EXECUTION COPY
KEY ENERGY SERVICES, INC.
Common Stock
UNDERWRITING AGREEMENT
June 27, 2000
Xxxxxx Brothers Inc.
As Representative of the several
Underwriters named in Schedule I
c/x Xxxxxx Brothers Inc.
Three World Financial Center
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Key Energy Services, Inc., a Maryland corporation (the
"COMPANY"), proposes, subject to the terms and conditions contained herein, to
sell to you (the "UNDERWRITERS"), an aggregate of 10,000,000 shares (the "FIRM
STOCK") of the Company's Common Stock, $0.10 par value (the "COMMON STOCK").
In addition, the Company proposes to grant to the
Underwriters an option to purchase up to an additional 1,500,000 shares of the
Common Stock on the terms and for the purposes set forth in Section 1 (the
"OPTION STOCK"). The Firm Stock, and the Option Stock, if purchased, are
hereinafter collectively called the "SHARES." This is to confirm the agreement
concerning the purchase of the Shares from the Company by the Underwriters
The Company has filed with the Securities and Exchange
Commission (the "COMMISSION"), a registration statement on Form S-3 (No.
333-67665) and a prospectus for the registration of the issuance of Shares
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), and the
rules and regulations thereunder (the "SECURITIES ACT REGULATIONS"). The
Company has prepared and filed such amendments thereto, if any, and such
prospectus supplements, if any, as may have been required to the date hereof,
and will file such additional amendments thereto and such prospectus
supplements as may hereafter be required in connection with the offering and
sale of the Shares. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including all information deemed
(whether by incorporation by reference or otherwise) to be a part of the
registration statement at the time it became effective pursuant to Rule
430A(b) of the Securities Act Regulations) is hereinafter called the
"REGISTRATION STATEMENT," except that, if the Company files a post-effective
amendment to such registration statement which becomes effective prior to the
Delivery Date (as defined below), "Registration Statement" shall refer to such
registration statement as so amended. As used herein, the term "PROSPECTUS"
means the prospectus included in the Registration Statement in the form filed
with the Commission on April 16, 1999 pursuant to Rule 424(b) under the
Securities Act Regulations, except that, subject to Section 5(a) below, if any
revised prospectus or prospectus supplement
shall be provided to the Underwriters by the Company for use in connection
with the offering and sale of the Shares which differs from the Prospectus
(whether or not such revised prospectus or prospectus supplement is required
to be filed by the Company pursuant to Rule 424(b) of the Securities Act
Regulations), the term "Prospectus" shall refer to the Prospectus as revised
or supplemented by such revised prospectus or prospectus supplement, as the
case may be, from and after the time it is first provided to the Underwriters
for such use. The Commission has not issued any order preventing or suspending
the use of the Prospectus.
1. SALE AND PURCHASE OF THE SHARES. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to sell to the
several Underwriters, and the Underwriters agree, severally and not jointly,
to purchase from the Company, at a price of $9.195 per share (the "INITIAL
PRICE"), the number of shares of Firm Stock set forth opposite that
Underwriter's name in Schedule I hereto.
In addition, the Company grants to the Underwriters an
option to purchase up to 1,500,000 shares of Option Stock. Such option is
granted for the purpose of covering over-allotments in the sale of Firm Stock
and is exercisable as provided in Section 2 hereof. Shares of Option Stock
shall be purchased severally for the account of the Underwriters in proportion
to the number of shares of Firm Stock set forth opposite the name of such
Underwriters in Schedule I hereto. The respective purchase obligations of each
Underwriter with respect to the Option Stock shall be adjusted by the
Representative so that no Underwriter shall be obligated to purchase Option
Stock other than in 100 share amounts.
The price of both the Firm Stock and any Option Stock shall
be $9.195 per share.
The Company shall not be obligated to deliver any of the
Shares to be delivered on any Delivery Date (as hereinafter defined), except
upon payment for all the Shares to be purchased on such Delivery Date as
provided herein.
2. DELIVERY AND PAYMENT. Delivery by the Company of the
Firm Stock to the Representative for the respective accounts of the
Underwriters, and payment of the purchase price by wire transfer payable in
same day funds drawn to the order of the Company for the Firm Stock purchased
from the Company, against delivery of the respective certificates therefor to
the Representative, shall take place at the offices of Xxxxxx & Xxxxxxx, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., New York City time, on
the fourth business day following the date of this Agreement, or at such time
on such other date, not later than 10 business days after the date of this
Agreement, as shall be agreed upon by the Company and the Representative (such
time and date of delivery and payment are sometimes referred to as the "FIRST
DELIVERY DATE").
The option granted in Section 1 will expire 30 days after
the date of this Agreement and may be exercised in whole or in part from time
to time by written notice being given to the Company by the Representative.
Such notice shall set forth the aggregate number of shares of Option Stock as
to which the option is being exercised, the names in which the shares of
Option Stock are to be registered, the denominations in which the shares of
Option Stock are to be issued and the date and time, as determined by the
Representative, when the shares of
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Option Stock are to be delivered; PROVIDED, HOWEVER, that this date and time
shall not be earlier than the First Delivery Date nor earlier than the second
business day after the date on which the option shall have been exercised nor
later than the fifth business day after the date on which the option shall
have been exercised. The date and time the shares of Option Stock are
delivered are sometimes referred to as a "SECOND DELIVERY DATE" and the First
Delivery Date and any Second Delivery Date are sometimes each referred to as a
"DELIVERY DATE".
Certificates evidencing the Shares shall be registered in
such names and shall be in such denominations as the Representative shall
request at least two full business days before the applicable Delivery Date
and shall be made available to the Representative for checking and packaging,
at such place as is designated by the Representative, on the full business day
before the applicable Delivery Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to the Underwriters as follows:
(a) The Company's capitalization consists of 200,000,000
shares of Common Stock, of which as of June 26, 2000, 85,790,838 shares
are outstanding and 16,632,853 shares are reserved for issuance
pursuant to outstanding options, warrants and convertible securities.
The Company's certificate of incorporation gives the Company's board of
directors the authority, without further shareholder action, to
redesignate all of the authorized and unissued shares of the Company's
Common Stock into one or more series of preferred stock. As of the date
hereof, no shares have been so designated or issued. The outstanding
shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable and conform
to the description thereof contained in the Prospectus; and all of the
issued and outstanding capital stock or partnership interests, as
applicable, of each of the Subsidiaries (which capitalized term is
defined to include only those subsidiaries of the Company that are
listed in Schedule II hereto) have been duly and validly authorized and
issued and are fully paid and non-assessable, and all of the
outstanding shares of capital stock or partnership interests, as
applicable, of the Subsidiaries are directly or indirectly owned of
record and beneficially by the Company; except as disclosed in the
Prospectus, there are no outstanding (i) securities or obligations of
the Company or any of its Subsidiaries convertible into or exchangeable
for any capital stock of the Company or any such Subsidiary, (ii)
warrants, rights or options to subscribe for or purchase from the
Company or any such Subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or any such Subsidiary to issue any shares
of capital stock, any such convertible or exchangeable securities or
obligation, or any such warrants, rights or options.
