aggregate, material to the Company and its Subsidiaries, taken as a whole;
(e) except as disclosed in Section 5.1(e) of the Disclosure Letter, make or
agree to make any new capital expenditure or expenditures in excess of $10,000
each and $50,000 in the aggregate;
(f) except as required to comply with applicable law or agreements, Plans
or arrangements existing on the date hereof, (i) adopt, enter into, terminate or
amend in any material respect any employment contract, collective bargaining
agreement or Plan, (ii) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee (except for
normal increases of cash compensation or cash bonuses in the ordinary course of
business consistent with past practice), (iii) pay any benefit not provided for
under any Company Plan, (iv) increase in any manner the severance or termination
pay of any officer or employee, (v) except as permitted in clause (ii), grant
any awards under any Plan (including the grant of stock options, stock
appreciation rights, stock-based or stock-related awards, performance units or
restricted stock or the removal of existing restrictions in any Plans or
agreements or awards made thereunder), (vi) take
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any action to fund or in any other way secure the payment of compensation or
benefits under any employee agreement, contract or Plan or (vii) except as
provided in Section 2.10(a), take any action to accelerate the vesting of, or
cash out rights associated with, any Stock Options;
(g) enter into any agreement of a nature that would be required to be filed
as an exhibit to Form 10-K under the Exchange Act, other than contracts for the
sale of the Company's products in the ordinary course of business or as
contemplated by this Agreement;
(h) (i) incur or assume any long-term debt, or except in the ordinary
course of business in amounts consistent with past practice, incur or assume any
short-term indebtedness; (ii) issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or of any of its
Subsidiaries; (iii) enter into any "keep well" or other arrangement to maintain
any financial condition of another person; (iv) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; or (v) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly-owned Subsidiaries of the Company);
(i) make any change in accounting methods, principles or practices unless
required by GAAP;
(j) compromise or settle any material claim or litigation;
(k) take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Offer set forth in
Annex A or any of the conditions to the Merger set forth in Article VI not being
satisfied, or would make any representation or warranty of the Company contained
herein inaccurate in any respect at, or as of any time prior to, the Effective
Time, or that would impair the ability of the Company to consummate the Merger
in accordance with the terms hereof or delay such consummation;
(l) make or rescind any Tax election or settle or compromise any Tax
liability or refund or change in any material respect any of the methods of
reporting income or deductions for federal income tax purposes;
(m) permit any material insurance policy naming it as a beneficiary or a
loss payable payee to be canceled or terminated, except in the ordinary course
of business and consistent with past practice;
(n) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries (other than the Merger);
(o) enter into any agreement or arrangement with any affiliate of the
Company or any of its Subsidiaries (other than agreements or arrangements
between the Company and wholly-owned Subsidiaries or between wholly-owned
Subsidiaries) on terms less favorable to the Company or the Subsidiary, as the
case may be, than could be reasonably expected to have been obtained with an
unaffiliated third party on an arm's-length basis;
(p) amend, terminate or waive any provisions of any of the agreements set
forth in Section 3.21(a) of the Disclosure Letter; or
(q) enter into an agreement, contract, commitment or arrangement to do any
of the foregoing, or authorize, recommend, propose or announce an intention to
do any of the foregoing.
SECTION 5.2 Access to Information, Confidentiality. From the date hereof
to the Effective Time, the Company shall, and shall cause its Subsidiaries,
officers, directors, employees, auditors and other agents to, afford the
officers, employees, auditors, counsel, financing sources and other agents of
Parent access at all reasonable times (i) to the Company's and its Subsidiaries'
officers, employees, agents, properties, offices, and other facilities and to
all books and records, and shall furnish such persons with all financial,
operating and other data and information as they may from time to time request
(including accountants' work papers) and (ii) the Company's and its
Subsidiaries' management information systems and other consultants. During such
period, the Company shall, and shall cause its Subsidiaries to, furnish promptly
to Parent a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of the federal or state securities laws or the federal, state, local or foreign
tax laws. Parent will, and will cause Purchaser to, hold any such information
which is non-public in confidence in accordance
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with the provisions of a letter agreement dated June 30, 1999 between the
Company and Parent (the "CONFIDENTIALITY AGREEMENT").
SECTION 5.3 No Solicitation. (a) The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of the Company or any of its Subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative or agent
retained by the Company or any Subsidiary (collectively, the "COMPANY
REPRESENTATIVES") to, directly or indirectly, (i) solicit, initiate or knowingly
encourage the submission of any Acquisition Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any nonpublic information with respect to, or take any other action
designated or reasonably likely to facilitate any inquiries or the making of any
proposal that constitutes an Acquisition Proposal; provided, however, that the
Company may, in response to an unsolicited Acquisition Proposal received after
the date hereof, and subject to compliance with Section 5.3(c), participate in
discussions or negotiations with a third party making an Acquisition Proposal
(and may furnish information to such third party pursuant to a customary
confidentiality agreement on terms no less favorable to the Company than the
Confidentiality Agreement) if (x) the Board of Directors of the Company
reasonably determines that the Acquisition Proposal is a bona fide Superior
Proposal (as defined below) and (y) the Board of Directors determines (after
consultation with independent outside counsel) that failing to take such action
could reasonably be determined to constitute a breach of its fiduciary duties to
the Company's stockholders under applicable law. The Company shall immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any person conducted
heretofore by the Company or any Company Representative with respect to any
Acquisition Proposal existing on the date hereof. The Company agrees not to
release any third party from, or amend or waive any provision of, any standstill
agreement to which it is a party unless the Board of Directors of the Company
determines (after consultation with independent outside counsel) that failing to
take such action could reasonably be determined to constitute a breach of its
fiduciary duties to the Company's stockholders under applicable law. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in this Section 5.3(a) by any Company Representative shall be deemed
to be a breach of this Section 5.3(a) by the Company. For purposes of this
Agreement, "ACQUISITION PROPOSAL" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Company and its Subsidiaries, taken as a
whole (other than the purchase of the Company's products in the ordinary course
of business), or of over 10% of any class of equity securities of the Company or
any of its Subsidiaries or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 10% or more of any
class of equity securities of the Company or any of its Subsidiaries or any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Offer or the Merger or which would reasonably be expected to dilute
materially the benefits to Parent of the transactions contemplated hereby.
(b) Except as set forth in this Section 5.3, neither the Board of Directors
of the Company nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Board of Directors or such committee of the Offer, the
Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an "ACQUISITION AGREEMENT") related to any
Acquisition Proposal. Notwithstanding the foregoing, prior to the time of
acceptance for payment of Shares in the Offer, the Board of Directors of the
Company may (subject to the terms of this and the following sentence) withdraw
or modify its approval or recommendation of the Offer, this Agreement or the
Merger, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the second
business day following Parent's receipt of written notice advising Parent that
the Board of Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal; provided, that the Board
of Directors of the Company shall have determined (and been advised in writing
by
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independent outside counsel) that the failure to take such action could
reasonably be determined to cause the Board of Directors of the Company to
violate its fiduciary duties to the Company's stockholders under applicable law;
and provided further, that the Company shall not enter into an Acquisition
Agreement with respect to a Superior Proposal unless the Company shall have
furnished Parent with written notice not later than noon (New York time) two
days in advance of any date that it intends to enter into such agreement and
shall have caused its financial and legal advisors to negotiate with Parent to
make such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the transactions contemplated herein on such
adjusted terms. In addition, if the Company proposes to enter into an
Acquisition Agreement with respect to any Acquisition Proposal, it shall
concurrently with entering into such agreement pay, or cause to be paid, to
Parent the Termination Fee (as defined in Section 8.1). For purposes of this
Agreement, a "SUPERIOR PROPOSAL" means any bona fide Acquisition Proposal made
by a third party (i) that is on terms which the Board of Directors of the
Company determines in its good faith judgment (based on consultation with the
Company's financial advisor) to be more favorable to the Company's stockholders
than the Offer and the Merger and (ii) for which financing, to the extent
required, is then committed or which, in the good faith judgment of the Board of
Directors of the Company, is capable of being obtained by such third party.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 5.3, the Company shall promptly advise Parent orally
and in writing of any request for nonpublic information or of any Acquisition
Proposal known to it, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal. The Company will promptly inform Parent of any material
change in the details (including amendments or proposed amendments) of any such
request or Acquisition Proposal.
SECTION 5.4 Stockholder Approval; Preparation of Proxy Statement. (a) If
the Company Stockholder Approval is required by law, the Company shall, as soon
as practicable following the expiration of the Offer and payment for the Shares,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"STOCKHOLDERS MEETING") for the purpose of obtaining the Company Stockholder
Approval. The Company shall, through its Board of Directors, recommend to its
stockholders that the Company Stockholder Approval be given. Notwithstanding the
foregoing, if Purchaser or any subsidiary of Parent shall acquire at least 90%
of the outstanding Shares, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Stockholders Meeting in accordance with
Section 253 of the DGCL.
(b) If the Company Stockholder Approval is required by law, the Company
shall, as soon as practicable following the expiration of the Offer, prepare and
file a preliminary Proxy Statement with the SEC and shall use its best efforts
to respond to any comments of the SEC or its staff and to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after responding to all such comments to the satisfaction of the staff. The
Company shall notify Parent promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will supply
Parent with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC staff, on the other hand, with
respect to the Proxy Statement or the Merger. If at any time prior to the
Stockholders Meeting there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer and
all other Shares owned by Parent or any Subsidiary of Parent to be voted in
favor of the Company Stockholder Approval.
SECTION 5.5 Reasonable Efforts. Upon and subject to the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to use
all reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Offer, the Merger and the other
transactions contemplated by this Agreement, including using reasonable
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efforts to take the following actions: (i) the taking of all reasonable acts
necessary to cause the Offer Conditions to be satisfied, (ii) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to avoid an action or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (v) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, in connection with any
filing or submission required or action to be taken by Parent, the Company or
any of their respective Subsidiaries to consummate the Offer, the Merger or the
other transactions contemplated by this Agreement, the Company shall not,
without Parent's prior written consent, commit to any divestiture of assets or
businesses of the Company or any of its Subsidiaries if such divested assets
and/or businesses are material to the assets or profitability of the Company and
its Subsidiaries taken as a whole; and neither Parent nor any of its
Subsidiaries shall be required to divest or hold separate or otherwise take or
commit to take any action that limits its freedom of action with respect to, or
its ability to retain, the Company and its Subsidiaries or any of the
businesses, product lines or assets of Parent or any of its Subsidiaries or that
would have a Material Adverse Effect on Parent. In connection with and without
limiting the foregoing, but subject to the terms and conditions hereof, the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Offer, the Merger,
this Agreement or any other transactions contemplated by this Agreement, use all
reasonable efforts to ensure that the Offer, the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer, the Merger, this
Agreement and the other transactions contemplated by this Agreement.
