KEY ENERGY SERVICES, INC.
Common Stock
UNDERWRITING AGREEMENT
December 13, 2001
Xxxxxx Brothers Inc.
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 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 "UNDERWRITER"), an aggregate of 5,400,000 shares (the "SHARES")
of the Company's Common Stock, $0.10 par value (the "COMMON STOCK"). This is to
confirm the agreement concerning the purchase of the Shares from the Company by
the Underwriter.
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 Underwriter 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 Underwriter 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
Underwriter, and the Underwriter agrees to purchase the Shares from the Company,
at a price of $8.00 per share.
The Company shall not be obligated to deliver any of the
Shares to be delivered on the 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
Shares to the Underwriter, and payment of the purchase price by wire transfer
payable in same day funds drawn to the order of the Company for the Shares
purchased from the Company, against delivery of the respective certificates
therefor to the Underwriter, 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 Underwriter
(such time and date of delivery and payment are sometimes referred to as the
"DELIVERY DATE").
Certificates evidencing the Shares shall be registered in such
names and shall be in such denominations as the Underwriter shall request at
least two full business days before the Delivery Date and shall be made
available to the Underwriter for checking and packaging, at such place as is
designated by the Underwriter, on the full business day before the Delivery
Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to the Underwriter as follows:
(a) The Company's capitalization consists of 200,000,000
shares of Common Stock, of which as of December 12, 2001, 102,546,713
shares are outstanding and 12,394,191 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 I 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; other than stock option grants
to employees and directors and 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
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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
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 except 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;
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(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 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 Delivery Date, (B) such
approvals as have been obtained, or will have been obtained at the
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 Underwriter;
(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
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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, 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 the 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 Underwriter and
furnished in writing by or on behalf of the Underwriter to the Company
expressly for use in the Registration Statement or the Prospectus;
(l) the Prospectus delivered to the Underwriter 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 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
5
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 or incorporated by reference 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
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, for the year ended June 30, 2001, 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;
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(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;
(v) except with respect to the blue sky survey, the Company
has not relied upon the Underwriter or legal counsel for the
Underwriter 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 Underwriter or to counsel for the
Underwriter pursuant to or in connection with this Agreement shall be
deemed a representation and warranty by the Company to the Underwriter
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
7
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 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,
except for failures to file that would not have a Material Adverse
Effect, 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
8
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, 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;
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(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 in connection with certain acquisitions and
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 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; and
(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.
4. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The
obligation of the Underwriter 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 Underwriter 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 Underwriter.
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(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 correct, in all material respects,
when made and on and as of the 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 Delivery
Date.
(d) The Underwriter shall have received on the Delivery
Date a certificate, addressed to the Underwriter 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 Underwriter shall have received, at the Delivery
Date, a signed letter from KPMG LLP addressed to the Underwriter and
dated the Delivery Date, in form and substance reasonably satisfactory
to the Underwriter confirming that they are independent accountants
within the meaning of the Securities Act and the Securities Act
Regulations, and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission 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
11
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 Company's
audited balance sheet for the fiscal year ended June
30, 2001 and the unaudited balance sheet for the
three months ended September 30, 2001 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 Underwriter 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 Underwriter at the
Delivery Date an opinion of Xxxxxx & Xxxxxx, L.L.P., counsel for the
Company and its Subsidiaries, addressed to the Underwriter and dated
the Delivery Date and in form and substance reasonably satisfactory to
Xxxxxx & Xxxxxxx, counsel for the Underwriter, stating that:
(i) The Company's capitalization consists of
200,000,000 shares of Common Stock, of which at December 12,
2001, 102,546,713 shares are outstanding and 12,394,191 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; other than
stock option grants to employees and directors and 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
12
Subsidiary to issue any shares of capital stock, any such
convertible or exchangeable securities or obligation, or
any such warrants, rights or options;
(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
13
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 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 Underwriter 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
Underwriter 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;
14
(xi) the Shares conform in all material respects
to the description thereof contained in the Registration
Statement and Prospectus;
(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" 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 Underwriter 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 Underwriter and they are justified in relying on such
other opinions. Copies of such certificates and other opinions shall be
furnished to the Underwriter and counsel for the Underwriter.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of
the Company, representatives of
15
the Underwriter and representatives of the independent certified
public accountants of the Company, at which conferences the contents
of the Registration Statement and the 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 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 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 Underwriter at
the request of the Company and shall so state therein.
