EXHIBIT 1.1
3,350,000 SHARES
INNOVATIVE VALVE TECHNOLOGIES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
OCTOBER [ ], 1997
TABLE OF CONTENTS
Section 1. Representations and Warranties of the Company.................2
Section 2. Purchase, Sale and Delivery of the Common Shares.............10
Section 3. Additional Covenants.........................................12
Section 4. Payment of Expenses..........................................16
Section 5. Conditions of the Obligations of the Underwriters............16
Section 6. Reimbursement of Underwriters' Expenses......................18
Section 7. Effectiveness of this Agreement..............................19
Section 8. Indemnification..............................................19
Section 9. Contribution.................................................21
Section 10. Default of One or More of the Several Underwriters...........22
Section 11. Termination of this Agreement................................23
Section 12. Representations and Indemnities to Survive Delivery..........23
Section 13. Notices.....................................................24
Section 14. Successors..................................................25
Section 15. Partial Unenforceability....................................25
Section 16. General Provisions..........................................25
Exhibit A...............................................................A-1
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Underwriting Agreement
October [ ], 1997
NATIONSBANC XXXXXXXXXX SECURITIES, INC.
XXXXXX XXXX LLC
As Representatives of the several Underwriters
c/o NATIONSBANC XXXXXXXXXX SECURITIES, INC.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
INTRODUCTORY. Innovative Valve Technologies, Inc., a Delaware
corporation (the "Company), proposes to issue and sell to the several
underwriters named in SCHEDULE A (the "Underwriters") an aggregate of 3,350,000
shares (the "Firm Common Shares") of its Common Stock, par value $0.001 per
share (the "Common Stock"). In addition, the Company has granted to the
Underwriters an option to purchase up to an additional 502,500 shares (the
"Optional Common Shares") of Common Stock, as provided in Section 2. The Firm
Common Shares and, if and to the extent such option is exercised, the Optional
Common Shares are collectively called the "Common Shares". NationsBanc
Xxxxxxxxxx Securities, Inc. ("Xxxxxxxxxx Securities") and Xxxxxx Xxxx LLC have
agreed to act as representatives of the several Underwriters (in such capacity,
the "Representatives") in connection with the offering and sale of the Common
Shares.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(File No. 333-31617), which contains a form of prospectus to be used in
connection with the public offering and sale of the Common Shares. Such
registration statement, as amended, including the financial statements, exhibits
and schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (collectively, the "Securities Act"),
including any information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430A under the Securities Act, is called the
"Registration Statement". Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b)
Registration Statement", and from and after the date and time of filing of the
Rule 462(b) Registration Statement the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. Such prospectus,
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in the form first used by the Underwriters to confirm sales of the Common
Shares, is called the "Prospectus". All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a preliminary
prospectus or the Prospectus, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("XXXXX").
The Company hereby confirms its agreements with the Underwriters as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each
Underwriter as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has
complied, to the Commission's satisfaction, with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed with the
Commission complied in all material respects with the Securities Act and,
if filed with the Commission by electronic transmission pursuant to
XXXXX, was identical to the copy thereof delivered to the Underwriters
for use in connection with the offer and sale of the Common Shares,
except as permitted by Regulation S-T under the Securities Act. Each of
the Registration Statement, any Rule 462(b) Registration Statement and
any post-effective amendment thereto, at the time it became effective,
complied in all material respects with the applicable requirements of the
Securities Act and 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 not misleading. The Prospectus,
as amended or supplemented, as of its date and at all subsequent times,
did not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
The representations and warranties set forth in the two immediately
preceding sentences do not apply to statements in or omissions from the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in
writing by the Representatives expressly for use therein. There are no
contracts, agreements, instruments or other documents required to be
described in the Prospectus or to be filed as exhibits to the
Registration Statement which have not been described or filed as
required.
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(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company has
delivered to the Representatives two complete manually signed copies of
the Registration Statement and of each consent of experts filed as a part
thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company
has not distributed and will not distribute, prior to the later of the
Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Common Shares, any offering material in
connection with the offering and sale of the Common Shares other than a
preliminary prospectus, the Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable against the Company in accordance
with its terms, except as that enforceability may be subject to the
effect of (i) any applicable bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally, (ii) general principles of equity (regardless of
whether that enforceability is considered in a proceeding in equity or at
law) and (iii) any implied covenant of good faith or fair dealing, and
except as rights to indemnity and contribution hereunder may be limited
by Federal or state laws.
(e) AUTHORIZATION OF THE COMMON SHARES. The Common Shares to be
purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable and free of and will not have been
issued in violation of any preemptive or similar rights that have not
been duly and effectively waived.
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There are
no persons with registration or other similar rights to have any equity
or debt securities registered for sale under the Registration Statement
or included in the offering contemplated by this Agreement, except for
such rights as have been duly waived.
(g) NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed in
the Prospectus, subsequent to the respective dates as of which
information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations, properties, net
worth or prospects, whether or not arising from transactions in the
ordinary course of business, of the Company and its Subsidiaries (as
defined below), considered as one entity (any such
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change is called a "Material Adverse Change"); (ii) the Company and its
Subsidiaries, considered as one entity, have not incurred any material
liability or obligation, indirect, direct or contingent, not in the
ordinary course of business or entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has
been no dividend or distribution of any kind declared, paid or made by
the Company or, except for dividends paid to the Company or other
Subsidiaries, any of its Subsidiaries, on any class of capital stock or
repurchase or redemption by the Company or any of its Subsidiaries of any
class of capital stock.
(h) INDEPENDENT ACCOUNTANTS. The accountants, (i) Xxxxxx Xxxxxxxx
LLP, who have certified the financial statements of the Company, The
Safe-Seal Company, Inc. and subsidiaries ("Safe-Seal"), Plant
Specialties, Inc. ("Plant Specialties"), the Steam Supply Group ("Steam
Supply"), the ICE/VARCO Group ("ICE/VARCO") and the Southern Valve Group
("Southern Valve") included in the Registration Statement and the
Prospectus, and (ii) Deloitte & Touche LLP, who have certified the
financial statements of Harley Industries, Inc. and subsidiaries
("Harley") and GSV, Inc. ("GSV") included in the Registration Statement
and the Prospectus, are independent public accountants as required by the
Securities Act.