SECTION 5.6 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (a) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that it not so qualified becoming untrue or
inaccurate in any material respect, and (b) any failure by it to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it under this Agreement. No such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.7 Public Announcements. The initial press releases with respect
to the execution of this Agreement shall be prepared by the parties in form and
substance acceptable to Parent and the Company. Thereafter, so long as this
Agreement is in effect, neither the Company, Parent nor any of their respective
affiliates shall issue or cause the publication of any press release or other
announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any listing agreement with a
national securities exchange or trading market.
SECTION 5.8 Directors' and Officers' Indemnification and Insurance.
(a) For six years after the Effective Time, the Surviving Corporation (or
any successor to the Surviving Corporation) shall indemnify, defend and hold
harmless the present and former officers and directors of the Company and its
Subsidiaries (each an "INDEMNIFIED PARTY") against all losses, claims, damages,
liabilities, fees and expenses (including reasonable fees and disbursements of
counsel and judgments, fines, losses, claims, liabilities and amounts paid in
settlement (provided that any such settlement is effected with the written
consent of Parent or the Surviving Corporation, which consent will not be
unreasonably withheld)) arising out of actions or omissions occurring at or
prior to the Effective Time to the full extent permitted under Delaware law
(provided that such actions or omissions were in compliance with the standards
set forth under Delaware law, the Certificate of Incorporation and the Bylaws of
the Company), subject to the terms of the Certificate of Incorporation and the
Bylaws of the Company, all as in effect at the date hereof; provided that,
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in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until disposition of any and all such claims; provided, further,
that nothing herein shall impair any rights or obligations of any present or
former directors or officers of the Company.
(b) Parent or the Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance for a period of not less
than six years after the Effective Date; provided, that the Parent may
substitute therefor policies of substantially similar coverage and amounts
containing terms no less favorable to such former directors or officers;
provided, further, that in no event shall the Company be required to pay
aggregate premiums for insurance under this Section in excess of 200% of the
aggregate premiums paid by the Company in 1999 on an annualized basis for such
purpose.
SECTION 5.9 Warrants. At any time after payment for Shares pursuant to the
Offer and prior to the Effective Time (but in no event later than January 31,
2000 if Purchaser has accepted Shares for payment pursuant to the Offer prior to
such date), as determined by Purchaser, the parties shall take the actions
necessary to cause each outstanding warrant to purchase Shares granted pursuant
to the Warrants dated March 26, 1999 (the "WARRANTS") originally issued to Chase
Bank of Texas, National Association, Bank of America, N.A., Wells Fargo Bank
(Texas), National Association, Comerica Bank-Texas, and National City Bank of
Kentucky, exercisable for an aggregate of 482,262 shares, to be surrendered and
canceled by the holders thereof pursuant to the Third Amendment to Loan
Agreement, dated as of October 22, 1999, among the Company and each of the
holders of the Warrants (the "THIRD AMENDMENT TO LOAN AGREEMENT"). For the
remainder of this Section 5.9 only, all capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Third Amendment to Loan
Agreement. In order to effect the cancellation of the Warrants pursuant to
Section 3 of the Third Amendment to Loan Agreement and to terminate the
Revolving Loan Commitments, terminate and release the Loan Agreement (except as
contemplated in the Third Amendment to Loan Agreement), and release the Company
and the Subsidiaries from all claims of the Lenders and the Agent under and
relating to the Loan Documents (except as contemplated in the Third Amendment to
Loan Agreement) (a) Purchaser shall pay, or provide the funds and cause the
Company to pay, the Notes in full, (b) Purchaser shall provide Cover, or provide
the funds and cause the Company to provide Cover, for all then-outstanding
Letters of Credit, and (c) Purchaser shall pay, or provide the funds and cause
the Company to pay, all amounts due under Section 11.3 of the Loan Agreement.
Upon payment of the amounts required pursuant to the Third Amendment to Loan
Agreement, as set forth in this Section 5.9, the Company shall cause the
Warrants to be delivered to Parent, together with such agreements and other
documentation in form and substance reasonably satisfactory to Parent, executed
by the holders of the Warrants effecting the surrender and cancellation of the
Warrants effective upon performance of the obligations set forth in this Section
5.9.
SECTION 5.10 Convertible Notes. At any time after payment for Shares
pursuant to the Offer and prior to the Effective Time (but in no event later
than January 31, 2000 if Purchaser has accepted Shares for payment pursuant to
the Offer prior to such date), as determined by the Purchaser, Purchaser shall
pay, or provide the funds and cause the Company to pay, the Convertible Notes,
as modified by the Note Modification Agreements (as such terms are defined in
Annex A to the Disclosure Letter).
SECTION 5.11 Subsidiary Acquisition Agreements. At any time after payment
for Shares pursuant to the Offer and prior to the Effective Time (but in no
event later than January 31, 2000 if Purchaser has accepted Shares for payment
pursuant to the Offer prior to such date), as determined by Purchaser, Purchaser
shall pay, or provide the funds and cause the Company to pay, the amounts
outstanding under (a) Paragraph 6 of the Collier Merger Agreement, on the terms
set forth in that certain letter agreement dated November 9, 1999, executed by
the Company and the individuals to whom such sums are owed, (b) Paragraph 5(C)
of the Colonial Merger Agreement, as amended by Second Amendment to Merger
Agreement entered into by the parties thereto, and (c) Paragraph 6(C) of the
Plant Maintenance Merger Agreement, as amended by Second Amendment to Merger
Agreement entered into by the parties thereto (as such terms are defined in
Annex A to the Disclosure Letter).
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SECTION 5.12 Releases under Loan Agreement. Upon payment of the amounts
required pursuant to the Third Amendment to Loan Agreement as set forth in
Section 5.9, the Company shall deliver to Parent evidence of the termination and
release of all Liens on any assets of the Company or any subsidiary of the
Company granted in connection with, and executed receipts, payoff letters or
similar documents executed by the Company's lenders under, the Company Loan
Agreement (as such term is defined in Annex A to the Disclosure Letter), each in
form and substance reasonably satisfactory to Parent and Parent's lenders (such
evidence being referred to as the "RELEASES").
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or the Purchaser, as the case may be, to the extent
permitted by applicable law:
(a) Stockholder Approval. If required by applicable law in order to
consummate the Merger, the Company Stockholder Approval shall have been
obtained;
(b) No Injunctions, Consents. No law, statute, rule, executive order,
decree, regulation, temporary restraining order or preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
Governmental Entity shall be in effect which declares this Agreement invalid or
unenforceable in any material respect or which prohibits consummation of the
Merger, and all governmental consents, orders and approvals required for the
consummation of the Merger and the other transactions contemplated hereby shall
have been obtained and shall be in effect at the Effective Time;
(c) Purchase of Shares in Offer. Parent, Purchaser or their affiliates
shall have purchased Shares pursuant to the Offer; and
(d) HSR Approval. The applicable waiting period under the HSR Act shall
have expired or been terminated.
ARTICLE VII.
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any stockholder approval of the Merger):
(a) By the mutual written consent of the Board of Directors of Parent or
Purchaser and the Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the Board of
Directors of Parent or Purchaser:
(i) if the Offer shall have expired without any Shares being purchased
therein; provided, however, that the right to terminate this Agreement
under this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of Purchaser to purchase Shares pursuant to
the Offer on or prior to the date on which the Offer shall have expired; or
(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their best efforts to lift), which
permanently restrains, enjoins or otherwise prohibits the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger and
such order, decree, ruling or other action shall have become final and
non-appealable.
26
<PAGE> 30
(c) By the Board of Directors of the Company:
(i) if Parent, Purchaser or any of their affiliates shall have failed
to commence the Offer on or prior to five business days following the date
of the initial public announcement of the Offer; provided, that the Company
may not terminate this Agreement pursuant to this Section 7.1(c)(i) if the
Company is in material breach of this Agreement;
(ii) in connection with entering into a definitive agreement in
accordance with Section 5.3(b), provided the Company has complied with all
provisions thereof, including the notice provisions therein, and that the
Company makes simultaneous payment of the Termination Fee; or
(iii) if Parent or Purchaser shall have breached in any material
respect any of their respective representations, warranties, covenants or
other agreements contained in this Agreement, which breach cannot be or has
not been cured within 30 days after the giving of written notice to Parent
or Purchaser, as applicable, except, in any case, for such breaches which
are not reasonably likely to affect adversely Parent's or Purchaser's
ability to complete the Offer or the Merger.
(d) By the Board of Directors of Parent or Purchaser:
(i) if, due to an occurrence that if occurring after the commencement
of the Offer would result in a failure to satisfy any of the conditions set
forth in Annex A hereto, Parent, Purchaser, or any of their affiliates
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer;
provided, that Parent or Purchaser may not terminate this Agreement
pursuant to this Section 7.1(d)(i) if Parent or Purchaser is in material
breach of this Agreement;
(ii) if prior to the purchase of Shares pursuant to the Offer, the
Company shall have breached any representation, warranty, covenant or other
agreement contained in this Agreement which would give rise to the failure
of a condition set forth in paragraph (f) or (h) of Annex A hereto; or
(iii) if either Parent or Purchaser is entitled to terminate the Offer
as a result of the occurrence of any event set forth in paragraph (e) of
Annex A hereto.
SECTION 7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Parent, Purchaser or
the Company except (A) for fraud or for breach of this Agreement and (B) as set
forth in Section 8.1.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1 Fees and Expenses. (a) Except as provided in Section
8.1(b)below, all costs and expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated hereby shall be paid by
the party incurring such expenses.