(b) each of the Company and its subsidiaries has been duly
formed and is validly existing in good standing under the laws of its
jurisdiction of organization with full power and authority to own its
properties and to conduct its business as described in the Registration
Statement and Prospectus and, in the case of the Company, to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby, except where the failure by any of such
subsidiaries to be organized or validly existing or to have such power
or authority or to be in good standing would not reasonably be
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expected to have a material adverse effect on the consolidated
financial condition, business, properties or results of operations of
the Company and its subsidiaries taken as a whole (a "MATERIAL ADVERSE
EFFECT");
(c) the Company and all of its subsidiaries are duly
qualified or licensed by each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, except where the failure,
individually or in the aggregate, to be so qualified or licensed
would not reasonably be expected to have a Material Adverse Effect;
except as disclosed in the Prospectus, no subsidiary (other than
Odessa Exploration Incorporated) is prohibited or restricted,
directly or indirectly, from paying dividends to the Company, or from
making any other distribution with respect to such subsidiary's
capital stock or from repaying to the Company or any other subsidiary
any amounts which may from time to time become due under any loans or
advances to such subsidiary from the Company or such other
subsidiary, or from transferring any such subsidiary's property or
assets to the Company or to any other subsidiary; other than the
Company's interests in the Xxxxxx Midstream 1995-2 Business Trust and
the Xxxxxx Midstream 1997-1 Business Trust and as disclosed in the
Prospectus, the Company does not own, directly or indirectly, more
than one percent of the capital stock or other equity securities of
any other corporation or any ownership interest in any partnership,
joint venture or other association;
(d) the Company and its subsidiaries are in compliance in
all material respects with all applicable laws, rules, regulations,
orders, decrees and judgments, including those relating to
transactions with affiliates, except where the failure to be in
compliance would not have a Material Adverse Effect;
(e) neither the Company nor any of its Subsidiaries is in
breach of or in default under (nor has any event occurred which with
notice, lapse of time, or both would constitute a breach of, or default
under), its respective articles of incorporation or charter or by-laws,
or in the performance or observance of any obligation, agreement,
covenant or condition contained in any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is a party
or by which any of them or their respective properties is bound, except
for such breaches or defaults which would not reasonably be expected to
have a Material Adverse Effect;
(f) the execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby
will not: (A) conflict with, or result in any breach of, or
constitute a default under (nor constitute any event which with
notice, lapse of time, or both would constitute a breach of, or
default under), (i) any provision of the articles of incorporation or
charter or by-laws of the Company or any of its subsidiaries, (ii)
any provision of any license, indenture, mortgage, deed of trust,
loan or credit agreement or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which any of
them or their respective properties may be bound or affected, or
(iii) any federal, state, local or foreign law, regulation or rule or
any decree, judgment or order applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, except
in the case of clause (ii) or this clause (iii) for
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such breaches or defaults which would not reasonably be expected to
have a Material Adverse Effect; (B) result in the creation or
imposition of any material lien, charge, claim or encumbrance upon
any property or asset of the Company or its subsidiaries; (C)
accelerate the right of any holder of a security or obligation of the
Company or its subsidiaries to receive a payment prior to maturity;
or (D) trigger a change in control provision under any obligation,
agreement, covenant or condition contained in any license, indenture,
mortgage, deed of trust, loan or credit agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which any of them or their respective properties is
bound, except, in the case of (B), (C) or (D), which would not
reasonably be expected to have a Material Adverse Effect;
(g) this Agreement has been duly authorized, executed and
delivered by the Company;
(h) no approval, authorization, consent or order of or
filing with any federal, state or local governmental or regulatory
commission, board, body, authority or agency is required in connection
with the Company's execution, delivery and performance of this
Agreement, the consummation of the transaction contemplated hereby,
and its sale and delivery of the Shares, other than (A) such as have
been obtained, or will have been obtained at the First Delivery Date,
(B) such approvals as have been obtained, or will have been obtained
at the First Delivery Date, in connection with the approval of the
listing of the Shares on the New York Stock Exchange and (C) any
necessary qualification under the securities or blue sky laws of the
various jurisdictions in which the Shares are being offered by the
Underwriters;
(i) each of the Company and its subsidiaries has all
necessary licenses, authorizations, consents and approvals and has
made all necessary filings required under any federal, state or local
law, regulation or rule, and has obtained all necessary
authorizations, consents and approvals from other persons, required in
order to conduct their respective businesses as described in the
Prospectus, except to the extent that any failure to have any such
licenses, authorizations, consents or approvals, to make any such
filings or to obtain any such authorizations, consents or approvals
would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect; neither the Company nor any of its
subsidiaries is in violation of, in default under, or has received any
notice regarding a possible violation, default or revocation of any
such license, authorization, consent or approval or any federal,
state, local or foreign law, regulation or rule or any decree, order
or judgment applicable to the Company or any of its subsidiaries which
could reasonably be expected to have a Material Adverse Effect; and
such licenses, authorizations, consents or approvals do not,
individually or in the aggregate, contain any restriction sufficiently
burdensome as to have a Material Adverse Effect and which restriction
is not adequately disclosed in the Prospectus;
(j) The Registration Statement has become effective under
the Securities Act and no stop order suspending the effectiveness of
the Registration Statement has been issued under the Securities Act
and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of the Company, are threatened by the
Commission,
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and any request on the part of the Commission for additional
information has been complied with;
(k) the Registration Statement complies, and the Prospectus
and any further amendments or supplements thereto will, when filed with
the Commission, comply in all material respects with the requirements
of the Securities Act and the Securities Act Regulations; the
Registration Statement did not, and any amendment thereto relating to
this offering will not, in each case as of the applicable effective
date, contain an 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; and the Prospectus or any amendment
or supplement thereto at the time of its delivery, will not, as of the
applicable filing date and at each Delivery Date, contain an 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
the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that the Company makes no warranty or
representation with respect to any statement contained in the
Registration Statement or the Prospectus in reliance upon and in
conformity with the information concerning the Underwriters and
furnished in writing by or on behalf of the Underwriters through the
Representative to the Company expressly for use in the Registration
Statement or the Prospectus;