(i) PREPARATION OF THE FINANCIAL STATEMENTS. The historical
financial statements, together with the related notes, included in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), present fairly in all material respects the separate
financial position, results of operations, shareholders' equity (and
deficit) and cash flows of each of the Company, Safe-Seal, Harley, Plant
Specialties, GSV, Steam Supply, ICE/VARCO and Southern Value on the basis
stated in the Registration Statement at the respective dates or for the
respective periods to which they apply; such financial statements and
notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except
as disclosed therein; and the summary and selected financial and
statistical information and data included in the Registration Statement
and the Prospectus (and any amendment or supplement thereto) present
fairly the information shown therein and such data have been compiled on
a basis consistent with the financial statements presented therein and
the books and records of the Company, Safe-Seal, Harley, Plant
Specialities, Steam Supply, ICE/VARCO and Southern Valve, as applicable.
The pro forma combined financial statements of the Company and its
Subsidiaries, together with the related notes, as set forth in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), present fairly the information shown therein, have
been prepared in accordance with the applicable provisions of Article 11
of Regulation S-X promulgated by the Commission with respect to pro forma
financial statements and have been properly compiled on the pro forma
bases described therein and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein; and the other
financial and statistical information and data included in the
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Registration Statement and the Prospectus (and any amendment or
supplement thereto) are accurately presented and prepared on a basis
consistent with such financial statements and the books and records of
the Company and its Subsidiaries.
(j) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. All of the Company's subsidiaries (collectively, its
"Subsidiaries") are listed on SCHEDULE B hereto. Each of the Company and
each of its Subsidiaries and the companies to be acquired on the Closing
Date (as defined below) as identified in the Registration Statement (the
"Additional Companies") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and, in the case of the Company,
to enter into and perform its obligations under this Agreement. Each of
the Company and its Subsidiaries (and the Additional Companies) is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except for such jurisdictions where the failure to so
qualify or to be in good standing would not, individually or in the
aggregate, result in a Material Adverse Change. All of the issued and
outstanding capital stock of each Subsidiary and Additional Company has
been duly authorized and validly issued, is fully paid and nonassessable
and is or, with respect to the Additional Companies, on the Closing Date
will be owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
claim, except for those granted by the Company in connection with the New
Credit Facility (as defined in the Prospectus) and disclosed in the
Prospectus. The Company does not own or control, directly or indirectly,
any corporation, partnership, joint venture, association or other
business organization or entity other than its Subsidiaries listed on
SCHEDULE B hereto.
(k) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. As of the date
of this Agreement, the Company has authorized capital stock consisting of
30,000,000 shares of Common Stock and 5,000,000 shares of its Preferred
Stock, par value $0.001 per share (the "Preferred Stock"). Prior to the
issuances of shares of Common Stock described in clauses (ii), (iii) and
(iv) of the first sentence in Note (1) to the table under the caption
"Prospectus Summary--This Offering" in the Prospectus ("Note(1)"), the
Company will have issued and outstanding 242,839 shares of Common Stock
and no shares of Preferred Stock. After the issuances of shares of Common
Stock described in clauses (ii), (iii) and (iv) of Note (1) and prior to
the issuance and sale of the Common Shares, the Company will have issued
and outstanding 4,041,139 shares of Common Stock and no shares of
Preferred Stock. As of the First Closing Date (as defined in Section
2(b)below), (i) all those 4,041,139 shares of Common Stock will have been
duly authorized and validly issued in compliance with the applicable
federal and state securities laws and will be fully paid and
nonassessable and (ii) none of those shares will have been issued in
violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or
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purchase securities of the Company. The Common Shares have been duly
authorized and, when issued and delivered to the Underwriters against
payment therefor in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free of any preemptive rights,
rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. The capital stock of the Company
(including the Common Shares) conforms in all material respects to the
description thereof contained in the Prospectus. Except as described in
the Prospectus, (i) there are no authorized or outstanding, and there are
no commitments to issue or grant, options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any
capital stock of the Company or any of its Subsidiaries and (ii) there is
no holder of any securities of the Company or any other person who has
the right, contractual or otherwise, to cause the Company to sell or
otherwise issue to him, her or it, or permit him, her or it to underwrite
the sale of, any of the Common Shares. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the
options or other rights granted thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
(l) STOCK EXCHANGE LISTING. The Common Shares have been approved
for inclusion on the Nasdaq National Market, subject only to official
notice of issuance.
(m) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED. Neither the Company nor any of its
Subsidiaries (or any of the Additional Companies) is in violation of its
charter or by-laws (or similar organizational document) or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement,
bond, debenture, note or other evidence of indebtedness, contract,
agreement, franchise, lease or other instrument to which the Company or
any of its Subsidiaries (or any of the Additional Companies) is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any of its Subsidiaries (or any of
the Additional Companies) is subject (each, an "Existing Instrument"),
except for such Defaults as would not, individually or in the aggregate,
result in a Material Adverse Change. The Company's execution, delivery
and performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus (i) have been duly authorized
by all necessary corporate action and will not result in any violation of
the provisions of the charter or by-laws (or similar organizational
document) of the Company or any of its Subsidiaries (or any Additional
Company), (ii) will not conflict with or constitute a breach of, or
Default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
of its Subsidiaries (or any Additional Company) pursuant to, or require
the consent of any other party to, any Existing Instrument, except for
such conflicts, breaches, Defaults, liens, charges and encumbrances as
would not, individually or in the aggregate, result in a Material Adverse
Change and (iii) will not result in any violation of any material
statute, law, administrative
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regulation or any administrative or court judgment, order or decree
applicable to the Company or any of its Subsidiaries (or any Additional
Company) or their respective properties, except for such violations as
would not, individually or in the aggregate, result in a Material Adverse
Change. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or
regulatory authority or agency, is required for the Company's execution,
delivery and performance of this Agreement and consummation of the
transactions contemplated hereby and by the Prospectus, except such as
have been obtained or made by the Company and are in full force and
effect under the Securities Act, the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
(collectively, the "Exchange Act"), applicable state securities or blue
sky laws and from the National Association of Securities Dealers, Inc.