(b) If (x) the Board of Directors of the Company shall terminate this
Agreement pursuant to Section 7.1(c)(ii), (y) the Board of Directors of Parent
or Purchaser shall terminate this Agreement pursuant to Section
7.1(d)(iii)hereof, or (z) prior to the termination of this Agreement (other than
by the Board of Directors of the Company pursuant to Section 7.1(c)(i) or
7.1(c)(iii)), an Acquisition Proposal shall have been made and within 12 months
of such termination, the same or another Acquisition Proposal from the same or
another party shall be accepted and the related transaction consummated pursuant
to a definitive agreement or otherwise, the Company shall pay to Parent
(concurrently with such termination, in the case of clauses (x) or (y) above,
and not later than two business days after the Company takes any such action
with respect to an Acquisition Proposal, in the case of clause (z) above) an
amount equal to $3 million plus an amount equal to the fees and expenses
incurred by Parent and Purchaser in connection with the Offer, the
27
<PAGE> 31
Merger, this Agreement and the consummation of the transactions contemplated
hereby (the "TERMINATION FEE").
SECTION 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto (by action taken by their
respective Boards of Directors), at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
approval of this Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce the amount or change the form
of the Merger Consideration.
SECTION 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
SECTION 8.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service, such as Federal
Express, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or Purchaser, to:
Flowserve Corporation
222 W. Las Colinas Blvd., Suite 1500
Irving, Texas 75039
Attention: Ronald Shuff
Telephone No.: (972) 443-6543
Telecopy No.: (972) 443-6843
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: Ford Lacy, P.C.
Telephone No.: (214) 969-2724
Telecopy No.: (214) 969-4343
and
(b) if to the Company, to:
Innovative Valve Technologies, Inc.
2 Northpoint Drive, Suite 300
Houston, Texas 77060
Attention: Charles F. Schugart
Telephone No.: (281) 925-0302
Telecopy No.: (281) 925-0362
with a copy to:
Boyer, Ewing & Harris
Nine Greenway Plaza, Suite 3100
Houston, Texas 77046
Attention: John R. Boyer, Jr.
Telephone No.: (713) 871-8022
Telecopy No.: (713) 871-8024
28
<PAGE> 32
SECTION 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
and the Confidentiality Agreement (including the documents and the instruments
referred to herein and therein): (a) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, and (b) except as
provided in Section 5.8, is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
SECTION 8.7 Severability. Any term or provision of this Agreement that is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision with
a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
SECTION 8.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof; provided, however, that
the laws of the respective jurisdictions of incorporation of each of the parties
shall govern the relative rights, obligations, powers, duties and other internal
affairs of such party and its board of directors.
SECTION 8.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly-owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective successors
and assigns.
ARTICLE IX.
DEFINITIONS
SECTION 9.1 Defined Terms. As used herein, the following terms shall have
the following meanings:
(a) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "beneficial owner" with respect to any Shares means a person who, or
any of whose affiliates or associates (as such term is defined in Rule 12b-2 of
the Exchange Act), (i) beneficially owns, directly or indirectly, such Shares,
(ii) has, directly or indirectly, (A) the right to acquire such Shares (whether
such right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote such Shares pursuant to any agreement, arrangement or
understanding or (iii) has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of such Shares with any other
beneficial owner of such Shares; "beneficially own" and "beneficial ownership"
shall have correlative meanings.
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, power to elect a
majority of directors or other managers, as trustee or executor, by contract or
credit arrangement or otherwise;
29
<PAGE> 33
(d) "Material Adverse Effect" on a person means any event, circumstances,
condition, development, change or occurrence causing, resulting in or having (or
with the passage of time likely to cause, result in or have) a material adverse
effect on the consolidated financial condition, businesses, results of
operations or prospects on such person and its Subsidiaries taken as a whole.
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(f) "Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which the Company, the Surviving Corporation or
such other person, as the case may be (either alone or through or together with
any other Subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
(g) "Taxes" means any and all federal, state, local, foreign or other taxes
of any kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any taxing
authority, including, without limitation, taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, transfer, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth, and
taxes or other charges in the nature of excise, withholding, ad valorem or value
added.
(h) "Tax Return" means any return, report or similar statement (including
the attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
SECTION 9.2 Additional Definitions
<TABLE>
<CAPTION>
DEFINED TERM SECTION DEFINED IN
- ------------ ---------------------------
<S> <C>
Acquisition Agreement..................................... 5.3
Acquisition Proposal...................................... 5.3
Agreement................................................. Introduction
Award Termination Agreement............................... 2.10
Board of Directors........................................ 1.2
Certificate of Incorporation.............................. 2.5
Certificate of Merger..................................... 2.3
Certificates.............................................. 2.9
Chapter 11 Stockholder Agreement.......................... Preliminary Statements
Chapter 11 Stockholders................................... Preliminary Statements
Closing Date.............................................. 2.2
Code...................................................... 2.9
Common Stock.............................................. Preliminary Statements
Company................................................... Introduction
Company Controlled Group Member........................... 3.12
Company Controlled Group Plan............................. 3.12
Company Financial Statements.............................. 3.6
Company Group............................................. 3.11
Company Plans............................................. 3.12
Company Representatives................................... 5.3
Company Stockholder Approval.............................. 3.3
Confidentiality Agreement................................. 5.2
Converted Notes........................................... 5.10
Current SEC Reports....................................... 3.7
Delaware Bankruptcy Court................................. Preliminary Statements
DGCL...................................................... 2.1
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
DEFINED TERM SECTION DEFINED IN
- ------------ ---------------------------
<S> <C>
Disclosure Letter......................................... Introduction to Article III
Dissenting Shares......................................... 2.8
Dissenting Stockholder.................................... 2.8
Effective Time............................................ 2.3
Environmental Law......................................... 3.13
ERISA..................................................... 3.12
Exchange Act.............................................. 1.1
Expiration Date........................................... 1.1
Financial Advisor......................................... 1.2
14f-1 Information Statement............................... 1.3
fully diluted basis....................................... Annex A
GAAP...................................................... 3.6
Governmental Entity....................................... 3.4
Hazardous Substance....................................... 3.13
HSR Act................................................... 3.4
Independent Directors..................................... 1.3
Indemnified Party......................................... 5.8
Intellectual Property Rights.............................. 3.16
Interim Period............................................ 5.1
Legal Provisions.......................................... 3.9
Liens..................................................... 3.2
Merger.................................................... Preliminary Statements
Merger Consideration...................................... 2.8
Minimum Condition......................................... Annex A
Offer..................................................... Preliminary Statements
Offer Conditions.......................................... 1.1
Offer Documents........................................... 1.1
Offer Price............................................... 1.1
Parent.................................................... Introduction
Paying Agent.............................................. 2.9
Permits................................................... 3.9
Plan...................................................... 3.12
Proxy Statement........................................... 3.4
Purchaser................................................. Introduction
Releases.................................................. 5.12
Rights.................................................... 3.2
Rights Agreement.......................................... 3.2
SEC....................................................... 1.1
SEC Reports............................................... 3.5
Schedule 14D-1............................................ 1.1
Schedule 14D-9............................................ 1.2
Securities Act............................................ 3.5
Series A Preferred Stock.................................. 3.2
Shares.................................................... Preliminary Statements
Stockholder Agreements.................................... Preliminary Statements
Stockholder/Option Agreement.............................. Preliminary Statements
Stockholders Meeting...................................... 5.4
Stock Options............................................. 2.10
Stock Plan................................................ 2.10
Subsidiary Acquisition Agreements......................... 3.2
Superior Proposal......................................... 5.3
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
DEFINED TERM SECTION DEFINED IN
- ------------ ---------------------------
<S> <C>
Surviving Corporation..................................... 2.1
Termination Fee........................................... 8.1
Third Amendment to Loan Agreement......................... 5.9
Warrants.................................................. 5.9
</TABLE>
SECTION 9.3 Other Definitional Provisions
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificates, reports or other documents made or delivered
pursuant hereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning when used
in the plural, and vice versa.
(c) As used herein, the neuter gender shall also denote the masculine and
feminine, and the masculine gender shall also denote the neuter and feminine
where the context so permits.
(d) When a reference is made in this Agreement to a Section, such reference
shall be to a Section of this Agreement unless otherwise indicated.
(e) Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation").
[Signature Page Follows]
32
<PAGE> 36
IN WITNESS WHEREOF, each of the parties to this Agreement has caused this
Agreement to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
FLOWSERVE CORPORATION, a New York
corporation
By: /s/ RONALD F. SHUFF
----------------------------------
Name: Ronald F. Shuff
Title: Vice President, Secretary and
General Counsel
FORREST ACQUISITION SUB, INC.,
a Delaware corporation
By: /s/ RONALD F. SHUFF
----------------------------------
Name: Ronald F. Shuff
Title: Secretary and Treasurer
INNOVATIVE VALVE TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ CHARLES F. SCHUGART
----------------------------------
Name: Charles F. Schugart
Title: President
<PAGE> 37
ANNEX A
Capitalized terms used in this Annex A have the meanings set forth in the
attached Agreement, except that the term "Merger Agreement" shall be deemed to
refer to the attached Agreement.