(l) the Prospectus delivered to the Underwriters for use in
connection with the offering of the Shares will be identical in all
material respects to the version of the Prospectus created to be
transmitted to the Commission for filing via the Electronic Data
Gathering Analysis and Retrieval System ("XXXXX"), except to the extent
permitted by Regulation S-T;
(m) on or before the First Delivery Date, all legal or
governmental proceedings, contracts or documents of a character
required to be filed as exhibits to the Registration Statement or to be
summarized or described in the Prospectus will have been so filed,
summarized or described as required;
(n) there are no actions, suits, proceedings, inquiries or
investigations pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries or any of their
respective officers and directors or to which the properties, assets or
rights of any such entity are subject, at law or in equity, before or
by any federal, state, local or foreign governmental or regulatory
commission, board, body, authority, arbitral panel or agency which
could result in a judgment, decree, award or order which, if determined
adversely to the Company, would reasonably be expected to have a
Material Adverse Effect;
(o) the consolidated historical financial statements,
including the notes thereto, filed as part of the Registration
Statement or included in the Prospectus present fairly the consolidated
financial position of the entities to which such financial statements
relate (the "COVERED ENTITIES") as of the dates indicated and the
consolidated results of operations and changes in financial position
and cash flows of the Covered Entities for the periods specified; such
financial statements have been prepared in conformity, in all material
respects, with generally accepted accounting principles applied on a
consistent
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basis during the periods involved and in accordance with Regulation S-X
promulgated by the Commission; and the amounts in the Company's Form
10-K under the caption "Selected Financial Data" incorporated by
reference into the Prospectus fairly present, in all material
respects, the information shown therein and have been compiled on a
basis consistent with the financial statements included in the
Prospectus;
(p) KPMG LLP, whose reports on the consolidated financial
statements of the Company and its subsidiaries are filed with the
Commission as part of the Prospectus, are and were during the periods
covered by their reports, independent public accountants as required by
the Securities Act and the Securities Act Regulations;
(q) subsequent to the most recent dates as of which
information is given in the Registration Statement and the Prospectus,
and except as may be otherwise stated in the Registration Statement or
Prospectus, there has not been (A) any material adverse change in the
assets, business, operations, earnings, prospects, properties or
condition (financial or otherwise), present or prospective, of the
Company and its Subsidiaries taken as a whole, whether or not arising
in the ordinary course of business, (B) any transaction, which is
material to the Company and its Subsidiaries taken as a whole, entered
into by the Company or any of its Subsidiaries that is not in the
ordinary course of business, (C) any obligation, contingent or
otherwise, directly or indirectly incurred by the Company or any of its
Subsidiaries, which is material to the Company and its Subsidiaries
taken as a whole other than those that were incurred in the ordinary
course of business or (D) any dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock;
(r) the Shares, when issued, will conform in all material
respects to the description thereof contained in the Prospectus;
(s) except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statement;
(t) the Shares have been duly authorized and, when issued
and duly delivered against payment therefor as contemplated by this
Agreement, will be validly issued, fully paid and nonassessable, free
and clear of any pledge, lien, encumbrance, security interest or other
claim, and the issuance and sale of the Shares by the Company is not
subject to preemptive or other similar rights arising by operation of
law, under the articles of incorporation or by-laws of the Company,
under any agreement to which the Company or any of its Subsidiaries is
a party or otherwise;
(u) the Company has not taken, and will not take, directly
or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
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(v) except with respect to the blue sky survey, the Company
has not relied upon the Underwriters or legal counsel for the
Underwriters for any legal, tax or accounting advice in connection with
the offering and sale of the Shares;
(w) any certificate signed by any officer of the Company or
any Subsidiary delivered to the Representative or to counsel for the
Underwriters pursuant to or in connection with this Agreement shall be
deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby;
(x) the form of certificate used to evidence the Common
Stock complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the articles of
incorporation and by-laws of the Company and the requirements of the
New York Stock Exchange;
(y) the Company and the Subsidiaries have good and
marketable title in fee simple to all real property, if any, and good
title to all personal property owned by them, in each case free and
clear of all liens, security interests, pledges, charges,
encumbrances, mortgages and defects, except such as are disclosed in
the Prospectus or permitted by the indenture for the Company's 14%
Senior Subordinated Notes due 2009 or such as do not result in a
Material Adverse Effect and do not interfere with the use made or
proposed to be made of such property by the Company and its
Subsidiaries; and any real property and buildings held under lease by
the Company or any Subsidiary are held under valid, existing and
enforceable leases, with such exceptions as are disclosed in the
Prospectus or which would not reasonably be expected to have a
Material Adverse Effect;
(z) the descriptions in the Prospectus of the contracts,
leases and other legal documents therein described present fairly the
information required to be shown, and there are no contracts, leases,
or other documents of a character required to be described in the
Prospectus or to be filed as exhibits to the Registration Statement
which are not described or filed as required;
(aa) the Company and each subsidiary owns or possesses
adequate license or other rights to use all patents, trademarks,
service marks, trade names, copyrights, software and design licenses,
trade secrets, manufacturing processes, other intangible property
rights and know-how (collectively "INTANGIBLES") necessary to entitle
the Company and each subsidiary to conduct its business as described in
the Prospectus, except to the extent that the failure to own or possess
any such Intangibles would not have a Material Adverse Effect, and
neither the Company, nor any subsidiary, has received notice of
infringement of or conflict with (and the Company knows of no such
infringement of or conflict with) asserted rights of others with
respect to any Intangibles which could reasonably be expected to have a
Material Adverse Effect;
(bb) the Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; and (ii) transactions
are recorded as necessary to permit preparation of financial statements
in
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conformity with generally accepted accounting principles and to
maintain asset accountability;
(cc) each of the Company and the Subsidiaries has filed on a
timely basis all necessary federal, state, local and foreign income and
franchise tax returns required to be filed through the date hereof and
have paid all taxes shown as due thereon other than those being
contested in good faith and for which reserves have been provided in
accordance with generally accepted accounting principles, those
currently payable without penalty or interest, or the nonpayment of
which would not have a Material Adverse Effect; and no tax deficiency
has been asserted or determined adversely to the Company or any of its
subsidiaries which has had a Material Adverse Effect (nor does the
Company have any knowledge of any tax deficiency which, if determined
adversely to the Company or any of its subsidiaries, would have such a
Material Adverse Effect).