(the "NASD").
(n) NO MATERIAL ACTIONS OR PROCEEDINGS. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or
any of its Subsidiaries (or any Additional Company), (ii) which has as
the subject thereof any officer or director of, or property owned or
leased by, the Company or any of its Subsidiaries (or any Additional
Company) or (iii) relating to environmental or discrimination matters,
except such that would not reasonably be expected to result in a Material
Adverse Change or adversely affect the consummation of the transactions
contemplated by this Agreement and the Prospectus. No labor dispute with
the employees of the Company or any of its Subsidiaries (or any
Additional Company), or, to the Company's knowledge, with the employees
of any principal supplier of the Company or any of its Subsidiaries (or
any Additional Company), exists or, to the best of the Company's
knowledge, is threatened or imminent, except for such disputes as would
not, individually or in the aggregate, result in a Material Adverse
Change.
(o) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries
(and the Additional Companies) own or possess valid and enforceable
rights to use all patents, trademarks, trademark registrations, service
marks, service xxxx registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the Prospectus as being
owned by them or any of them or material to the conduct of their
respective businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person or entity to the rights of
the Company and its Subsidiaries (and the Additional Companies) with
respect to the foregoing or of any infringement by any other person or
entity with respect to the foregoing. Except for such matters as have
been finally resolved, neither the Company nor any of its Subsidiaries
(or the Additional Companies) has received any notice of infringement or
conflict with asserted intellectual property rights of others, which
infringement or conflict, if the subject of an unfavorable decision,
would result in a Material Adverse Change.
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(p) ALL NECESSARY PERMITS, ETC. The Company and each of its
Subsidiaries (and each Additional Company) possess such valid and current
certificates, authorizations or permits issued by the appropriate local,
state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses, except for any such permits the
absence or lapse of which would not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Change; and neither
the Company nor any to its Subsidiaries (or any Additional Company) has
received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate,
authorization or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, reasonably could be
expected to result in a Material Adverse Change.
(q) TITLE TO PROPERTIES. The Company and each of its Subsidiaries
(and each Additional Company) has good and indefeasible title to all the
properties and assets reflected as owned in the financial statements
referred to in Section 1(i) above (or elsewhere in the Prospectus), in
each case free and clear of any security interests, mortgages, liens,
encumbrances, equities, claims, easements and other defects and
impairments, except such as (i) are disclosed in the Prospectus or (ii)
do not materially and adversely affect the value of such property and do
not materially interfere with the use made or proposed to be made of such
property by the Company or such Subsidiary (or any Additional Company).
The real property, improvements, equipment and personal property held
under lease by the Company or any of its Subsidiaries (or any Additional
Company) are held under valid and enforceable leases, with such
exceptions as are not material and do not materially interfere with the
use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company or such Subsidiary (or any
Additional Company).
(r) TAX LAW COMPLIANCE. The Company and its Subsidiaries (and each
Additional Company) have filed all necessary federal, state, local and
foreign income and franchise tax returns or have properly requested
extensions thereof and have paid all taxes required to be paid by any of
them and, if due and payable, any related or similar assessment, fine or
penalty levied against any of them, except where the failure to do so
would not, individually or in the aggregate, result in a Material Adverse
Change. The Company has made adequate charges, accruals and reserves in
the applicable financial statements referred to in Section 1(i) above in
respect of all federal, state, local and foreign income and franchise
taxes for all periods as to which the tax liability of the Company or any
of its Subsidiaries (and each Additional Company) has not been finally
determined.
(s) COMPANY NOT AN "INVESTMENT COMPANY". The Company is not, and
after receipt of payment for the Common Shares will not be, an
"investment company" within the meaning of Investment Company Act of
1940, as amended.
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(t) INSURANCE. Each of the Company and its Subsidiaries (and the
Additional Companies) are insured by recognized, financially sound and
reputable institutions with policies in such amounts and with such
deductibles and covering such risks as management of the Company
reasonably believes are generally deemed adequate and customary for their
businesses including, but not limited to, policies covering real and
personal property owned or leased by the Company and its Subsidiaries
(and the Additional Companies) against theft, damage, destruction, acts
of vandalism and earthquakes. The Company has no reason to believe that
it or any Subsidiary (or any Additional Company) will not be able (i) to
renew its existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may be
necessary or appropriate to conduct its business as now conducted and at
a cost that would not result in a Material Adverse Change. Neither of the
Company nor any Subsidiary (or any Additional Company) has been denied
any insurance coverage which it has sought or for which it has applied
during the past five years.
(u) NO PRICE STABILIZATION OR MANIPULATION. The Company has not
taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause or result in stabilization
or manipulation of the price of the Common Stock to facilitate the sale
or resale of the Common Shares.
(v) RELATED PARTY TRANSACTIONS. There are no related-party
transactions involving the Company or any of its Subsidiaries (or any
Additional Company) or any other person required to be described in the
Prospectus which have not been described as required.