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and may postpone the acceptance for payment of and payment for any tendered
Shares, and may terminate or amend the Offer if (i) a number of Shares which
constitutes at least a majority of the Shares outstanding on a fully diluted
basis shall not have been validly tendered and not withdrawn prior to the
expiration of the Offer (the "MINIMUM CONDITION"; for purposes hereof "FULLY
DILUTED BASIS" means issued and outstanding Shares, Shares subject to issuance
under Stock Plan and Shares subject to issuance upon exercise of outstanding
warrants, calls, subscriptions or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
the Company or securities convertible or exchangeable for such capital stock),
exclusive of Shares potentially issuable under (w) Warrants subject to
termination under the Third Amendment to Loan Agreement, (x) Stock Options which
are to be terminated under duly executed Award Termination Agreements, (y)
conversion rights under Convertible Notes subject to duly executed Note
Modification Agreements and (z) Obligations subject to termination under any of
the duly executed Subsidiary Acquisition Agreements, other than the New Collier
Shares; (ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated prior to the expiration of the Offer, or (iii) at any
time on or after the date of the Merger Agreement and prior to the acceptance
for payment for Shares, any of the following events shall occur or shall be
determined by the Purchaser to have occurred:
(a) there shall have been threatened or instituted by any Governmental
Entity any action or proceeding before any court or governmental, administrative
or regulatory authority or agency of competent jurisdiction, domestic or
foreign, (i) challenging or seeking to make illegal, materially delay or
otherwise directly or indirectly restrain or prohibit or make materially more
costly the making of the Offer, the acceptance for payment of, or payment for,
any Shares by Parent, Purchaser or any other affiliate of Parent, or the
consummation of any other transaction contemplated by the Merger Agreement, or
seeking to obtain material damages in connection with the Offer, the Merger or
any such other transaction; (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, Parent or any of their Subsidiaries of
all or any material portion of the business or assets of the Company, Parent or
any of their Subsidiaries, or to compel the Company, Parent or any of their
Subsidiaries to dispose of or hold separate all or any portion of the business
or assets of the Company, Parent or any of their Subsidiaries, as a result of
the Offer, the Merger or any of the other transactions contemplated by the
Merger Agreement; (iii) seeking to impose or confirm limitations on the ability
of Parent, Purchaser or any other affiliate of Parent to exercise effectively
full rights of ownership of any Shares, including, without limitation, the right
to vote any Shares acquired by Purchaser pursuant to the Offer or otherwise on
all matters properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of this Agreement and the Merger; (iv)
seeking to require divestiture by Parent, Purchaser or any other affiliate of
Parent of any Shares; or (v) which otherwise has a Material Adverse Effect on
the Company;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any Governmental
Entity, other than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act, that is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clauses (i) through (v)
of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or in
the Nasdaq National Market System, (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States (whether or
not
A-1
<PAGE> 38
mandatory), (iii) a commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, (iv) any limitation (whether or not mandatory) by any United States
governmental authority on the extension of credit by banks or other financial
institutions, or (v) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening thereof;
(d) there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably likely to
result in any material adverse change) in the consolidated financial condition,
businesses, results of operations or prospects of the Company and its
Subsidiaries, taken as a whole, other than any such change that is the result of
cancellation of a distributor agreement or similar agreement from an original
equipment manufacturer or other material supplier;
(e) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Purchaser its
approval or recommendation of the Offer, the Merger or this Agreement or
resolved to do so, or shall have approved or recommended any Acquisition
Proposal, or (ii) the Company shall have entered into any Acquisition Agreement
with respect to any Superior Proposal in accordance with Section 5.3(b) of the
Merger Agreement;
(f) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true and
correct and any such representations and warranties that are not so qualified
shall not be true and correct in any material respect, in each case as of the
date of the Merger Agreement and as of the scheduled Expiration Date of the
Offer;
(g) (i) any stockholder of the Company party to a Stockholder Agreement
shall have failed to perform in any material respect any material obligation or
to comply in any material respect with any material agreement or covenant of
such stockholder to be performed or complied with by such stockholder under such
Stockholder Agreement or (ii) either Chapter 11 Stockholder Agreement shall not
have been approved by the Delaware Bankruptcy Court for the District of Delaware
and a plan of reorganization shall not have been confirmed by the Delaware
Bankruptcy Court with respect to the Chapter 11 Stockholder party to such
Chapter 11 Stockholder Agreement;
(h) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement; or
(i) the Merger Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Parent or Purchaser, in any such case and
regardless of the circumstances (unless such condition is caused by the action
or inaction of Parent or Purchaser) giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment of
or payment for Shares.
A-2
<PAGE> 39
SCHEDULE A
LIST OF STOCKHOLDERS EXECUTING STOCKHOLDER/OPTION AGREEMENT
Roger L. Miller
William E. Haynes
Charles F. Schugart
Douglas R. Harrington, Jr.
<PAGE> 40
SCHEDULE B
LIST OF CHAPTER 11 STOCKHOLDERS
Philip Industrial Services Group, Inc.
Philip Environmental Services, Inc.
<PAGE> 41
EXHIBIT A
FORM OF STOCKHOLDER/OPTION AGREEMENT
<PAGE> 42
EXHIBIT B
FORM OF CHAPTER 11 STOCKHOLDER AGREEMENT
<PAGE> 1
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of November 18, 1999 (this "Agreement"),
among Forrest Acquisition Sub, Inc., a Delaware corporation ("Purchaser"), and
each of the persons listed on Schedule I hereto (each a "Stockholder" and
collectively, the "Stockholders").
RECITALS:
WHEREAS, concurrently, with the execution and delivery of this Agreement,
Purchaser, Flowserve Corporation, a New York corporation ("Parent"), and
Innovative Valve Technologies, Inc., a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger (the "Merger Agreement"), which
provides, among other things, for the acquisition of the Company by Parent by
means of a cash tender offer (the "Offer") by Purchaser for all outstanding
shares of Common Stock, par value $0.001 per share, of the Company (the "Common
Stock"), including the associated preferred share purchase rights (the "Rights,"
and together with the Common Stock, the "Shares") and for the subsequent merger
of Purchaser with and into the Company (the "Merger"), all on the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Purchaser have required that the Stockholders agree, and
the Stockholders have agreed, to enter into this Agreement; and
WHEREAS, the Board of Directors of the Company has approved this Agreement
and the transactions contemplated hereby prior to the date hereof;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. Terms used and not defined herein, but defined in the
Merger Agreement, shall have the respective meanings ascribed to them in the
Merger Agreement.
2. Tender of Shares; Agreement to Sell.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, each Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and in
accordance with the terms of the Offer, not later than the tenth business day
after commencement of the Offer, the number of shares set forth opposite such
Stockholder's name on Schedule I hereto (the "Existing Shares" and, together
with any Shares acquired by such Stockholder in any capacity after the date
hereof and prior to the termination of this Agreement by means of purchase,
dividend, distribution, exercise of options, warrants or other rights to acquire
Shares or in any other way, the "Stockholder Shares"), all of which are
beneficially owned by such Stockholder. If a Stockholder acquires beneficial
ownership of Shares after the date hereof and prior to termination of this
Agreement, such Stockholder shall tender such Shares on such tenth business day
or, if later, on the second business day after such acquisition.
(b) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable hereunder to each Stockholder such amounts as
are required to be withheld under the Internal Revenue Code of 1986, as amended
(the "Code"), or any applicable provision of state, local or foreign tax law, as
specified in the Offer Documents. To the extent that amounts are so withheld by
Purchaser, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to such Stockholder.
(c) Each Stockholder hereby permits Parent and Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC) the Stockholder's identity and ownership of
the Stockholder Shares and the nature of the Stockholder's commitments,
arrangements and understandings under this Agreement.
<PAGE> 2
3. Option.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, each Stockholder hereby grants to Purchaser an irrevocable option
(the "Option") to purchase the Stockholder Shares at a price equal to $1.62 per
Share. The Option may be exercised in whole or in part at any time prior to the
termination of this Agreement and after (i) the occurrence of any event as a
result of which Parent is entitled to receive a Termination Fee under the Merger
Agreement or (ii) such time as such Stockholder shall have breached in any
material respect any of its agreements in Section 2(a), 4(a), 4(b) or 4(d).
(b) If the Option becomes exercisable under Section 3(a), the Option shall
remain exercisable until the later of (i) the date that is 90 days after the
date the Option becomes exercisable and (ii) the date that is ten days after the
date that all waiting periods under the HSR Act required for the purchase of the
Stockholder Shares upon such exercise shall have expired or been terminated;
provided, that if at the expiration of such period there shall be in effect any
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Option, the exercise period shall be extended until ten days
after the date that no such injunction or order is in effect. In the event
Purchaser wishes to exercise the Option, Purchaser shall send a written notice
to each Stockholder identifying the place and date (not less than two (2) nor
more than ten (10) business days from the date of the notice) for the closing of
such purchase.
4. Additional Agreements.
(a) Each Stockholder shall, at any meeting of the stockholders of the
Company, however called, or in connection with any written consent of the
stockholders of the Company, vote (or cause to be voted) all Shares then held of
record or beneficially owned by such Stockholder, (i) in favor of the Merger,
the execution and delivery by the Company of the Merger Agreement and the
approval of the terms thereof and each of the other actions contemplated by the
Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof and (ii) against any proposal relating to an Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled.
(b) Each Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement and the Merger Agreement, it shall not (i) offer
to transfer (which term shall include, without limitation, any sale, tender,
gift, pledge, assignment or other disposition), transfer or consent to any
transfer of, any or all of the Stockholder Shares or any interest therein
without the prior written consent of Purchaser, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer or any
or all of the Stockholder Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to the
Stockholder Shares, (iv) deposit the Stockholder Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Stockholder
Shares or (v) take any other action that would make any representation or
warranty of the Stockholder contained herein untrue or incorrect in any material
respect or in any way restrict, limit or interfere in any material respect with
the performance of its obligations hereunder or the transactions contemplated
hereby or by the Merger Agreement.
(c) Each Stockholder hereby irrevocably grants to, and appoints, Purchaser
and any designee of Purchaser, and each of them individually, such Stockholder's
proxy and attorney-in-fact with full power of substitution), for and in the
name, place and stead of such Stockholder, to vote the Stockholder Shares, or
grant a consent or approval in respect of the Stockholder Shares, in the manner
specified in Section 4(a). Each Stockholder represents that any proxies
heretofore given in respect of the Stockholder Shares are not irrevocable and
that any such proxies are hereby revoked. Each Stockholder hereby affirms that
the irrevocable proxy set forth in this Section 4(c) is given in connection with
the execution of the Merger Agreement and that such irrevocable proxy is given
to secure the performance of the duties of such Stockholder under this
Agreement. Each Stockholder hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Each
Stockholder hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof.
2
<PAGE> 3
(d) Subject to Section 8, each Stockholder hereby agrees that such
Stockholder shall not, directly or indirectly, encourage, solicit, initiate or
participate in any way in any discussions or negotiations with, or provide any
information to, or afford any access to the properties, books or records of the
Company or any of its Subsidiaries to, or otherwise take any other action to
assist or facilitate, any Person or group (other than Parent or Purchaser or any
affiliate or associate of Parent or Purchaser) concerning any Acquisition
Proposal. Upon execution of this Agreement, each Stockholder will immediately
cease any existing activities, discussions or negotiations conducted heretofore
with respect to any Acquisition Proposal. Each Stockholder will immediately
communicate to Purchaser the terms of any Acquisition Proposal (or any
discussion, negotiation or inquiry with respect thereto) and the identity of the
Person making such Proposal or inquiry which it may receive.
(e) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws to consummate and make effective the
transactions contemplated by this Agreement. Each party shall promptly consult
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
(f) Each Stockholder hereby waives any rights of appraisal or rights to
dissent from the Merger that it may have.