(dd) each of the Company and its Subsidiaries carries, or is
covered by, insurance in such amounts and covering such risks that the
Company believes is adequate for the conduct of their respective
businesses and the value of their respective properties, and is
customary for companies engaged in similar businesses in similar
industries;
(ee) since the date of the Prospectus, neither the Company
nor any of its Subsidiaries has violated, or received notice of any
violation with respect to: (i) any federal or state law relating to
discrimination in the hiring, promotion or pay of employees; or (ii)
any applicable federal or state wages and hours law, the violation of
any of which would reasonably be expected to have a Material Adverse
Effect;
(ff) except as would not, individually or in the aggregate,
have a Material Adverse Effect: (i) the Company is in compliance with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); (ii) no "REPORTABLE
EVENT" (as defined in ERISA) has occurred with respect to any "PENSION
PLAN" (as defined in ERISA) for which the Company would have any
liability; (iii) the Company has not incurred and does not expect to
incur liability under (A) Title IV of ERISA with respect to termination
of, or withdrawal from, any "pension plan" or (B) Sections 412 or 4971
of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "CODE"); and
(iv) each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such
qualification;
(gg) there has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of toxic
wastes, medical wastes, hazardous wastes or hazardous substances by the
Company or any of its subsidiaries (or, to the knowledge of the
Company, any of their predecessors in interest) at, upon or from any of
the property now or previously owned or leased by the Company or its
subsidiaries in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule,
9
regulation, order, judgment, decree or permit, except for any violation
or remedial action which would not have, or could not be reasonably
likely to have, singularly or in the aggregate with all such
violations and remedial actions, a Material Adverse Effect; there has
been no material spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to
or caused by the Company or any of its subsidiaries or with respect to
which the Company or any of its subsidiaries have knowledge, except
for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not have or would not be reasonably
likely to have, singularly or in the aggregate with all such spills,
discharges, leaks, emissions, injections, escapes, dumpings and
releases, a Material Adverse Effect; and the terms "hazardous wastes",
"toxic wastes", "hazardous substances" and "medical wastes" shall have
the meanings specified in any applicable local, state, federal and
foreign laws or regulations with respect to environmental protection;
(hh) to the knowledge of the Company, neither the Company
nor any of its subsidiaries, nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company or any of its subsidiaries, has used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; made any
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment; or engaged in any transactions, maintained any bank account
or used any corporate funds except for transactions, bank accounts and
funds which have been and are reflected in the normally maintained
books and records of the Company and its subsidiaries;
(ii) there are no material outstanding loans or advances or
material guarantees of indebtedness by the Company or any of its
subsidiaries to or for the benefit of any of the officers or directors
of the Company or any of its subsidiaries or any of the members of the
families of any of them that are required to be disclosed in the
Prospectus that are not so disclosed;
(jj) since the 1992 reorganization of the Company, all
securities issued by the Company have been issued and sold in
compliance with (i) all applicable federal and state securities laws,
(ii) the laws of the applicable jurisdiction of incorporation of the
issuing entity and, (iii) to the extent applicable to the issuing
entity, the requirements of the New York Stock Exchange;
(kk) except as described in the Registration Statement or
the Prospectus, the Company has not sold or issued any shares of Common
Stock during the six-month period preceding the date of the Prospectus,
including any sales pursuant to Rule 144A under, or Regulations D or S
of, the Securities Act, other than shares issued pursuant to employee
benefit plans, qualified stock options plans or other employee
compensation plans or pursuant to outstanding options, rights or
warrants. The Company has not
10
distributed and will not distribute any other offering material in
connection with the offer and sale of the Shares other than the
Registration Statement and the Prospectus;
(ll) other than as described in the Prospectus, the Company
has not incurred any liability for any finder's fees or similar
payments in connection with the transactions herein contemplated;
(mm) no relationship, direct or indirect, exists between or
among the Company or any of its Subsidiaries on the one hand, and the
directors, officers, stockholders, customers or suppliers of the
Company or any of its Subsidiaries on the other hand, which is required
to be described in the Registration Statement or the Prospectus and
which is not so described;
(nn) neither the Company nor any of the subsidiaries is and,
after giving effect to the offering and sale of the Shares, will be an
"investment company" or an entity "controlled" by and "investment
company", as such terms are defined in the Investment Company Act of
1940, as amended;
(oo) there are no existing or, to the knowledge of the
Company, threatened labor disputes with the employees of the Company or
any of its subsidiaries which are likely to have, individually or in
the aggregate, a Material Adverse Effect; and
(pp) neither the Company nor any of the subsidiaries has
experienced or anticipates experiencing any year 2000 related problem
with any computer software (including, without limitation, software
which forms a part of any hardware) owned or used by the Company or any
subsidiary, or licensed by the Company or any subsidiary, as licensor
or as licensee, other than any shrinkwrap software available generally
to retail customers, which have had or are likely to have, individually
or in the aggregate, a Material Adverse Effect.
4. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The
obligations of the several Underwriters to purchase the Shares is subject to
each of the following terms and conditions:
(a) Notification that the Registration Statement remains
effective shall have been received by the Representative and the
Prospectus shall have been timely filed with the Commission in
accordance with Section 5(a) of this Agreement.
(b) No order preventing or suspending the use of the
Prospectus shall have been or shall be in effect and no order
suspending the effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose shall be pending before or
threatened by the Commission, and any requests by the Commission for
additional information (to be included in the Registration Statement or
the Prospectus or otherwise) shall have been complied with to the
satisfaction of the Commission and the Underwriters.
(c) The representations and warranties of the Company
contained in this Agreement and in the certificates delivered pursuant
to Section 4(d) shall be true and
11
correct when made and on and as of each Delivery Date as if made on
such date. The Company shall have materially performed all covenants
and agreements and satisfied all the conditions contained in this
Agreement required to be performed or satisfied by it at or before
the First Delivery Date.
(d) The Representative shall have received on the Delivery
Date a certificate, addressed to the Underwriters and dated such
Delivery Date, of the chief executive and the chief financial officer
of the Company to the effect that (i) the signers of such certificate
have carefully examined the Registration Statement, the Prospectus and
this Agreement and that the representations and warranties of the
Company in this Agreement are materially true and correct on and as of
the Delivery Date with the same effect as if made on the Delivery Date
and the Company has performed, in all material respects, all covenants
and agreements and satisfied, in all material respects, all conditions
contained in this Agreement required to be performed or satisfied by it
at or prior to the Delivery Date, and (ii) no stop order suspending the
effectiveness of the Registration Statement has been issued and to the
best of their knowledge, no proceedings for that purpose have been
instituted or are pending under the Securities Act.
(e) The Representative shall have received, at the time this
Agreement is executed and on the Delivery Date a signed letter from
KPMG LLP addressed to the Underwriters and dated, respectively, the
date of this Agreement and the Delivery Date, in form and substance
reasonably satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Securities Act and
the Securities Act Regulations, that the response to Item 10 of the
Registration Statement on Form S-3 is correct insofar as it relates to
them and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included or incorporated by
reference in the Registration Statement and the Prospectus and
reported on by them comply as to form in all material respects
with the applicable accounting requirements of the Securities
Act and the Securities Act Regulations;
(ii) on the basis of carrying out certain procedures
but not an examination in accordance with generally accepted
auditing standards which would not necessarily reveal matters
of significance with respect to the comments set forth in such
letter, a reading of the minutes of the meetings of the
stockholders and directors of the Company, and inquiries of
certain officials of the Company who have responsibility for
financial and accounting matters of the Company as to
transactions and events subsequent to the date of the latest
audited financial statements, except as disclosed in the
Registration Statement and the Prospectus, nothing came to
their attention which caused them to believe that:
(A) with respect to the Company, there were,
at a specified date not more than three business days
prior to the date of the letter, any increases in the
current liabilities and long-term liabilities of the
Company or any decreases in net income or in working
capital or the stockholders' equity in the Company,
as compared with the amounts shown on the
12
Company's audited balance sheet for the fiscal year
ended June 30, 1999 and the nine months ended March 31,
2000 incorporated by reference in the Registration
Statement; and
(iii) they have performed certain other procedures as
may be permitted under generally accepted auditing standards
as a result of which they determined that certain information
of an accounting, financial or statistical nature (which is
limited to accounting, financial or statistical information
derived from the general accounting records of the Company)
set forth or incorporated by reference in the Registration
Statement and the Prospectus and reasonably specified by the
Underwriters agrees with the accounting records of the
Company.
References to the Registration Statement and the
Prospectus in this paragraph (e) are to such documents as
amended and supplemented at the date of the letter.