(w) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the
Company nor any of its Subsidiaries (or any Additional Company) nor, to
the best of the Company's knowledge, any employee or agent of the
Company or any of its Subsidiaries (or any Additional Company), has made
any contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(x) COMPANY'S ACCOUNTING SYSTEM. The Company maintains a system
of accounting controls sufficient to provide reasonable assurances that
(i) its transactions and those of its Subsidiaries are executed in
accordance with management's general or specific authorization; (ii) its
transactions and those of its Subsidiaries are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to its assets and those
of its Subsidiaries is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability
for its assets and those of its Subsidiaries is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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(y) The Company and each of the Subsidiaries have conducted their
respective businesses in compliance with all applicable Federal, state
and local laws and regulations including, without limitation, those
promulgated under the Occupational Safety and Health Act ("OSHA Laws")
and those applicable to emissions into the environment, waste management
and waste disposal ("Environmental Laws") and, to the Company's best
knowledge, under current law there are no existing circumstances that
would prevent, interfere with, or materially increase the cost of the
Company's compliance with such OSHA Laws or Environmental Laws in the
future, except for any lack of compliance or the existence of any such
circumstance as would not result in, individually or in the aggregate, a
Material Adverse Change. Except as set forth in the Prospectus, there is
no material claim under any OSHA Law or Environmental Law pending or
threatened against the Company or any of its Subsidiaries (or any
Additional Company) (an "OSHA Claim" or an "Environmental Claim", as
applicable) and, to the Company's best knowledge, there are no past or
present actions, activities, circumstances, events or incidents,
including, without limitation, releases of any material into the
environment, that would reasonably be expected to form the basis of any
material claim against the Company or any of its Subsidiaries (or any
Additional Company).
(z) ERISA COMPLIANCE. The Company and its Subsidiaries (and the
Additional Companies) and any "employee benefit plan" (as defined under
the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company, its Subsidiaries
(and the Additional Companies) or their "ERISA Affiliates" (as defined
below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company or any of its Subsidiaries
(or any Additional Company) any member of any group of organizations
described in Section 414(b),(c),(m) or (o) of the Internal Revenue Code
of 1986, as amended, and the regulations and published interpretations
thereunder (the "Code") of which the Company or such Subsidiary (or any
Additional Company) is a member. No "reportable event" (as defined under
ERISA) has occurred or is reasonably expected to occur with respect to
any "employee benefit plan" established or maintained by the Company,
its Subsidiaries (and the Additional Companies) or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by the
Company, its Subsidiaries (or any Additional Company) or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would
have any "amount of unfunded benefit liabilities" (as defined under
ERISA). Neither the Company, its Subsidiaries (or any Additional
Company) nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee
benefit plan" established or maintained by the Company, its Subsidiaries
(and the Additional Companies) or any of their ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so
qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification, except for such
failures to
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qualify which would not, individually or in the aggregate, result in a
Material Adverse Change.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
(a) THE FIRM COMMON SHARES. The Company agrees to issue and sell
to the several Underwriters the Firm Common Shares upon the terms herein
set forth. On the basis of the representations, warranties and
agreements herein contained, and upon the terms but subject to the
conditions herein set forth, the Underwriters agree, severally and not
jointly, to purchase from the Company the respective number of Firm
Common Shares set forth opposite their names on SCHEDULE A. The purchase
price per Firm Common Share to be paid by the several Underwriters to
the Company shall be $[___] per share.
(b) THE FIRST CLOSING DATE. Delivery of certificates for the Firm
Common Shares to be purchased by the Underwriters and payment therefor
shall be made at the offices of Xxxxx & Xxxxx, L.L.P., 0000 Xxx Xxxxx
Xxxxx, Xxxxxxx, Xxxxx (or such other place as may be agreed to by the
Company and the Representatives) at [8:00] a.m. Houston time, on October
__, 1997, or such other time and date not later than 10:30 a.m. Houston
time, on [___] as the Representatives shall designate by notice to the
Company (the time and date of such closing are called the "First Closing
Date"). The Company hereby acknowledges that circumstances under which
the Representatives may provide notice to postpone the First Closing
Date as originally scheduled include, but are in no way limited to, any
determination by the Company or the Representatives to recirculate to
the public copies of an amended or supplemented Prospectus or a delay as
contemplated by the provisions of Section 10.
(C) THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE. In
addition, on the basis of the representations, warranties and agreements
herein contained, and upon the terms but subject to the conditions
herein set forth, the Company hereby grants an option to the several
Underwriters to purchase, severally and not jointly, up to an aggregate
of 502,500 Optional Common Shares from the Company at the purchase price
per share to be paid by the Underwriters for the Firm Common Shares. The
option granted hereunder is for use by the Underwriters solely in
covering any over-allotments in connection with the sale and
distribution of the Firm Common Shares. The option granted hereunder may
be exercised at any time (but not more than once) upon notice by the
Representatives to the Company, which notice may be given at any time
within 30 days from the date of this Agreement. Such notice shall set
forth (i) the aggregate number of Optional Common Shares as to which the
Underwriters are exercising the option, (ii) the names and denominations
in which the certificates for the Optional Common Shares are to be
registered and (iii) the time, date and place at which such certificates
will be delivered (which time and date may be simultaneous with, but not
earlier than, the First Closing Date; and in such case the term "First
Closing Date" shall refer to the time and date of
11
delivery of certificates for the Firm Common Shares and the Optional
Common Shares). Such time and date of delivery, if subsequent to the
First Closing Date, is called the "Second Closing Date" and shall be
determined by the Representatives and shall not be earlier than three
nor later than five full business days after delivery of such notice of
exercise. If any Optional Common Shares are to be purchased, each
Underwriter agrees, severally and not jointly, to purchase the number of
Optional Common Shares (subject to such adjustments to eliminate
fractional shares as the Representatives may determine) that bears the
same proportion to the total number of Optional Common Shares to be
purchased as the number of Firm Common Shares set forth on SCHEDULE A
opposite the name of such Underwriter bears to the total number of Firm
Common Shares. The Representatives may cancel the option at any time
prior to its expiration by giving written notice of such cancellation to
the Company.
(d) PUBLIC OFFERING OF THE COMMON SHARES. The Representatives
hereby advise the Company that the Underwriters intend to offer for sale
to the public, as described in the Prospectus, their respective portions
of the Common Shares as soon after this Agreement has been executed and
the Registration Statement has been declared effective as the
Representatives, in their sole judgment, have determined is advisable
and practicable.