5. Representations and Warranties of each Stockholder. Each Stockholder, as
to itself and no other Stockholder, hereby represents and warrants to Purchaser
as follows:
(a) The Stockholder is the record and beneficial owner of the Existing
Shares set forth opposite its name on Schedule I. The Existing Shares constitute
all of the Shares owned of record or beneficially owned by the Stockholder on
the date hereof. The Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Sections 2, 3 and 4
hereof, sole power of disposition, sole power to demand and waive appraisal
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Existing Shares with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) The Stockholder has the power and authority to enter into and perform
all of the Stockholder's obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and constitutes
a legal, valid and binding agreement of the Stockholder, enforceable against the
Stockholder in accordance with its terms. There is no beneficiary or holder of a
voting trust certificate or other interest of any trust of which the Stockholder
is a trustee, or any party to any other agreement or arrangement, whose consent
is required for the execution and delivery of this Agreement or the consummation
by the Stockholder of the transactions contemplated hereby.
(c) Except for filings under the HSR Act and the Exchange Act (i) no filing
with, and no permit, authorization, consent or approval of, any Governmental
Entity is necessary for the execution and delivery of this Agreement by the
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby and the compliance by the Stockholder with the provisions
hereof and (ii) none of the execution and delivery of this Agreement by the
Stockholder, the consummation by the Stockholder of the transactions
contemplated hereby or compliance by the Stockholder with any of the provisions
hereof, shall (A) conflict with or result in any breach of any organizational
documents applicable to the Stockholder, (B) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, modification or
acceleration) under, any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind, including, without limitation, any voting agreement, proxy arrangement,
pledge agreement, shareholders agreement or voting trust, to which the
Stockholder is a party or by which it or any of its properties or assets may be
bound or (C) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to the Stockholder or any of its
properties or assets.
3
<PAGE> 4
(d) Except as permitted by this Agreement, the Existing Shares beneficially
owned by the Stockholder and the certificates representing such shares are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
liens, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever, except for any such liens or proxies arising
hereunder. The transfer by the Stockholder of the Stockholder Shares to
Purchaser in the Offer or hereunder shall pass to and unconditionally vest in
Purchaser good and valid title to all Stockholder Shares, free and clear of all
liens, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever.
(e) No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Stockholder.
6. Stop Transfer. Each Stockholder shall request that the Company not
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder Shares, unless such
transfer is made in compliance with this Agreement.
7. Termination. This Agreement shall terminate upon the earlier of (a) the
Effective Time and (b) the termination of the Merger Agreement (unless, in the
case of this clause (b), Parent is or may be entitled to receive a Termination
Fee under the Merger Agreement following such termination or prior to such
termination any of the Stockholders has breached in any material respect Section
2(a), 4(a), 4(b) or 4(d)).
8. No Limitation. Notwithstanding any other provision hereof, nothing in
this Agreement shall be construed to prohibit the Stockholders, or any officer
or affiliate of any of the Stockholders who is or has designated a member of the
Board of Directors of the Company, from taking any action solely in his or her
capacity as a member of the Board of Directors of the Company or from exercising
his or her fiduciary duties as a member of such Board of Directors to the extent
specifically permitted by the Merger Agreement.
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) This Agreement shall not be assigned by operation of law or otherwise
without the prior written consent of each of the Stockholders (in the case of
any assignment by Purchaser) or Purchaser (in the case of an assignment by a
Stockholder), provided that Purchaser may assign its rights and obligations
hereunder to Parent or any direct or indirect Subsidiary of Parent, but no such
assignment shall relieve Purchaser of its obligations hereunder.
(c) Without limiting any other rights Purchaser may have hereunder in
respect of any transfer of Shares, each Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Stockholder Shares and shall
be binding upon any Person to which legal or beneficial ownership of such Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, such Stockholder's heirs, guardians, administrators or successors.
(d) This Agreement may not be amended, changed, supplemented or otherwise
modified with respect to a Stockholder except by an instrument in writing signed
on behalf of such Stockholder and Purchaser.
(e) All notices, requests, claims, demands and other communications
hereunder shall be given (and shall be deemed to have been duly received if
given) by hand delivery or by facsimile transmission with confirmation of
receipt, as follows:
If to a Stockholder:
At the address and facsimile number set forth on Schedule I hereto.
4
<PAGE> 5
With a copy to:
Boyer, Ewing & Harris
9 Greenway Plaza, Suite 3100
Houston, Texas 77046
Fax: (713) 871-2024
Attention: John Boyer
If to Parent or Purchaser:
Flowserve Corporation
222 W. Las Colinas Blvd., Suite 1500
Irving, Texas 75039
Fax: (972) 443-6543
Attention: Ronald Shuff
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Fax: (214) 969-4343
Attention: Ford Lacy, P.C.
or to such other address or facsimile number as the person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above.
(f) Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction such invalidity, illegality or
unenforceability will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(g) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
(h) The failure of any party hereto to exercise any rights, power or remedy
provided under this Agreement or otherwise available in respect hereof at law or
in equity, or to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy to demand such compliance.
(i) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
(j) This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware.
(k) The parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any state or Federal court located in the State of
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (A) consents to
submit itself to the personal jurisdiction of any state or Federal court located
in the state of Delaware in the event any dispute arises out of this Agreement
or any transaction contemplated by this Agreement, (B) agrees that it will not
attempt to deny or
5
<PAGE> 6
defeat such personal jurisdiction by motion or other request for leave from any
such court and (C) agrees that it will not bring any action relating to this
Agreement or any transaction contemplated by this Agreement in any court other
than any such court. The parties irrevocably and unconditionally waive any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in any state or
Federal court located in the State of Delaware, and hereby further irrevocably
and unconditionally waive and agree not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(l) The descriptive headings used herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(m) This Agreement may be executed in counterparts (by fax or otherwise),
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same agreement.
(n) Except as otherwise provide herein, each party shall pay its, his or
her own expenses incurred in connection with this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
IN WITNESS WHEREOF, Purchaser and the Stockholders have caused this
Agreement to be duly executed in multiple counterparts as of the day and year
first above written.
FORREST ACQUISITION SUB, INC.
By: /s/ RONALD F. SHUFF
----------------------------------
Name: Ronald F. Shuff
Title: Secretary and Treasurer
STOCKHOLDERS
/s/ ROGER L. MILLER
------------------------------------
Roger L. Miller
/s/ WILLIAM E. HAYNES
------------------------------------
William E. Haynes
/s/ CHARLES F. SCHUGART
------------------------------------
Charles F. Schugart
/s/ DOUGLAS R. HARRINGTON, JR.
------------------------------------
Douglas R. Harrington, Jr.
<PAGE> 8
SCHEDULE I
<TABLE>
<CAPTION>
NAME, FACSIMILE NUMBER AND NUMBER OF SHARES OF COMMON STOCK
ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- -------------------------- --------------------------------
<S> <C>
Roger L. Miller 563,219
2331 River Rock Trail
Kingwood, Texas 77345
William E. Haynes 146,665
614 Rock Cove
Houston, Texas 77079
Home Fax: (281) 493-0299
Charles F. Schugart 57,800
2214 Long Valley
Kingwood, Texas 77345
Business Fax: (281) 925-0362
Douglas R. Harrington, Jr. 17,000
28003 Sapphire Court
Magnolia, Texas 77353
Home Fax: (281) 289-2544
</TABLE>
<PAGE> 1
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of November 18, 1999 (this "Agreement"),
among Forrest Acquisition Sub, Inc., a Delaware corporation ("Purchaser"), and
Philip Industrial Services Group, Inc. (the "Stockholder").
RECITALS:
WHEREAS, concurrently, with the execution and delivery of this Agreement,
Purchaser, Flowserve Corporation, a New York corporation ("Parent"), and
Innovative Valve Technologies, Inc., a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger (the "Merger Agreement"), which
provides, among other things, for the acquisition of the Company by Parent by
means of a cash tender offer (the "Offer") by Purchaser for all outstanding
shares of Common Stock, par value $0.001 per share, of the Company (the "Common
Stock"), including the associated preferred share purchase rights (the "Rights,"
and together with the Common Stock, the "Shares") and for the subsequent merger
of Purchaser with and into the Company (the "Merger"), all on the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Stockholder has filed a voluntary petition under Chapter 11 of
the U.S. Bankruptcy Code with the Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Purchaser have required that the Stockholder agree, and
the Stockholder has agreed, to enter into this Agreement; and
WHEREAS, the Board of Directors of the Company has approved this Agreement
and the transactions contemplated hereby prior to the date hereof; and
WHEREAS, the current board of directors of the Stockholder has approved
this Agreement and the transactions contemplated hereby prior to the date
hereof;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. Terms used and not defined herein, but defined in the
Merger Agreement, shall have the respective meanings ascribed to them in the
Merger Agreement.
2. Tender of Shares; Agreement to Sell; Consideration.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, the Stockholder hereby agrees that, unless the Company shall
have terminated the Merger Agreement to accept a Superior Proposal and
subject to the approval of the Bankruptcy Court to the extent necessary, it
shall validly tender (or cause the record owner of such shares to validly
tender), and not to withdraw, pursuant to and in accordance with the terms
of the Offer, not later than the tenth business day after commencement of
the Offer (or if Bankruptcy Court approval of this Agreement pursuant to
Section 3(e) is received or the Stockholder's plan of reorganization is
confirmed by the Bankruptcy Court after such tenth business day, not later
than the first business day after the earlier to occur of such approval or
confirmation), the number of shares set forth opposite the Stockholder's
name on Schedule I hereto (the "Existing Shares" and, together with any
Shares acquired by the Stockholder in any capacity after the date hereof
and prior to the termination of this Agreement by means of purchase,
dividend, distribution, exercise of options, warrants or other rights to
acquire Shares or in any other way, the "Stockholder Shares"), all of which
are beneficially owned by the Stockholder. Unless the Company shall have
terminated the Merger Agreement to accept a Superior Proposal and subject
to the approval of the Bankruptcy Court to the extent necessary, if the
Stockholder acquires beneficial ownership of Shares after the date hereof
and prior to termination of this Agreement, the Stockholder shall tender
such Shares on such tenth business day or, if later, on the second business
day after such acquisition (or if Bankruptcy
<PAGE> 2
Court approval of this Agreement pursuant to Section 3(e) is received or
the Stockholder's plan of reorganization is confirmed after such tenth
business day or such later date, not later than the first business day
after the earlier to occur of such approval or confirmation).