(f) The Company shall furnish to the Representative at the
Delivery Date an opinion of Xxxxxx & Xxxxxx, L.L.P., counsel for the
Company and its Subsidiaries, addressed to the Underwriters and dated
the Delivery Date and in form and substance reasonably satisfactory to
Xxxxxx & Xxxxxxx, counsel for the Underwriters, stating that:
(i) The Company's capitalization consists of
200,000,000 shares of Common Stock, of which at June 26, 2000,
85,790,838 shares are outstanding and 16,632,853 shares are
reserved for issuance pursuant to outstanding options,
warrants and convertible securities; the Company's certificate
of incorporation gives the Company's board of directors the
authority, without further shareholder action, to redesignate
all of the authorized and unissued shares of the Company's
Common Stock into one or more series of preferred stock; the
outstanding shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and
non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued and
outstanding capital stock or partnership interests, as
applicable, of each of the Subsidiaries has been duly and
validly authorized and issued and are fully paid and
non-assessable, and, except for directors qualifying shares
and except as set forth in the Prospectus, all of the
outstanding shares of capital stock or partnership interests,
as applicable, of the Subsidiaries are directly or indirectly
owned of record and beneficially by the Company; except as
disclosed in the Prospectus, to such counsel's knowledge after
due inquiry, there are no outstanding (i) securities or
obligations of the Company or any of its Subsidiaries
convertible into or exchangeable for any capital stock of the
Company or any such Subsidiary, (ii) warrants, rights or
options to subscribe for or purchase from the Company or any
such Subsidiary any such capital stock or any such convertible
or exchangeable securities or obligations, or (iii)
obligations of the Company or any such Subsidiary to issue any
shares of capital stock, any such convertible or exchangeable
securities or obligation, or any such warrants, rights or
options;
13
(ii) the Company and its Subsidiaries each has been
duly organized and is validly existing in good standing under
the laws of its respective jurisdiction of organization with
full corporate power and authority to own its respective
properties and to conduct its respective business as described
in the Registration Statement and Prospectus and, in the case
of the Company, to execute and deliver this Agreement and to
consummate the transactions described in this Agreement,
except where the failure by any of such subsidiaries to be
organized, validly existing and in good standing, or the
failure to have such power or authority would not reasonably
be expected to have a Material Adverse Effect;
(iii) the Company and its Subsidiaries are duly
qualified or licensed by each jurisdiction in which their
respective ownership or lease of property or the conduct of
their respective businesses requires such qualification,
except where the failure to be so qualified or licensed would
not reasonably be expected to have a Material Adverse Effect.
Except as disclosed in the Prospectus, no Subsidiary is
prohibited or restricted, directly or indirectly, from paying
dividends to the Company, or from making any other
distribution with respect to such Subsidiary's capital stock
or from repaying to the Company or any other Subsidiary any
amounts which may from time to time become due under any loans
or advances to such Subsidiary from the Company or such other
Subsidiary, or from transferring any such Subsidiary's
property or assets to the Company or to any other Subsidiary;
(iv) to such counsel's knowledge, neither the
Company nor any of its Subsidiaries is in breach of, or in
default under (nor has any event occurred which with
notice, lapse of time, or both would constitute a breach
of, or default under), any license, indenture, mortgage,
deed of trust, loan or credit agreement or any other
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them or their
respective properties may be bound or affected or under any
law, regulation or rule or any decree, judgment or order
applicable to the Company or any of its Subsidiaries,
except such breaches or defaults which would not reasonably
be expected to have a Material Adverse Effect;
(v) the execution, delivery and performance of this
Agreement and the consummation by the Company of the
transactions contemplated by this Agreement do not and will
not (A) conflict with, or result in any breach of, or
constitute a default under (nor constitute any event which
with notice, lapse of time, or both would constitute a breach
of or default under) (i) any provisions of the articles of
incorporation, charter or by-laws of the Company or any
Subsidiary, (ii) any provision of any material license,
indenture, mortgage, deed of trust, loan, credit or other
agreement or instrument known to such counsel and to which the
Company or any Subsidiary is a party or by which any of them
or their respective properties or assets may be bound or
affected, (iii) any law or regulation binding upon or
applicable to the Company or any Subsidiary or any of their
respective properties or assets or (iv) any decree, judgment
or order known to such counsel to be applicable to the Company
or any Subsidiary, (B) result in
14
the creation or imposition of any lien, charge, claim or
encumbrance upon any property or assets of the Company or
its Subsidiaries, (C) accelerate the right of any holder of
a security or obligation of the Company or its Subsidiaries
to receive a payment prior to maturity or (D) trigger a
change in control provision under any obligation,
agreement, covenant or condition contained in any license,
indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument known to such
counsel to which the Company or any of its Subsidiaries is
a party or by which any of them or their respective
properties is bound, except for such breaches or defaults
which would not have a Material Adverse Effect;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company;
(vii) except for approvals in connection with the
listing of the Shares on the New York Stock Exchange, no
approval, authorization, consent or order of or filing with
any federal or state governmental or regulatory commission,
board, body, authority or agency is required in connection
with the execution, delivery and performance of this
Agreement, the consummation of the transaction contemplated
hereby, and the sale and delivery of the Shares by the Company
as contemplated hereby, other than such as have been obtained
or made under the Securities Act and the Securities Act
Regulations, and except that such counsel need express no
opinion as to any necessary qualification under the state
securities or blue sky laws of the various jurisdictions in
which the Shares are being offered by the Underwriters or any
approval of the underwriting terms and arrangements by the
National Association of Securities Dealers, Inc.;
(viii) the Shares have been duly authorized and when
the Shares have been issued and duly delivered against payment
therefor as contemplated by this Agreement, the Shares will be
validly issued, fully paid and nonassessable, and the
Underwriters will acquire the good and marketable title to the
Shares, free and clear of any pledge, lien, encumbrance,
security interest, or other claim;
(ix) the issuance and sale of the Shares by the
Company is not subject to preemptive or other similar rights
arising by operation of law, under the articles of
incorporation, charter or by-laws of the Company, or under any
agreement known to such counsel to which the Company or any of
its Subsidiaries is a party or, to such counsel's knowledge,
otherwise;
(x) to such counsel's knowledge, there are no
persons with registration or other similar rights to have any
equity securities, including securities which are convertible
into or exchangeable for equity securities, registered
pursuant to the Registration Statement;
(xi) the Shares conform in all material respects to
the descriptions thereof contained in the Registration
Statement and Prospectus;
15
(xii) the form of certificate used to evidence the
Common Stock complies in all material respects with all
applicable statutory requirements, with any applicable
requirements of the articles of incorporation and by-laws of
the Company and the requirements of the New York Stock
Exchange;
(xiii) the Registration Statement has become
effective under the Securities Act, the Prospectus was filed
with the Commission pursuant to the subparagraph of rule
424(b) of the Securities Act Regulations specified in such
opinion on the date specified in such opinion and no stop
order suspending the effectiveness of the Registration
Statement has been issued and, to such counsel's knowledge, no
proceedings with respect thereto have been commenced or
threatened;
(xiv) as of the effective date of the Registration
Statement and the date of filing of the Prospectus (including
any amendment or supplement thereto), respectively, the
Registration Statement and the Prospectus (except as to the
financial statements and other financial and statistical data
contained therein, as to which such counsel need express no
opinion) complied as to form in all material respects with the
requirements of the Securities Act and the Securities Act
Regulations;
(xv) the statements under the caption "Description
of Capital Stock" and in the risk factor captioned "Shares
Eligible for Future Sale," in the Registration Statement and
the Prospectus, insofar as such statements constitute a
summary of the legal matters referred to therein, constitute
accurate summaries thereof in all material respects; and
(xvi) to such counsel's knowledge, there are no
contracts or documents of a character which are required to be
filed as exhibits to the Registration Statement or required to
be described or summarized in the Prospectus which have not
been so filed, summarized or described, and all such summaries
and descriptions, in all material respects, fairly and
accurately set forth the material provisions of such contracts
and documents.