(e) PAYMENT FOR THE COMMON SHARES. Payment for the Common Shares
shall be made at the First Closing Date (and, if applicable, at the
Second Closing Date) by wire transfer of immediately available funds to
the order of the Company. It is understood that the Representatives have
been authorized, for their own account and the accounts of the several
Underwriters, to accept delivery of and receipt for, and make payment of
the purchase price for, the Firm Common Shares and any Optional Common
Shares the Underwriters have agreed to purchase. Xxxxxxxxxx Securities,
individually and not as the Representative of the Underwriters, may (but
shall not be obligated to) make payment for any Common Shares to be
purchased by any Underwriter whose funds shall not have been received by
the Representatives by the First Closing Date or the Second Closing
Date, as the case may be, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from any of its
obligations under this Agreement.
(f) DELIVERY OF THE COMMON SHARES. The Company shall deliver, or
cause to be delivered, to the Representatives for the accounts of the
several Underwriters certificates for the Firm Common Shares at the
First Closing Date, against the irrevocable release of a wire transfer
of immediately available funds for the amount of the purchase price
therefor. The Company shall also deliver, or cause to be delivered, to
the Representatives for the accounts of the several Underwriters,
certificates for the Optional Common Shares the Underwriters have agreed
to purchase at the First Closing Date or the Second Closing Date, as the
case may be, against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price
therefor. The certificates for the Common Shares shall be in definitive
form and registered in such
12
names and denominations as the Representatives shall have requested at
least two full business days prior to the First Closing Date (or the
Second Closing Date, as the case may be) and shall be made available for
inspection on the business day preceding the First Closing Date (or the
Second Closing Date, as the case may be) at such location in New York
City as the Representatives may designate. Time shall be of the essence,
and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriters.
(g) DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than
12:00 p.m. on the second business day following the date the Common
Shares are released by the Underwriters for sale to the public, the
Company shall deliver or cause to be delivered copies of the Prospectus
in such quantities and at such places as the Representatives shall
request.
SECTION 3. ADDITIONAL COVENANTS.
The Company further covenants and agrees with each
Underwriter as follows:
(a) REPRESENTATIVES' REVIEW OF PROPOSED AMENDMENTS AND
SUPPLEMENTS. During such period beginning on the date hereof and
ending on the later of the First Closing Date or such date, in
the opinion of counsel for the Underwriters, the Prospectus is no
longer required by law to be delivered in connection with sales
by an Underwriter or dealer (the "Prospectus Delivery Period"),
prior to amending or supplementing the Registration Statement
(including any registration statement filed under Rule 462(b)
under the Securities Act) or the Prospectus, the Company shall
furnish to the Representatives for review a copy of each such
proposed amendment or supplement, and the Company shall not file
any such proposed amendment or supplement to which the
Representatives reasonably object.
(b) SECURITIES ACT COMPLIANCE. After the date of this
Agreement, the Company shall promptly advise the Representatives
in writing (i) of the receipt of any comments of, or requests for
additional or supplemental information from, the Commission, (ii)
of the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or
supplement to any preliminary prospectus or the Prospectus, (iii)
of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (iv) of the issuance
by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment
thereto or of any order preventing or suspending the use of any
preliminary prospectus or the Prospectus, or of any proceedings
to remove, suspend or terminate from listing or quotation the
Common Stock from any securities exchange upon which it is listed
for trading or included or designated for quotation, or of the
threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop
13
order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment.
Additionally, the Company agrees that it shall comply with the
provisions of Rules 424(b) and 430A, as applicable, under the
Securities Act and will use its reasonable efforts to confirm
that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND
OTHER SECURITIES ACT MATTERS. If, during the Prospectus Delivery
Period, any event shall occur or condition shall exist as a
result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light
of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if in the opinion of the
Representatives or counsel for the Underwriters it is otherwise
necessary to amend or supplement the Prospectus to comply with
law, the Company agrees to promptly prepare (subject to Section
3(a) above), file with the Commission and furnish at its own
expense to the Underwriters and to dealers, amendments or
supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light
of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d)COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE
PROSPECTUS. The Company agrees to furnish the Representatives,
without charge, during the Prospectus Delivery Period, as many
copies of the Prospectus and any amendments and supplements
thereto as the Representatives may reasonably request.
(e) BLUE SKY COMPLIANCE. The Company shall cooperate
with the Representatives and counsel for the Underwriters to
qualify or register the Common Shares for sale under (or obtain
exemptions from the application of) the Blue Sky or state
securities laws of those jurisdictions designated by the
Representatives, shall comply with such laws and shall continue
such qualifications, registrations and exemptions in effect so
long as required for the distribution of the Common Shares. The
Company shall not be required to qualify as a foreign corporation
or to take any action that would subject it to general service of
process in any such jurisdiction where it is not presently
qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Representatives promptly
of the suspension of the qualification or registration of (or any
such exemption relating to) the Common Shares for offering, sale
or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or
exemption, the Company shall use its best efforts to obtain the
withdrawal thereof at the earliest possible moment.
(f) USE OF PROCEEDS. The Company shall apply the net
proceeds from the sale of the Common Shares sold by it in the
manner described under the caption "Use of Proceeds" in the
Prospectus.
14
(g) TRANSFER AGENT. The Company shall engage and maintain,
at its expense, a registrar and transfer agent for the Common
Stock.
(h) EARNINGS STATEMENT. As soon as practicable, the
Company will make generally available to its security holders and
to the Representatives an earnings statement (which need not be
audited) covering the twelve-month period ending December 31,
1998 that satisfies the provisions of Section 11(a) of the
Securities Act.
(j) PERIODIC REPORTING OBLIGATIONS. During the
Prospectus Delivery Period the Company shall file, on a timely
basis, with the Commission and the Nasdaq National Market all
reports and documents required to be filed under the Exchange
Act.