(b) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable hereunder to the Stockholder such amounts
as are required to be withheld under the Internal Revenue Code of 1986, as
amended (the "Code"), or any applicable provision of state, local or
foreign tax law, as specified in the Offer Documents. To the extent that
amounts are so withheld by Purchaser, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
Stockholder.
(c) The Stockholder hereby permits Parent and Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the SEC) the
Stockholder's identity and ownership of the Stockholder Shares and the
nature of the Stockholder's commitments, arrangements and understandings
under this Agreement.
(d) Subject to paragraph 2(b) hereof, Purchaser shall purchase the
Stockholder Shares for an aggregate price equal to the Offer Price
multiplied by the number of Stockholder Shares and shall pay such amount as
directed by Bankers Trust Company; provided, however, that this Agreement
shall not be binding on the Stockholder unless the Offer Price shall equal
or exceed $1.50 per share.
3. Additional Agreements.
(a) Except as otherwise contemplated by this Agreement, the
Stockholder shall, at any meeting of the stockholders of the Company,
however called, or in connection with any written consent of the
stockholders of the Company, vote (or cause to be voted) all Shares then
held of record or beneficially owned by the Stockholder, (i) in favor of
the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any
actions required in furtherance thereof and hereof and (ii) against any
proposal relating to an Acquisition Proposal and against any action or
agreement that would impede, frustrate, prevent or nullify this Agreement,
or result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the
Merger Agreement or which would result in any of the conditions set forth
in Annex A to the Merger Agreement or set forth in Article VI of the Merger
Agreement not being fulfilled.
(b) The Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement and the Merger Agreement, it shall not (i)
offer to transfer (which term shall include, without limitation, any sale,
tender, gift, pledge, assignment or other disposition), transfer or consent
to any transfer of, any or all of the Stockholder Shares or any interest
therein without the prior written consent of Purchaser, (ii) enter into any
contract, option or other agreement or understanding with respect to any
transfer or any or all of the Stockholder Shares or any interest therein,
(iii) grant any proxy, power-of-attorney or other authorization or consent
in or with respect to the Stockholder Shares, (iv) deposit the Stockholder
Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Stockholder Shares or (v) take any other action that
would make any representation or warranty of the Stockholder contained
herein untrue or incorrect in any material respect or in any way restrict,
limit or interfere in any material respect with the performance of its
obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Except as otherwise contemplated by this Agreement, the
Stockholder hereby irrevocably grants to, and appoints, Purchaser and any
designee of Purchaser, and each of them individually, the Stockholder's
proxy and attorney-in-fact with full power of substitution, for and in the
name, place and stead of the Stockholder, to vote the Stockholder Shares,
or grant a consent or approval in respect of the Stockholder Shares, in the
manner specified in Section 3(a). The Stockholder represents that any
proxies heretofore given in respect of the Stockholder Shares are not
irrevocable and that any such proxies are hereby revoked. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 3(c)
2
<PAGE> 3
is given in connection with the execution of the Merger Agreement and that
such irrevocable proxy is given to secure the performance of the duties of
the Stockholder under this Agreement. The Stockholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, unless this Agreement is terminated
under Section 6. The Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
(d) Subject to Section 7, the Stockholder hereby agrees that the
Stockholder shall not, directly or indirectly, encourage, solicit, initiate
or participate in any way in any discussions or negotiations with, or
provide any information to, or afford any access to the properties, books
or records of the Company or any of its Subsidiaries to, or otherwise take
any other action to assist or facilitate, any Person or group (other than
Parent or Purchaser or any affiliate or associate of Parent or Purchaser)
concerning any Acquisition Proposal. Upon execution of this Agreement, the
Stockholder will immediately cease any existing activities, discussions or
negotiations conducted heretofore with respect to any Acquisition Proposal.
The Stockholder will immediately communicate to Purchaser the terms of any
Acquisition Proposal (or any discussion, negotiation or inquiry with
respect thereto) and the identity of the Person making such Proposal or
inquiry which it may receive.
(e) The Stockholder hereby covenants and agrees that as soon as
practicable following public announcement by Parent of the execution of the
Merger Agreement, it will file, or cause to be filed, a petition with the
Bankruptcy Court requesting the approval of this Agreement and the
transactions contemplated hereby. The Stockholder shall deliver a copy of
such petition to Purchaser's counsel for review at least two business days
prior to such filing and shall promptly notify Purchaser of any action
taken by the Bankruptcy Court with respect to the approval of this
Agreement or the confirmation of a plan of reorganization regarding the
Stockholder.
(f) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws to consummate and make effective
the transactions contemplated by this Agreement. Each party shall promptly
consult with the other and provide any necessary information and material
with respect to all filings made by such party with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby.
(g) The Stockholder hereby waives any rights of appraisal or rights to
dissent from the Merger that it may have.
(h) The Stockholder shall use its best efforts to secure the Agent's
Consent (as defined) as soon as practicable and, upon receipt thereof,
shall deliver a copy of same to Purchaser.
4. Representations and Warranties of each Stockholder. The Stockholder
hereby represents and warrants to Purchaser as follows:
(a) The Stockholder is the record and beneficial owner of the Existing
Shares set forth opposite its name on Schedule I. The Existing Shares
constitute all of the Shares owned of record or beneficially owned by the
Stockholder on the date hereof. The Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Sections 2 and 3 hereof, sole power of disposition, sole power to demand
and waive appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with respect to all of the
Existing Shares with no limitations, qualifications or restrictions on such
rights, subject to (i) applicable securities laws, (ii) the terms of this
Agreement, and (iii) the earlier to occur of the approval of this Agreement
and the transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court.
(b) The Stockholder has the power and authority to enter into and
perform all of the Stockholder's obligations under this Agreement, subject
to the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court and further subject to the receipt by the Stockholder of a
3
<PAGE> 4
consent from the agent bank on behalf of the lending banks to the
Stockholder under the Stockholder's principal bank credit arrangement (the
"Agent's Consent"). This Agreement has been duly and validly executed and
delivered by the Stockholder and, subject to the earlier to occur of the
approval of this Agreement and the transactions contemplated hereby by the
Bankruptcy Court and the confirmation of the Stockholder's plan or
reorganization by the Bankruptcy Court and further subject to the receipt
by the Stockholder of the Agent's Consent, constitutes a legal, valid and
binding agreement of the Stockholder, enforceable against the Stockholder
in accordance with its terms. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the Stockholder
is a trustee, or any party to any other agreement or arrangement, whose
consent is required for the execution and delivery of this Agreement or the
consummation by the Stockholder of the transactions contemplated hereby,
other than the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court.
(c) Except for filings under the HSR Act and the Exchange Act, and
subject to the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court and further subject to the receipt by the Stockholder of the Agent's
Consent, (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery of this Agreement by the Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby and the compliance by
the Stockholder with the provisions hereof, and (ii) none of the execution
and delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof, shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, modification or
acceleration) under, any of the terms, conditions or provisions of any
note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind, including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust, to which the Stockholder is a party or by which it or any of
its properties or assets may be bound or (C) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable
to the Stockholder or any of its properties or assets.
(d) Upon the payment by Purchaser of the Offer Price per share for the
Stockholder Shares as directed by Bankers Trust Company, the transfer by
the Stockholder of the Stockholder Shares to Purchaser in the Offer or
hereunder shall pass to and unconditionally vest in Purchaser good and
valid title to all Stockholder Shares, free and clear of all liens,
proxies, voting trusts or agreements, understandings or arrangements or any
other rights whatsoever, subject to the earlier to occur of the approval of
this Agreement and the transactions contemplated hereby by the Bankruptcy
Court and the confirmation of the Stockholder's plan of reorganization by
the Bankruptcy Court.
(e) No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Stockholder.
(f) The required number of the Stockholder's lenders have executed a
resolution authorizing the Stockholder to enter into the transactions
contemplated by this Agreement.
5. Stop Transfer. The Stockholder shall request that the Company not
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder Shares, unless such
transfer is made in compliance with this Agreement.
6. Termination. This Agreement shall terminate upon the earlier of (a) the
Effective Time and (b) the termination of the Merger Agreement (unless, in the
case of this clause (b), Parent is or may be entitled to
4
<PAGE> 5
receive a Termination Fee under the Merger Agreement following such termination
or prior to such termination the Stockholder has breached in any material
respect Section 2(a), 3(a), 3(b) or 3(d)).
7. No Limitation. Notwithstanding any other provision hereof, nothing in
this Agreement shall be construed to prohibit the Stockholder, or any officer or
affiliate of the Stockholder who is or has designated a member of the Board of
Directors of the Company, from taking any action solely in his or her capacity
as a member of the Board of Directors of the Company or from exercising his or
her fiduciary duties as a member of such Board of Directors to the extent
specifically permitted by the Merger Agreement.
8. Stockholder's Fiduciary Obligation. Notwithstanding anything contained
herein to the contrary, Stockholder shall have the right to take or refrain from
taking any such acts as it shall have reasonably determined are necessary to
fulfill its fiduciary obligations as a debtor and debtor in possession,
including, but not limited to, the right to withdraw the Shares tendered
pursuant to the Offer and to entertain and, if appropriate, accept any higher
and better offers to purchase the Shares, and Stockholder shall not be deemed to
be in breach of any provision of this Agreement as a result of taking any such
action or refraining from taking any such action, provided that Stockholder
shall furnish Purchaser with written notice of the terms of any competing offer
to purchase the Shares and shall provide Purchaser a reasonable opportunity to
match any such competing offer.
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the Stockholder (in the case
of any assignment by Purchaser) or Purchaser (in the case of an assignment
by the Stockholder), provided that Purchaser may assign its rights and
obligations hereunder to Parent or any direct or indirect Subsidiary of
Parent, but no such assignment shall relieve Purchaser of its obligations
hereunder.
(c) Without limiting any other rights Purchaser may have hereunder in
respect of any transfer of Shares, the Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Stockholder
Shares and shall be binding upon any Person to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs,
guardians, administrators or successors.
(d) This Agreement may not be amended, changed, supplemented or
otherwise modified with respect to the Stockholder except by an instrument
in writing signed on behalf of such Stockholder and Purchaser.
(e) All notices, requests, claims, demands and other communications
hereunder shall be given (and shall be deemed to have been duly received if
given) by hand delivery or by facsimile transmission with confirmation of
receipt, as follows:
If to the Stockholder:
At the address and facsimile number set forth on Schedule I hereto.