To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of responsible officers of the
Company and public officials and on the opinions of other counsel
satisfactory to the Representative as to matters which are governed by
laws other than the laws of the States of New York and Texas, the
General Corporation Law of the State of Delaware and the Federal laws
of the United States; provided that such counsel shall state that in
their opinion the Underwriters and they are justified in relying on
such other opinions. Copies of such certificates and other opinions
shall be furnished to the Representative and counsel for the
Underwriters.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of
the Company, representatives of the Underwriters and representatives of
the independent certified public accountants of the Company, at which
conferences the contents of the Registration Statement and the
16
Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Registration Statement and the Prospectus (except as specified the
foregoing opinion), on the basis of the foregoing, no facts have come
to the attention of such counsel which lead such counsel to reasonably
believe that the Registration Statement at the time it became effective
(except with respect to the financial statements and notes and
schedules thereto and other financial and statistical data, as to which
such counsel need express no belief) contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus as amended or supplemented (except
with respect to the financial statements, notes and schedules thereto
and other financial and statistical data, as to which such counsel need
make no statement) on the date thereof contained any untrue statement
of a material fact or omitted 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 foregoing opinion shall be rendered to the Underwriters at
the request of the Company and shall so state therein.
(g) All proceedings taken in connection with the sale of the
Shares as herein contemplated shall be reasonably satisfactory in form
and substance to the Representative and its counsel and the
Representative shall have received from Xxxxxx & Xxxxxxx a favorable
opinion, addressed to the Underwriters and dated the Delivery Date,
with respect to the Shares, the Registration Statement and the
Prospectus, and such other related matters as the Representative may
reasonably request, and the Company shall have furnished to Xxxxxx &
Xxxxxxx such documents as they may reasonably request for the purpose
of enabling them to pass upon such matters.
(h) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus (A) any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus or (B) any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause
(A) or (B), is, in the judgment of the Representative, so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered on such
delivery date on the terms and in the manner contemplated in the
Prospectus.
(i) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Company's debt securities by any "nationally recognized statistical
rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) of the Securities Act Regulations and (ii)
no
17
such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating
of any of the Company's debt securities.
(j) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared
by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv)
there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of the Representative,
impracticable or inadvisable to proceed with the public offering or
delivery of the Shares being delivered on such delivery date on the
terms and in the manner contemplated in the Prospectus.
(k) The New York Stock Exchange shall have approved the Shares
for listing, subject only to official notice of issuance.
(l) The Representative shall have received lock-up agreements
from each director and executive officer of the Company, in the form of
EXHIBIT A attached hereto.
(m) The Company shall have furnished or caused to be furnished
to the Representative such further certificates or documents as the
Representative shall have reasonably requested.
5. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees as follows:
(i) The Company will cause a prospectus supplement to
be filed (but only if the Representative or its counsel has
not reasonably objected thereto by notice to the Company after
having been furnished a copy a reasonable time prior to
filing) in connection with the offering of the Shares and will
notify the Representative promptly of such filing.
(ii) Until the later of the completion of the
distribution of the Shares and the expiration of the
over-allotment option granted in Section 1 hereof, the Company
shall promptly advise the Representative in writing (i) when
any amendment to the Registration Statement shall have become
effective or any supplement to the Prospectus has been filed,
(ii) of any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional
information, (iii) of the issuance of any stop order
18
suspending the effectiveness of the Registration Statement or
the institution or threatening of any proceeding for that
purpose and (iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for such
purpose. For a period of 60 days after the First Delivery
Date, the Company shall not file any amendment of the
Registration Statement or supplement to the Prospectus
relating to the offering of the Shares unless the Company has
furnished the Representative a copy for its review prior to
filing and shall not file any such proposed amendment or
supplement to which the Representative reasonably objects. The
Company shall use its best efforts to prevent the issuance of
any stop order and, if issued, to obtain as soon as possible
the withdrawal thereof.
(iii) Until the later of the completion of the
distribution of the Shares and the expiration of the
over-allotment option granted in Section 1 hereof, the Company
shall deliver promptly to the Representative such number of
the following documents as the Representative shall reasonably
request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment
thereto (in each case excluding exhibits) and (ii) each
preliminary prospectus, the Prospectus and any amended or
supplemented Prospectus; and, if the delivery of a prospectus
is required at any time after the filing of the Prospectus in
connection with the offering or sale of the Shares and if at
such time any events shall have occurred as a result of which
the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary to amend or
supplement the Prospectus in order to comply with the
Securities Act, to notify the Representative and, upon its
request, to prepare and furnish without charge to each
Underwriter as many copies as the Representative may from time
to time reasonably request of an amended or supplemented
Prospectus which will correct such statement or omission or
effect such compliance.
(iv) The Company shall make generally available to
its security holders and to the Representative as soon as
practicable, but not later than 45 days after the end of the
12-month period beginning at the end of the fiscal quarter of
the Company during which the effective date of the
Registration Statement occurs (or 90 days if such 12-month
period coincides with the Company's fiscal year), an earning
statement (which need not be audited) of the Company, covering
such 12-month period, which shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 of the Rules.
(v) The Company shall furnish to the Representative
and counsel for the Underwriters, upon request and without
charge, copies of the Registration Statement (including all
exhibits thereto and amendments thereof) and all amendments
thereof and, so long as delivery of a prospectus by an
Underwriter or
19
dealer may be required by the Securities Act or the Securities
Act Regulations, as many copies of the Prospectus and any
amendments thereof and supplements thereto as such
Underwriter may reasonably request.
(vi) The Company shall reasonably cooperate with the
Representative and counsel for the Underwriters in endeavoring
to qualify the Shares for offer and sale in connection with
the offering under the laws of such jurisdictions as the
Representative and the Company have mutually agreed are
appropriate and shall maintain such qualifications in effect
so long as required for the distribution of the Shares;
PROVIDED, HOWEVER, that the Company shall not be required in
connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any
jurisdiction or subject itself to taxation as doing business
in any jurisdiction.