(k) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. Except
as provided in this Agreement, the Company will not sell, contract to
sell or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or
grant any options or warrants to purchase Common Stock, for a period of
180 days after the date of the Prospectus (the "Lock-Up Period"),
without the prior written consent of Xxxxxxxxxx Securities, except that
the Company may (i) issue (a) 2,419,338 shares of Common Stock (the
"Merger Shares") on or prior to the First Closing Date in exchange for
shares of capital stock of Safe-Seal in connection with the merger of
Safe-Seal and the Company as described in the Prospectus, (b) up to
5,000,000 shares of Common Stock (the "Acquisition Shares") during the
Lock-Up Period in connection with additional acquisitions, (c) the
shares of Common Stock (the "Xxxxxx Shares") on or prior to the First
Closing Date to subsidiaries of Xxxxxx Services Corp. ("Xxxxxx") in
repayment of $8.7 million of indebtedness of the Company owed to Xxxxxx
and the redemption of $2.0 million of Safe-Seal preferred stock held by
Xxxxxx as described in the Prospectus, and (d) on the Closing Date, the
shares of Common Stock ("the Southern Valve Shares") to be issued in
connection with the closing of the acquisition of Southern Valve as
described in the Prospectus, in each case so long as the purchaser or
recipient of such Merger Shares, Acquisition Shares, Xxxxxx Shares and
Southern Valve Shares agrees to be bound by a lock-up letter in form and
substance reasonably satisfactory to you pursuant to which such
purchaser or recipient agrees with the Company not to sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to
purchase, or otherwise transfer or dispose of, any such Merger Shares,
Acquisition Shares, Xxxxxx Shares and Southern Valve Shares at any time
before the expiration of the Lock-Up Period, (ii) issue shares of Common
Stock during the Lock-Up Period pursuant to the exercise of options,
warrants or convertible notes granted or issued by the Company prior to
the date hereof so long as the recipients of shares of Common Stock
received pursuant to any such exercises agree to be bound by a lock-up
letter in form and substance reasonably satisfactory to you pursuant to
which such recipients agree with the Company not to sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose of, any such shares of Common Stock at
any time before the expiration of the Lock-Up Period and (iii) grant
15
awards and permit the exercise of awards granted pursuant to the
Company's 1997 Incentive Plan during the Lock-Up Period. The Company
further agrees for the express benefit of the Underwriters that, during
the Lock-Up Period, it will not, without the prior written consent of
Xxxxxxxxxx Securities, waive any provision of any registration rights
agreement, stockholders agreement or any reorganization agreement in
each case relating to any restriction imposed on the subsequent transfer
or other disposition of shares of Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock and will take
reasonable steps to cause its transfer agent to enforce any such
provision so as to limit the transfer or other disposition of those
shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock during the Lock-Up Period.
(l) The Company has furnished or will furnish to you "lock-up"
letters in the form previously provided by you, signed by each of its
current officers and directors and each of its stockholders previously
designated by you who holds 5,000 or more shares of Common Stock.
(m) FUTURE REPORTS TO THE REPRESENTATIVES. During the period of
five years hereafter the Company will furnish to the Representatives, in
care of NationsBanc Xxxxxxxxxx Securities, Inc. at 000 Xxxxxxxxxx
Xxxxxx, Xxx Xxxxxxxxx, XX 00000 Attention [_________]: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of
the close of such fiscal year and statements of income, stockholders'
equity and cash flows for the year then ended and the opinion thereon of
the Company's independent certified public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement,
Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its capital stock.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all
costs, fees and expenses incurred in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Common Shares (including all printing and engraving costs),
(ii) all fees and expenses of the registrar and transfer agent of the Common
Stock, (iii) all necessary issue, transfer and other stamp taxes in connection
with the issuance and sale of the Common Shares to the Underwriters, (iv) all
fees and expenses of the Company's counsel, independent public or certified
public accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), each preliminary prospectus and the
Prospectus, and all amendments and
16
supplements thereto, and this Agreement, (vi) all filing fees, attorneys' fees
and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Common Shares for offer and sale under
the Blue Sky laws, and, if requested by the Representatives, preparing and
printing a "Blue Sky Survey" or memorandum, and any supplements thereto,
advising the Underwriters of such qualifications, registrations and exemptions,
(vii) the filing fees incident to, and the reasonable fees and expenses of
counsel for the Underwriters in connection with, the NASD's review and approval
of the Underwriters' participation in the offering and distribution of the
Common Shares, (viii) the fees and expenses associated with including the Common
Stock on the Nasdaq National Market, and (ix) all other fees, costs and expenses
referred to in Item 13 of Part II of the Registration Statement. Except as
provided in this Section 4, Section 6, Section 7, Section 8 and Section 9
hereof, the Underwriters shall pay their own expenses, including the fees and
disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, if any, shall be subject to the
accuracy of the representations and warranties on the part of the Company set
forth in Section 1 hereof as of the date hereof and as of the First Closing Date
as though then made and, with respect to the Optional Common Shares, as of the
Second Closing Date as though then made, to the timely performance by the
Company of its covenants and other obligations hereunder and to each of the
following additional conditions:
(a) ACCOUNTANTS' COMFORT LETTER. On the date hereof, the
Representatives shall have received from Xxxxxx Xxxxxxxx LLP, independent
public or certified public accountants for the Company, a letter dated the
date hereof addressed to the Underwriters, in form and substance
satisfactory to the Representatives, containing statements and information
of the type ordinarily included in accountant's "comfort letters" to
underwriters, delivered according to Statement of Auditing Standards No. 72
(or any successor bulletin), with respect to the audited and unaudited
financial statements and certain financial information contained in the
Registration Statement and the Prospectus (and the Representatives shall
have received [___] additional conformed copies of such accountants' letter
for each of the several Underwriters).
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER;
NO OBJECTION FROM NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with
the Commission (including the information required by Rule 430A under
the Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement
17
containing the information required by such Rule 430A, and such
post-effective amendment shall have become effective;
(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement or any
post-effective amendment to the Registration Statement shall be in
effect, and no proceedings for such purpose shall have been instituted
or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the
fairness and reasonableness of the underwriting terms and arrangements
applicable to the transactions contemplated hereby.
(c) NO MATERIAL ADVERSE CHANGE. For the period from and
after the date of this Agreement and prior to the First Closing Date
and, with respect to the Optional Common Shares, the Second Closing
Date, if any, in the judgment of the Representatives there shall not
have occurred any Material Adverse Change.