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606-1285
(312) 407-0411 (facsimile)
Attn: J. Gregory St. Clair
5
<PAGE> 6
If to Parent or Purchaser:
Flowserve Corporation
222 W. Las Colinas Blvd., Suite 1500
Irving, Texas 75039
(972) 443-6843 (facsimile)
Attention: Ronald Shuff
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
(214) 969-4343 (facsimile)
Attention: Ford Lacy, P.C.
or to such other address or facsimile number as the person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above.
(f) Whenever possible, each provision or portion of any provision of
this Agreement will be interpreted in such manner as to be effective and
valid under applicable law but if any provision or portion of any provision
of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other
provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
(g) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(h) The failure of any party hereto to exercise any rights, power or
remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or
remedy to demand such compliance.
(i) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
(j) This Agreement shall be governed and construed in accordance with
the laws of the State of Delaware.
(k) The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any state or
Federal court located in the State of Delaware, this being in addition to
any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (A) consents to submit itself to the
personal jurisdiction of any state or Federal court located in the state of
Delaware in the event any dispute arises out of this Agreement or any
transaction contemplated by this Agreement, (B) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (C) agrees that it will not bring
any action relating to this Agreement or any transaction contemplated by
this Agreement in any court other than any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue
of any action, suit or proceeding arising out of
6
<PAGE> 7
this Agreement or the transactions contemplated hereby in any state or
Federal court located in the State of Delaware, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
(l) The descriptive headings used herein are inserted for convenience
of reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
(m) This Agreement may be executed in counterparts (by fax or
otherwise), each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same agreement.
(n) Except as otherwise provide herein, each party shall pay its, his
or her own expenses incurred in connection with this Agreement.
(o) The obligations of the Stockholder hereunder are subject to the
Stockholder's receipt of the Agent's Consent.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, Purchaser and the Stockholders have caused this
Agreement to be duly executed in multiple counterparts as of the day and year
first above written.
FORREST ACQUISITION SUB, INC.
By: /s/ RONALD F. SHUFF
------------------------------------
Name: Ronald F. Shuff
Title: Secretary and Treasurer
STOCKHOLDER
PHILIP INDUSTRIAL SERVICES GROUP, INC.
By: /s/ COLIN SOULE
------------------------------------
Name: Colin Soule
Title: Secretary
8
<PAGE> 9
SCHEDULE I
<TABLE>
<CAPTION>
NAME, FACSIMILE NUMBER AND NUMBER OF SHARES OF COMMON STOCK
ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- -------------------------- --------------------------------
<S> <C>
Philip Industrial Services Group, Inc. 2,185,758
5151 San Felipe, Suite 1600
Houston, Texas 77056
</TABLE>
<PAGE> 1
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of November 18, 1999 (this "Agreement"),
among Forrest Acquisition Sub, Inc., a Delaware corporation ("Purchaser"), and
Philip Environmental Services, Inc. (the "Stockholder").
RECITALS:
WHEREAS, concurrently, with the execution and delivery of this Agreement,
Purchaser, Flowserve Corporation, a New York corporation ("Parent"), and
Innovative Valve Technologies, Inc., a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger (the "Merger Agreement"), which
provides, among other things, for the acquisition of the Company by Parent by
means of a cash tender offer (the "Offer") by Purchaser for all outstanding
shares of Common Stock, par value $0.001 per share, of the Company (the "Common
Stock"), including the associated preferred share purchase rights (the "Rights,"
and together with the Common Stock, the "Shares") and for the subsequent merger
of Purchaser with and into the Company (the "Merger"), all on the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Stockholder has filed a voluntary petition under Chapter 11 of
the U.S. Bankruptcy Code with the Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Purchaser have required that the Stockholder agree, and
the Stockholder has agreed, to enter into this Agreement; and
WHEREAS, the Board of Directors of the Company has approved this Agreement
and the transactions contemplated hereby prior to the date hereof; and
WHEREAS, the current board of directors of the Stockholder has approved
this Agreement and the transactions contemplated hereby prior to the date
hereof;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. Terms used and not defined herein, but defined in the
Merger Agreement, shall have the respective meanings ascribed to them in the
Merger Agreement.
2. Tender of Shares; Agreement to Sell; Consideration.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, the Stockholder hereby agrees that, unless the Company shall
have terminated the Merger Agreement to accept a Superior Proposal and
subject to the approval of the Bankruptcy Court to the extent necessary, it
shall validly tender (or cause the record owner of such shares to validly
tender), and not to withdraw, pursuant to and in accordance with the terms
of the Offer, not later than the tenth business day after commencement of
the Offer (or if Bankruptcy Court approval of this Agreement pursuant to
Section 3(e) is received or the Stockholder's plan of reorganization is
confirmed by the Bankruptcy Court after such tenth business day, not later
than the first business day after the earlier to occur of such approval or
confirmation), the number of shares set forth opposite the Stockholder's
name on Schedule I hereto (the "Existing Shares" and, together with any
Shares acquired by the Stockholder in any capacity after the date hereof
and prior to the termination of this Agreement by means of purchase,
dividend, distribution, exercise of options, warrants or other rights to
acquire Shares or in any other way, the "Stockholder Shares"), all of which
are beneficially owned by the Stockholder. Unless the Company shall have
terminated the Merger Agreement to accept a Superior Proposal and subject
to the approval of the Bankruptcy Court to the extent necessary, if the
Stockholder acquires beneficial ownership of Shares after the date hereof
and prior to termination of this Agreement, the Stockholder shall tender
such Shares on such tenth business day or, if later, on the second business
day after such acquisition (or if Bankruptcy
<PAGE> 2
Court approval of this Agreement pursuant to Section 3(e) is received or
the Stockholder's plan of reorganization is confirmed after such tenth
business day or such later date, not later than the first business day
after the earlier to occur of such approval or confirmation).
(b) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable hereunder to the Stockholder such amounts
as are required to be withheld under the Internal Revenue Code of 1986, as
amended (the "Code"), or any applicable provision of state, local or
foreign tax law, as specified in the Offer Documents. To the extent that
amounts are so withheld by Purchaser, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
Stockholder.
(c) The Stockholder hereby permits Parent and Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the SEC) the
Stockholder's identity and ownership of the Stockholder Shares and the
nature of the Stockholder's commitments, arrangements and understandings
under this Agreement.
(d) Subject to paragraph 2(b) hereof, Purchaser shall purchase the
Stockholder Shares for an aggregate price equal to the Offer Price
multiplied by the number of Stockholder Shares and shall pay such amount as
directed by Bankers Trust Company; provided, however, that this Agreement
shall not be binding on the Stockholder unless the Offer Price shall equal
or exceed $1.50 per share.
3. Additional Agreements.
(a) Except as otherwise contemplated by this Agreement, the
Stockholder shall, at any meeting of the stockholders of the Company,
however called, or in connection with any written consent of the
stockholders of the Company, vote (or cause to be voted) all Shares then
held of record or beneficially owned by the Stockholder, (i) in favor of
the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any
actions required in furtherance thereof and hereof and (ii) against any
proposal relating to an Acquisition Proposal and against any action or
agreement that would impede, frustrate, prevent or nullify this Agreement,
or result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the
Merger Agreement or which would result in any of the conditions set forth
in Annex A to the Merger Agreement or set forth in Article VI of the Merger
Agreement not being fulfilled.
(b) The Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement and the Merger Agreement, it shall not (i)
offer to transfer (which term shall include, without limitation, any sale,
tender, gift, pledge, assignment or other disposition), transfer or consent
to any transfer of, any or all of the Stockholder Shares or any interest
therein without the prior written consent of Purchaser, (ii) enter into any
contract, option or other agreement or understanding with respect to any
transfer or any or all of the Stockholder Shares or any interest therein,
(iii) grant any proxy, power-of-attorney or other authorization or consent
in or with respect to the Stockholder Shares, (iv) deposit the Stockholder
Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Stockholder Shares or (v) take any other action that
would make any representation or warranty of the Stockholder contained
herein untrue or incorrect in any material respect or in any way restrict,
limit or interfere in any material respect with the performance of its
obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Except as otherwise contemplated by this Agreement, the
Stockholder hereby irrevocably grants to, and appoints, Purchaser and any
designee of Purchaser, and each of them individually, the Stockholder's
proxy and attorney-in-fact with full power of substitution, for and in the
name, place and stead of the Stockholder, to vote the Stockholder Shares,
or grant a consent or approval in respect of the Stockholder Shares, in the
manner specified in Section 3(a). The Stockholder represents that any
proxies heretofore given in respect of the Stockholder Shares are not
irrevocable and that any such proxies are hereby revoked. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 3(c)
2
<PAGE> 3
is given in connection with the execution of the Merger Agreement and that
such irrevocable proxy is given to secure the performance of the duties of
the Stockholder under this Agreement. The Stockholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, unless this Agreement is terminated
under Section 6. The Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
(d) Subject to Section 7, the Stockholder hereby agrees that the
Stockholder shall not, directly or indirectly, encourage, solicit, initiate
or participate in any way in any discussions or negotiations with, or
provide any information to, or afford any access to the properties, books
or records of the Company or any of its Subsidiaries to, or otherwise take
any other action to assist or facilitate, any Person or group (other than
Parent or Purchaser or any affiliate or associate of Parent or Purchaser)
concerning any Acquisition Proposal. Upon execution of this Agreement, the
Stockholder will immediately cease any existing activities, discussions or
negotiations conducted heretofore with respect to any Acquisition Proposal.
The Stockholder will immediately communicate to Purchaser the terms of any
Acquisition Proposal (or any discussion, negotiation or inquiry with
respect thereto) and the identity of the Person making such Proposal or
inquiry which it may receive.
(e) The Stockholder hereby covenants and agrees that as soon as
practicable following public announcement by Parent of the execution of the
Merger Agreement, it will file, or cause to be filed, a petition with the
Bankruptcy Court requesting the approval of this Agreement and the
transactions contemplated hereby. The Stockholder shall deliver a copy of
such petition to Purchaser's counsel for review at least two business days
prior to such filing and shall promptly notify Purchaser of any action
taken by the Bankruptcy Court with respect to the approval of this
Agreement or the confirmation of a plan of reorganization regarding the
Stockholder.