(vii) Without the prior written consent of the
Representative, for a period of 60 days after the date of this
Agreement, the Company shall not (i) register with the
Commission (other than on Form S-8 or on any successor form),
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option to contract to sell,
grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any equity
securities of the Company or any securities convertible into
or exercisable or exchangeable for equity securities of the
Company or any right to acquire equity securities of the
Company, or (ii) enter into any swap or similar agreement that
transfers, in whole or in part, the economic risk of ownership
of any equity securities of the Company, whether any such
transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities,
in cash or otherwise, except for (A) the issuance of the
Shares pursuant to the Prospectus, (B) the issuance of options
granted to employees of the Company by the compensation
committee of the Board of Directors, provided that any such
options not be exercisable within 60 days of the date of this
Agreement, (C) the issuance of equity securities of the
Company in connection with the acquisition of any company that
is not an affiliate of the Company, (D) the issuance of equity
securities of the Company in exchange for outstanding
securities of the Company and (E) the issuance of equity
securities of the Company upon the exercise of outstanding
options, warrants or other securities convertible into or
exchangeable for equity securities of the Company.
(viii) On or before completion of this offering, the
Company shall make all filings required under applicable
securities laws and by the New York Stock Exchange, including
any required registration under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT").
(ix) The Company will apply the net proceeds from the
offering of the Shares in the manner set forth under "Use of
Proceeds" in the Prospectus.
(b) The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Shares and any taxes
payable in that connection; (b) the
20
costs incident to the preparation, printing and filing under the
Securities Act of the Prospectus and any amendments and exhibits
thereto; (c) the costs of distributing the Prospectus as originally
filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any preliminary
prospectus, the Prospectus and any amendment or supplement to the
Prospectus, all as provided in this Agreement; (d) any applicable
listing or other fees; (e) the fees and expenses (not in excess, in
the aggregate, of $10,000, including related fees and expenses of
counsel to the Underwriters) of qualifying the Shares under the
securities laws of the several jurisdictions as provided in Section
5(a)(vi) and of preparing, printing and distributing a Blue Sky
Memorandum; (f) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection
with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval
of the Company, travel and lodging expenses of the representatives
and officers of the Company and any such consultants, and one-half of
the cost of any aircraft chartered in connection with the road show
and (g) all other costs and expenses incident to the performance of
the obligations of the Company under this Agreement; provided that,
except as provided in this Section 5 and in Section 9 the
Underwriters shall pay their own costs and expenses, including the
costs and expenses of their counsel, one-half of the cost of any
aircraft chartered in connection with the road show, any transfer
taxes on the Shares which they may sell and the expenses of
advertising any offering of the Shares made by the Underwriters. The
Underwriters agree to pay up to $400,000 of the expenses of the
Company in connection with the offer and sale of the Shares as
described in this Section 5(b).
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall 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, from
and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of
Shares), to which that Underwriter, officer, employee or controlling
person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of,
or is based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any preliminary prospectus, the
Registration Statement or the Prospectus or in any amendment or
supplement thereto, or (B) in any materials or information provided to
investors by, or with the approval of, the Company in connection with
the marketing of the offering of the Shares ("MARKETING MATERIALS"),
including any roadshow or investor presentations made to investors by
the Company (whether in person or electronically), (ii) the omission or
alleged omission to state in any preliminary prospectus, the
Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Marketing Materials, any material fact
required to be stated therein or necessary to make the statements
therein not misleading or (iii) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated
hereby, and which is
21
included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon matters covered by
clause (i) or (ii) above (provided that the Company shall not be
liable under this clause (iii) to the extent that it is determined in
a final judgment by a court of competent jurisdiction that such loss,
claim, damage, liability or action resulted directly from any such
acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct), and
shall reimburse each Underwriter and each such officer, employee or
controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that Underwriter, officer, employee or
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred; PROVIDED, HOWEVER, that the
Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus, the
Registration Statement or the Prospectus, or in any such amendment or
supplement, in reliance upon and in conformity with written
information concerning such Underwriter furnished to the Company
through the Representative by or on behalf of any Underwriter
specifically for inclusion therein which information consists solely
of the information specified in Section 6(e); and PROVIDED, FURTHER,
that the indemnity agreement contained in this Section 6(a) with
respect to the preliminary prospectus shall not inure to the benefit
of an Underwriter (or to the benefit of any person controlling such
Underwriter) with respect to any person asserting any such loss,
expense, liability, damage or claim which is the subject thereof if
the Prospectus or any supplement thereto prepared with the consent of
the Representative and furnished to the Underwriters prior to the
First Delivery Date corrected any such alleged untrue statement or
omission and if such Underwriter failed to send or give a copy of the
Prospectus or supplement thereto to such person at or prior to the
written confirmation of the sale of Shares to such person, unless such
failure resulted from noncompliance by the Company with Section
5(a)(iii) above. The foregoing indemnity agreement is in addition to
any liability which the Company may otherwise have to any Underwriter
or to any officer, employee or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees,
each of its directors, and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or (ii) the omission or alleged
omission to state in any preliminary prospectus, the Registration
Statement or the Prospectus, or in any amendment or supplement thereto,
any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Underwriter
furnished to the Company through the Representative by or on behalf of
that Underwriter specifically for
22
inclusion therein, and shall reimburse the Company and any such
director, officer or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any
Underwriter may otherwise have to the Company or any such director,
officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 6, notify the
indemnifying party in writing of the claim or the commencement of that
action; PROVIDED, HOWEVER, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 6 except to the extent it has been materially prejudiced
by such failure and, PROVIDED FURTHER, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 6. If
any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that
it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; PROVIDED, HOWEVER, that the Representative shall have
the right to employ counsel to represent jointly the Representative and
the other Underwriter and their respective officers, employees and
controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Underwriters
against the Company under this Section 6 if, in the reasonable judgment
of the Representative, it is advisable for the Representative and those
Underwriters, officers, employees and controlling persons to be jointly
represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Company. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding
in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with the consent of the
indemnifying party or if there be a final judgment of the plaintiff in
any such action, the indemnifying party agrees to indemnify and hold
harmless any indemnified party from and against any loss or liability
by reason of such settlement or judgment.
23
(d) If the indemnification provided for in this Section 6
shall for any reason be unavailable to or insufficient to hold harmless
an indemnified party under Section 6(a) or 6(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as
shall be appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from the
offering of the Shares 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 with respect to the statements
or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, 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 with respect to such
offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Shares purchased under this Agreement
(before deducting expenses) received by the Company, on the one hand,
and the total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Shares purchased under
this Agreement, on the other hand, bear to the total gross proceeds
from the offering of the Shares under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the 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 or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant
to this Section were to be determined by pro rata allocation or by any
other method of allocation which does not take into account the
equitable considerations referred to herein. The amount paid or payable
by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this
Section shall be deemed to include, for purposes of this Section 6(d),
any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 6(d), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it
and distributed to the public was offered to the public exceeds the
amount of any damages which such Underwriter has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. 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.
(e) The Underwriters severally confirm and the Company
acknowledges that the statements with respect to the public offering of
the Shares by the Underwriters set forth on the cover page of, the
legend concerning over-allotments on the inside front cover page of and
the concession and reallowance figures appearing under the caption
"Underwriting" in, the Prospectus are correct and constitute the only
information
24
concerning such Underwriters furnished in writing to the Company by or
on behalf of the Underwriters specifically for inclusion in the
Registration Statement and the Prospectus.