(d) OPINION OF COUNSEL FOR THE COMPANY. On each of the
First Closing Date and the Second Closing Date the
Representatives shall have received the favorable opinions of
Xxxxx & Xxxxx, L.L.P., special securities counsel for the Company
and Xxxxx, Xxxxx & Xxxxxx Incorporated, counsel to the Company,
each dated as of such Closing Date, the forms of which are
attached as, respectively, EXHIBIT A and EXHIBIT B (and the
Representatives shall have received an additional [___] conformed
copies of such counsels' legal opinions for each of the several
Underwriters).
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS. On each of
the First Closing Date and the Second Closing Date the
Representatives shall have received the favorable opinion of
Xxxxxx, Xxxxx & Bockius LLP, counsel for the Underwriters, dated
as of such Closing Date, with respect to the matters set forth in
paragraphs (ii), (viii), (ix), (xi), (xii), and the next-to-last
paragraph of EXHIBIT A (and the Representatives shall have
received an additional [___] conformed copies of such counsel's
legal opinion for each of the several Underwriters).
(f) OFFICERS' CERTIFICATE. On each of the First Closing
Date and the Second Closing Date the Representatives shall have
received a written certificate executed by the Chairman of the
Board, Chief Executive Officer or President of the Company and
the Chief Financial Officer or Chief Accounting Officer of the
Company, dated as of such Closing Date, to the effect set forth
in subsection (b)(ii) of this Section 5, and further to the
effect that:
(i) for the period from and after the date of this
Agreement and prior to such Closing Date, there has not occurred
any Material Adverse Change;
18
(ii) the representations, warranties and covenants of
the Company set forth in Section 1 of this Agreement are true and
correct with the same force and effect as though expressly made on and
as of such Closing Date; and
(iii) the Company has complied with all the agreements
herein and satisfied all the conditions hereunder on its part to be
performed or satisfied at or prior to such Closing Date including,
without limitation, the delivery of the lock-up letters to be delivered
pursuant to Section 3(l) above.
(g) BRING-DOWN COMFORT LETTER. On each of the First
Closing Date and the Second Closing Date the Representatives
shall have received from Xxxxxx Xxxxxxxx LLP independent public
or certified public accountants for the Company, a letter dated
such date, in form and substance satisfactory to the
Representatives, to the effect that they reaffirm the statements
made in the letter furnished by them pursuant to subsection (a)
of this Section 5, except that the specified date referred to
therein for the carrying out of procedures shall be no more than
three business days prior to the First Closing Date or Second
Closing Date, as the case may be (and the Representatives shall
have received an additional [___] conformed copies of such
accountants' letter for each of the several Underwriters).
(h) ADDITIONAL DOCUMENTS. On or before each of the First
Closing Date and the Second Closing Date, the Representatives and
counsel for the Underwriters shall have received such
information, documents and opinions as they may reasonably
require for the purposes of enabling them to pass upon the
issuance and sale of the Common Shares as contemplated herein, or
in order to evidence the accuracy of any of the representations
and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Common Shares, at any time prior
to the Second Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 4, Section 6, Section
8 and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this
Agreement is terminated by the Representatives pursuant to Section 5, Section 7,
Section 10 or Section 11 (i), (iv) or (v), or if the sale to the Underwriters of
the Common Shares on the First Closing Date is not consummated because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse the Representatives and the other Underwriters (or such Underwriters
as have not improperly terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Representatives and the
19
Underwriters in connection with the proposed purchase and the offering and sale
of the Common Shares, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i)
the execution of this Agreement by the parties hereto and (ii) notification by
the Commission to the Company and the Representatives of the effectiveness of
the Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by
any party by notice to each of the other parties hereto, and any such
termination shall be without liability on the part of (a) the Company to any
Underwriter, except that the Company shall be obligated to reimburse the
expenses of the Representatives and the Underwriters pursuant to Sections 4 and
6 hereof, or (b) any Underwriter to the Company; provided, however, that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive any such termination pursuant to (a) or (b).
SECTION 8. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees and
each person, if any, who controls any Underwriter within the meaning of the
Securities Act or the Exchange Act against any loss, claim, damage,
liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including, without limitation, in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
(i) upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereto, including
any information deemed to be a part thereof pursuant to Rule 430A under the
Securities Act, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading; or (ii) upon any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and to reimburse each Underwriter, its officers and
employees and each such controlling person for any and all expenses
(including the fees and disbursements of counsel chosen by Xxxxxxxxxx
Securities) as such expenses are reasonably incurred by such Underwriter,
its officers and employees or such controlling person in connection with
20
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; PROVIDED, HOWEVER, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of
or based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representatives expressly for
use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further,
that with respect to any preliminary prospectus, the foregoing indemnity
agreement shall not inure to the benefit of any Underwriter from whom the
person asserting any loss, claim, damage, liability or expense purchased
Common Shares, or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section 2
and a copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the
sale of the Common Shares to such person, and if the Prospectus (as so
amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage, liability or expense. The indemnity agreement set forth
in this Section 8(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND
OFFICERS. Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each of its directors and officers who signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, against any
loss, claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer or controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the
written consent of such Underwriter), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
arises out of or is based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), in reliance upon and in conformity with written information
furnished to the Company by the Representatives relating to the Underwriters
and expressly for use therein; and to reimburse the Company, or any such
director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. The Company hereby acknowledges that the
21
only information that the Underwriters have furnished to the Company
expressly for use in the Registration Statement, any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) are the
statements set forth (A) as the last paragraph on the inside front cover
page of the Prospectus concerning stabilization and passive market making by
the Underwriters and (B) in the table in the first paragraph and in the
second, sixth, eighth and ninth paragraphs under the caption "Underwriting"
in the Prospectus; and the Underwriters confirm that such statements are
correct. The indemnity agreement set forth in this Section 8(b) shall be in
addition to any liabilities that each Underwriter may otherwise have.
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES.
Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
this Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party for
contribution or otherwise under the indemnity agreement contained in this
Section 8 to the extent it is not prejudiced as a proximate result of such
failure. In case any such action is brought against any indemnified party
and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate
in, and, to the extent that it shall elect, jointly with all other
indemnifying parties similarly notified, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, if the defendants
in any such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded, based on
the opinion of counsel, that a conflict may arise between the positions of
the indemnifying party and the indemnified party in conducting the defense
of any such action or that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of such indemnifying party's
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall
not be liable for the expenses of more than one separate counsel (together
with local counsel), approved by the indemnifying party (Xxxxxxxxxx
Securities in the case of Section 8(b) and Section 9), representing the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.
22
(d) SETTLEMENTS. The indemnifying party under this Section 8
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense by
reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(c) hereof, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
30 days after receipt by such indemnifying party of the aforesaid request and
(ii) such indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or consent to the entry
of judgment in any pending or threatened action, suit or proceeding in
respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, from the offering of the Common Shares pursuant to this Agreement or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Underwriters, on the other hand, in connection with the
offering of the Common Shares pursuant to this Agreement shall be deemed to be
in the same respective proportions as the total net proceeds from the offering
of the Common Shares pursuant to this Agreement (before deducting expenses)
received by the Company, and the total underwriting discount received by the
Underwriters, in each case as set forth on the front cover page of the
Prospectus bear to the aggregate initial public offering price of the Common
Shares as set forth on such cover. The relative fault of the Company, on the one
hand, and the Underwriters, on the other hand, shall be
23
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company, on the one
hand, or the Underwriters, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; PROVIDED, HOWEVER,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the underwriting
discount received by such Underwriter in connection with the Common Shares
underwritten by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
SCHEDULE A. For purposes of this Section 9, each officer and employee of an
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director and officer of the Company
who signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act shall have
the same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS.
If, on the First Closing Date or the Second Closing Date, as the case may be,
any one or more of the several Underwriters shall fail or refuse to purchase
Common Shares that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on SCHEDULE A
bears to the aggregate number of
24
Firm Common Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Common Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date. If, on the First Closing Date or the
Second Closing Date, as the case may be, any one or more of the Underwriters
shall fail or refuse to purchase Common Shares and the aggregate number of
Common Shares with respect to which such default occurs exceeds 10% of the
aggregate number of Common Shares to be purchased on such date, and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Common Shares are not made within 48 hours after such default, this Agreement
shall terminate without liability of any party (other than a defaulting
underwriter or underwriters) to any other party except that the provisions of
Section 4, Section 6, Section 7, Section 8 and Section 9 shall at all times be
effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed
to include any person substituted for a defaulting Underwriter under this
Section 10. Any action taken under this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First
Closing Date this Agreement may be terminated by the Representatives by notice
given to the Company if at any time (i) trading or quotation in any of the
Company's securities shall have been suspended or limited by the Commission or
by the Nasdaq Stock Market, or trading in securities generally on either the
Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
the Nasdaq Stock Market or the New York Stock Exchange by the Commission or the
NASD; (ii) a general banking moratorium shall have been declared by any of
federal, New York, or California authorities; (iii) there shall have occurred
any outbreak or escalation of national or international hostilities or any
crisis or calamity, or any change in the United States or international
financial markets, or any substantial change or development involving a
prospective substantial change in United States' or international political,
financial or economic conditions, as in the judgment of the Representatives is
material and adverse and makes it impracticable to market the Common Shares in
the manner and on the terms described in the Prospectus or to enforce contracts
for the sale of securities; (iv) in the judgment of the Representatives there
shall have occurred any Material Adverse Change; or (v) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as in the judgment of the Representatives may interfere
materially with the conduct of the business and operations of the Company and
its Subsidiaries (and the Additional Companies) takes as a whole regardless of
whether or not such loss shall have been insured. Any termination pursuant to
this Section 11 shall be without liability
25
on the part of (i) the Company to any Underwriter, except to the extent that the
Company may be obligated to reimburse the expenses of the Representatives and
the Underwriters pursuant to Section 4 and Section 6 hereof, (ii) any
Underwriter to the Company, or (iii) of any party hereto to any other party
except that the provisions of Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers, directors, agents or
any controlling person, as the case may be, and will survive delivery of and
payment for the Common Shares sold hereunder and any termination of this
Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in
writing and shall be mailed, hand delivered or telecopied and confirmed to the
parties hereto as follows:
If to the Representatives:
c/o: NationsBanc Xxxxxxxxxx Securities, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxxxx
with copies to:
NationsBanc Xxxxxxxxxx Securities, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxx LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: [_________________]
26
If to the Company:
Innovative Valve Technologies, Inc.
00000 Xxxxxxx Xxxxx
Xxxxx X-000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with copies to:
Xxxxx & Xxxxx, L.L.P.
0000 Xxx Xxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Leader
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit
of and be binding upon the parties hereto, including any substitute
Underwriters pursuant to Section 10, and to the benefit of the employees,
officers and directors and controlling persons referred to in Section 8 and
Section 9, and in each case their respective successors, and no other person
will have any right or obligation hereunder. The term "successors" shall not
include any purchaser of the Common Shares as such from any of the Underwriters
merely by reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 16. GENERAL PROVISIONS. This Agreement constitutes the
entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may be
executed in two or more counterparts, each one of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement may not be amended or modified unless in writing by
all of the
27
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party for whom the condition is meant to
benefit. The Section headings herein are for the convenience of the parties
only and shall not affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a
sophisticated business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without limitation,
the indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
28
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
INNOVATIVE VALVE TECHNOLOGIES, INC.
By:__________________________
[Title]
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives as of the date first above written.
NATIONSBANC XXXXXXXXXX SECURITIES, INC.
XXXXXX XXXX LLC
Acting as Representatives of the several Underwriters named in the attached
Schedule A.
By: NATIONSBANC XXXXXXXXXX SECURITIES, INC.
By: _________________________________
Name:
Title:
29
SCHEDULE A
NUMBER OF FIRM COMMON
UNDERWRITERS SHARES TO BE PURCHASED
NationsBanc Xxxxxxxxxx Securities, Inc. [___]
Xxxxxx Xxxx LLC [___]
[___]
[___]
[___]
Total [___]