(f) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws to consummate and make effective
the transactions contemplated by this Agreement. Each party shall promptly
consult with the other and provide any necessary information and material
with respect to all filings made by such party with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby.
(g) The Stockholder hereby waives any rights of appraisal or rights to
dissent from the Merger that it may have.
(h) The Stockholder shall use its best efforts to secure the Agent's
Consent (as defined) as soon as practicable and, upon receipt thereof,
shall deliver a copy of same to Purchaser.
4. Representations and Warranties of each Stockholder. The Stockholder
hereby represents and warrants to Purchaser as follows:
(a) The Stockholder is the record and beneficial owner of the Existing
Shares set forth opposite its name on Schedule I. The Existing Shares
constitute all of the Shares owned of record or beneficially owned by the
Stockholder on the date hereof. The Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Sections 2 and 3 hereof, sole power of disposition, sole power to demand
and waive appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with respect to all of the
Existing Shares with no limitations, qualifications or restrictions on such
rights, subject to (i) applicable securities laws, (ii) the terms of this
Agreement, and (iii) the earlier to occur of the approval of this Agreement
and the transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court.
(b) The Stockholder has the power and authority to enter into and
perform all of the Stockholder's obligations under this Agreement, subject
to the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court and further subject to the receipt by the Stockholder of a
3
<PAGE> 4
consent from the agent bank on behalf of the lending banks to the
Stockholder under the Stockholder's principal bank credit arrangement (the
"Agent's Consent"). This Agreement has been duly and validly executed and
delivered by the Stockholder and, subject to the earlier to occur of the
approval of this Agreement and the transactions contemplated hereby by the
Bankruptcy Court and the confirmation of the Stockholder's plan or
reorganization by the Bankruptcy Court and further subject to the receipt
by the Stockholder of the Agent's Consent, constitutes a legal, valid and
binding agreement of the Stockholder, enforceable against the Stockholder
in accordance with its terms. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the Stockholder
is a trustee, or any party to any other agreement or arrangement, whose
consent is required for the execution and delivery of this Agreement or the
consummation by the Stockholder of the transactions contemplated hereby,
other than the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court.
(c) Except for filings under the HSR Act and the Exchange Act, and
subject to the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court and further subject to the receipt by the Stockholder of the Agent's
Consent, (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery of this Agreement by the Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby and the compliance by
the Stockholder with the provisions hereof, and (ii) none of the execution
and delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof, shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, modification or
acceleration) under, any of the terms, conditions or provisions of any
note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind, including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust, to which the Stockholder is a party or by which it or any of
its properties or assets may be bound or (C) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable
to the Stockholder or any of its properties or assets.
(d) Upon the payment by Purchaser of the Offer Price per share for the
Stockholder Shares as directed by Bankers Trust Company, the transfer by
the Stockholder of the Stockholder Shares to Purchaser in the Offer or
hereunder shall pass to and unconditionally vest in Purchaser good and
valid title to all Stockholder Shares, free and clear of all liens,
proxies, voting trusts or agreements, understandings or arrangements or any
other rights whatsoever, subject to the earlier to occur of the approval of
this Agreement and the transactions contemplated hereby by the Bankruptcy
Court and the confirmation of the Stockholder's plan of reorganization by
the Bankruptcy Court.
(e) No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Stockholder.
(f) The required number of the Stockholder's lenders have executed a
resolution authorizing the Stockholder to enter into the transactions
contemplated by this Agreement.
5. Stop Transfer. The Stockholder shall request that the Company not
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder Shares, unless such
transfer is made in compliance with this Agreement.
6. Termination. This Agreement shall terminate upon the earlier of (a) the
Effective Time and (b) the termination of the Merger Agreement (unless, in the
case of this clause (b), Parent is or may be entitled to
4
<PAGE> 5
receive a Termination Fee under the Merger Agreement following such termination
or prior to such termination the Stockholder has breached in any material
respect Section 2(a), 3(a), 3(b) or 3(d)).
7. No Limitation. Notwithstanding any other provision hereof, nothing in
this Agreement shall be construed to prohibit the Stockholder, or any officer or
affiliate of the Stockholder who is or has designated a member of the Board of
Directors of the Company, from taking any action solely in his or her capacity
as a member of the Board of Directors of the Company or from exercising his or
her fiduciary duties as a member of such Board of Directors to the extent
specifically permitted by the Merger Agreement.
8. Stockholder's Fiduciary Obligation. Notwithstanding anything contained
herein to the contrary, Stockholder shall have the right to take or refrain from
taking any such acts as it shall have reasonably determined are necessary to
fulfill its fiduciary obligations as a debtor and debtor in possession,
including, but not limited to, the right to withdraw the Shares tendered
pursuant to the Offer and to entertain and, if appropriate, accept any higher
and better offers to purchase the Shares, and Stockholder shall not be deemed to
be in breach of any provision of this Agreement as a result of taking any such
action or refraining from taking any such action, provided that Stockholder
shall furnish Purchaser with written notice of the terms of any competing offer
to purchase the Shares and shall provide Purchaser a reasonable opportunity to
match any such competing offer.
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the Stockholder (in the case
of any assignment by Purchaser) or Purchaser (in the case of an assignment
by the Stockholder), provided that Purchaser may assign its rights and
obligations hereunder to Parent or any direct or indirect Subsidiary of
Parent, but no such assignment shall relieve Purchaser of its obligations
hereunder.
(c) Without limiting any other rights Purchaser may have hereunder in
respect of any transfer of Shares, the Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Stockholder
Shares and shall be binding upon any Person to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs,
guardians, administrators or successors.
(d) This Agreement may not be amended, changed, supplemented or
otherwise modified with respect to the Stockholder except by an instrument
in writing signed on behalf of such Stockholder and Purchaser.
(e) All notices, requests, claims, demands and other communications
hereunder shall be given (and shall be deemed to have been duly received if
given) by hand delivery or by facsimile transmission with confirmation of
receipt, as follows:
If to the Stockholder:
At the address and facsimile number set forth on Schedule I hereto.
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606-1285
(312) 407-0411 (facsimile)
Attn: J. Gregory St. Clair
5
<PAGE> 6
If to Parent or Purchaser:
Flowserve Corporation
222 W. Las Colinas Blvd., Suite 1500
Irving, Texas 75039
(972) 443-6843 (facsimile)
Attention: Ronald Shuff
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
(214) 969-4343 (facsimile)
Attention: Ford Lacy, P.C.
or to such other address or facsimile number as the person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above.
(f) Whenever possible, each provision or portion of any provision of
this Agreement will be interpreted in such manner as to be effective and
valid under applicable law but if any provision or portion of any provision
of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other
provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
(g) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(h) The failure of any party hereto to exercise any rights, power or
remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or
remedy to demand such compliance.
(i) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
(j) This Agreement shall be governed and construed in accordance with
the laws of the State of Delaware.
(k) The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any state or
Federal court located in the State of Delaware, this being in addition to
any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (A) consents to submit itself to the
personal jurisdiction of any state or Federal court located in the state of
Delaware in the event any dispute arises out of this Agreement or any
transaction contemplated by this Agreement, (B) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (C) agrees that it will not bring
any action relating to this Agreement or any transaction contemplated by
this Agreement in any court other than any such court. The parties
irrevocably and
6
<PAGE> 7
unconditionally waive any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in any state or Federal court located in the State of
Delaware, and hereby further irrevocably and unconditionally waive and
agree not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum.
(l) The descriptive headings used herein are inserted for convenience
of reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
(m) This Agreement may be executed in counterparts (by fax or
otherwise), each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same agreement.
(n) Except as otherwise provided herein, each party shall pay its, his
or her own expenses incurred in connection with this Agreement.
(o) The obligations of the Stockholder hereunder are subject to the
Stockholder's receipt of the Agent's Consent.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, Purchaser and the Stockholders have caused this
Agreement to be duly executed in multiple counterparts as of the day and year
first above written.
FORREST ACQUISITION SUB, INC.
By: /s/ RONALD F. SHUFF
----------------------------------
Name: Ronald F. Shuff
Title: Secretary and Treasurer
STOCKHOLDER
PHILIP ENVIRONMENTAL SERVICES, INC.
By: /s/ COLIN SOULE
----------------------------------
Name: Colin Soule
Title: Secretary
8
<PAGE> 9
SCHEDULE I
<TABLE>
<CAPTION>
NAME, FACSIMILE NUMBER AND NUMBER OF SHARES OF COMMON STOCK
ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- -------------------------- --------------------------------
<S> <C>
Philip Environmental Services, Inc. 154,958
5151 San Felipe, Suite 1600
Houston, Texas 77056
</TABLE>
<PAGE> 1
Exhibit 99(c)(5)
FORREST CORPORATION
- -----------------------------------------------------------------------
CONFIDENTIAL
October 29, 1999
SERVCO
Attention: Charles Schugart, President
RE: Forrest/Servco Transaction (All terms used herein shall have the
definitions ascribed to them in the 10/22/99 draft Agreement and
Plan of Merger between Forrest, Forrest Acquisition Sub, Inc. and
Servco)
Dear Charles:
As we discussed by telephone on October 28, 1999, Parent has incurred, and
is continuing to incur, substantial out-of-pocket fees and expenses in
connection with the proposed transaction with the Company. As an inducement for
Parent to continue incurring such fees and expenses and in light of the
unexpected volatility in the trading price of the Common Stock and resulting
uncertainty that it creates for a transaction being consummated, the Company
agrees that if within six months of the date hereof an Acquisition Proposal is
accepted and the related transaction consummated pursuant to a definitive
agreement or otherwise, then in such event the Company shall pay to Parent
(within two business days after the Company consummates any such Acquisition
Proposal) an amount equal to the out-of-pocket fees and expenses incurred by
Parent and Purchaser in connection with the Offer, the Merger, the Agreement and
the consummation of the transactions contemplated thereby.
The terms and provisions of this letter shall terminate upon the earlier of
six months from the date hereof and the execution of a definitive Agreement.
Please confirm that the foregoing accurately states our agreement by
signing and returning the duplicate original of this letter.
Sincerely,
/s/ RONALD SHUFF
------------------------------------
Ronald Shuff
Vice President, Secretary and
General Counsel
Accepted and agreed as of
October 29, 1999 by:
SERVCO
By: /s/ CHARLES SCHUGART
------------------------------------
Charles Schugart, President