7. DEFAULTING UNDERWRITERS. If, on either Delivery Date, any
Underwriter defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting Underwriters shall be obligated to
purchase the Shares which the defaulting Underwriter agreed but failed to
purchase on such Delivery Date; PROVIDED, HOWEVER, that the remaining
non-defaulting Underwriters shall not be obligated to purchase any of the
Shares on such Delivery Date if the total number of Shares which the
defaulting Underwriter agreed but failed to purchase on such date exceeds
9.09% of the total number of Shares to be purchased on such Delivery Date, and
the remaining non-defaulting Underwriters shall not be obligated to purchase
more than 110% of the number of Shares which it agreed to purchase on such
Delivery Date pursuant to the terms of Section 1. If the foregoing maximums
are exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representative who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the Shares to be purchased on such Delivery Date.
If the remaining Underwriters or other underwriters satisfactory to the
Representative do not elect to purchase the Shares which the defaulting
Underwriter agreed but failed to purchase on such Delivery Date, this
Agreement shall terminate without liability on the part of the non-defaulting
Underwriters or the Company, except that the Company will continue to be
liable for the payment of expenses to the extent set forth in Sections 5 and
Section 9. As used in this Agreement, the term "Underwriter" includes, for all
purposes of this Agreement unless the context requires otherwise, any party
not listed in Schedule I hereto who, pursuant to this Section 7, purchases any
of the Shares which a defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of
any liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Shares of a
defaulting or withdrawing Underwriter, either the Representative or the
Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement,
the Prospectus or in any other document or arrangement.
8. TERMINATION. The obligations of the Underwriters
hereunder may be terminated by the Representative by notice given to and
received by the Company prior to delivery of and payment for the Firm Stock
if, prior to that time, any of the events described in Sections 4(h), 4(i) or
4(j), shall have occurred or if the Underwriters shall decline to purchase the
Shares for any reason permitted under this Agreement.
9. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company
shall fail to tender the Shares for delivery to the Underwriters by reason of
any failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company
(including, without limitation, with respect to the transactions contemplated
by this Agreement) is not fulfilled, the Company will reimburse the
Underwriters for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred by the Underwriters
25
in connection with this Agreement and the proposed purchase of the Shares, and
upon demand the Company shall pay the full amount thereof to the
Representative. If this Agreement is terminated pursuant to Section 7 by
reason of the default of one or more Underwriters, the Company shall not be
obligated to reimburse any defaulting Underwriter on account of those expenses.
10. MISCELLANEOUS. The respective agreements,
representations, warranties, indemnities and other statements of the Company
or its officers and of the Underwriters set forth in or made pursuant to this
Agreement shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Underwriters or the Company or any
of the officers, directors or controlling persons referred to in Section 6
hereof, and shall survive delivery of and payment for the Shares. The
provisions of Sections 5(b), 6 and 7 shall survive the termination or
cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company and their respective successors and assigns, and, to
the extent expressed herein, for the benefit of persons controlling the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from the Underwriters
merely because of such purchase.
All notices and communications hereunder shall be in writing
and mailed or delivered or by telephone or telegraph if subsequently confirmed
in writing, (a) if to the Underwriters, c/x Xxxxxx Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate Department,
with a copy to Xxxxxxx X. Xxx, Xxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, and (b), if to the Company, to the offices of the Company at
Key Energy Services, Inc., Xxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxx Xxxxxxxxx, Xxx
Xxxxxx 00000, Attention: General Counsel, with a copy to Xxxxxx X. Xxxxx,
Xxxxxx & Xxxxxx, L.L.P., 000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
26
Please confirm that the foregoing correctly sets forth the
agreement among us.
Very truly yours,
KEY ENERGY SERVICES, INC.
By /s/ Xxxx X. Xxxxxx, Xx.
---------------------------------------------
Name Xxxx X. Xxxxxx, Xx.
-------------------------------------------
Its Senior Vice President and General Counsel
--------------------------------------------
Confirmed:
XXXXXX BROTHERS INC.
For themselves and as Representative
of the several Underwriters named
in Schedule I hereto.
By /s/ Xxxxx X. Xxxxxx, Xx.
-----------------------------------
Title: Senior Vice President
27
Schedule I
Underwriters Number of Shares of Firm Stock to be Purchased
------------ ----------------------------------------------
Xxxxxx Brothers Inc. 4,750,000
Xxxx Xxxxxxxx Incorporated 4,750,000
FAC/Equities,
a division of First Albany Corporation 500,000
----------
Total 10,000,000
==========
Schedule II
EXHIBIT A
Form of Director and Executive
Officer Lock-up Agreement
LOCK-UP AGREEMENT
June __, 2000
KEY ENERGY SERVICES, INC.
Xxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Xxxxxx Brothers Inc.
Three World Financial Center
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned understands that Xxxxxx Brothers Inc., as
Representative ("Representative") of the several underwriters (the
"UNDERWRITERS"), proposes to enter into an Underwriting Agreement with Key
Energy Services, Inc. (the "COMPANY") providing for the public offering by the
Underwriters, including the Representative, of Common Stock, par value $.10
per share (the "COMMON STOCK"), of the Company (the "PUBLIC OFFERING").
In consideration of the Underwriters' agreement to purchase
and undertake the Public Offering of the Company's Common Stock and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
undersigned agrees that, without the prior written consent of the
Representative, he, she or it will not, during the period commencing on the
date hereof and ending 60 days after the date of this agreement, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option to contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of the Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or any right to acquire Common Stock, or (ii)
enter into any swap or similar agreement that transfers, in whole or in part,
the economic risk of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
provisions shall not apply to (i) exercise of options or warrants, or (ii)
transfers, without consideration, of the Common Stock or any securities
convertible into, or exercisable or exchangeable for Common Stock to family
members or to one or more trusts established for the benefit of one or more
family members, provided that the transferee executes and delivers to the
Representative, an agreement whereby the transferee agrees to be bound by all
of the foregoing terms and provisions.
Exhibit A
In addition, the undersigned agrees that the Company may,
(i) with respect to any shares of Common Stock for which the undersigned is
the record holder, cause the transfer agent for the Company to note
stop-transfer instructions with respect to such shares of Common Stock
consistent with the foregoing paragraph on the transfer books and records of
the Company and (ii) with respect to any shares of Common Stock for which the
undersigned is the beneficial holder but not the record holder, cause the
record holder of such shares of Common Stock to cause the transfer agent for
Company to note stop-transfer instructions with respect to such shares of
Common Stock consistent with the foregoing paragraph on the transfer books and
records of the Company.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to enter into this letter agreement,
and that, upon request, the undersigned will execute any additional documents
necessary or desirable in connection with the enforcement hereof. All
authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and any obligations of the undersigned shall
be binding upon the heirs, personal representatives, successors, and assigns
of the undersigned.
Very truly yours,
--------------------------
--------------------------
(Name - Please Type)
--------------------------
--------------------------
--------------------------
(Address)
--------------------------
(Social Security or Taxpayer Identification No.)
Exhibit A