(g) All corporate proceedings required to be taken in
connection with the sale of the Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Underwriter and
its counsel and the Underwriter shall have received from Xxxxxx &
Xxxxxxx a favorable opinion, addressed to the Underwriter and dated the
Delivery Date, with respect to the matters covered in paragraphs (xiii)
and (xiv) of Section 4(f) hereof, and such other related matters as the
Underwriter 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 Underwriter, 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
16
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 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 a suspension of trading in the
Common Stock for at least one full trading day on the New York Stock
Exchange and trading in securities on the New York Stock Exchange
generally shall not have been suspended.
(k) The New York Stock Exchange shall have approved the
Shares for listing, subject only to official notice of issuance.
(l) The Underwriter shall have received lock-up
agreements from each executive officer of the Company and all but one
of the directors of the Company, in the form of EXHIBIT A attached
hereto; provided that the Company will use its commercially reasonable
best efforts to cause all of its directors to execute such lock-up
agreements and deliver them to the Underwriter on or before the
Delivery Date.
(m) The Company shall have furnished or caused to be
furnished to the Underwriter such further certificates or documents
customarily furnished in connection with an underwritten public
offering of common stock, as the Underwriter 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 Underwriter 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 Underwriter promptly of such filing.
(ii) Until the completion of the distribution of
the Shares, the Company shall promptly advise the Underwriter
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 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 Delivery Date, the
Company shall not file any amendment of the Registration
Statement or supplement to the Prospectus, in each case,
relating to the offering of the Shares unless the Company has
furnished the Underwriter a copy for its review prior to
17
filing and shall not file any such proposed amendment or
supplement to which the Underwriter 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 completion of the distribution of
the Shares, the Company shall deliver promptly to the
Underwriter such number of the following documents as the
Underwriter 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) 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 Underwriter and, upon its
request, to prepare and furnish without charge to the
Underwriter as many copies as the Underwriter 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 Underwriter 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 Underwriter
and counsel for the Underwriter, 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 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 the Underwriter may reasonably request.
(vi) The Company shall reasonably cooperate with
the Underwriter and counsel for the Underwriter in endeavoring
to qualify the Shares for offer and sale in connection with
the offering under the laws of such jurisdictions as the
Underwriter 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
18
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
Underwriter, for a period of 90 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 and directors 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, (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 and
(F) a post-effective amendment to the Company's "universal"
shelf registration statement on Form S-4 to register
additional shares of Common Stock, provided that any takedown
of this shelf registration statement must comply with the
provisions of this paragraph.
(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 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), 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 Underwriter) of
19
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 Underwriter shall pay its own
costs and expenses.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless the
Underwriter, its officers and employees and each person, if any, who
controls the 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 the 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) 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 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 the Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated
hereby, and which is 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 the Underwriter through its gross negligence or willful misconduct),
and shall reimburse the Underwriter and each such officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the 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 the Registration Statement or the
20
Prospectus, or in any such amendment or supplement, in reliance upon
and in conformity with written information concerning the Underwriter
furnished to the Company through the Underwriter by or on behalf of the
Underwriter specifically for inclusion therein which information
consists solely of the information specified in Section 6(e).
(b) The Underwriter, 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 the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or (ii) the omission or alleged
omission to state in 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 the Underwriter furnished to the Company through the
Underwriter specifically for 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
the 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. 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
21
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.
(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 Underwriter 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 Underwriter 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 Underwriter 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
Underwriter 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. 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 Underwriter, 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 Underwriter 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), Underwriter shall
not 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 the Underwriter has otherwise paid or become
liable to pay by reason of
22
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 Underwriter confirms and the Company acknowledges
that the statements with respect to the public offering of the Shares
by the Underwriter set forth on the cover page of, the disclosure
concerning over-allotments and the concession and reallowance figures
appearing under the caption "Underwriting" in, the Prospectus are
correct and constitute the only information concerning the Underwriter
furnished in writing to the Company by or on behalf of the Underwriter
specifically for inclusion in the Registration Statement and the
Prospectus.
7. INTENTIONALLY OMITTED.
8. TERMINATION. The obligations of the Underwriter
hereunder may be terminated by the Underwriter by notice given to and received
by the Company prior to delivery of and payment for the Shares 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 Underwriter shall decline to purchase the Shares for any
reason permitted under this Agreement.
9. REIMBURSEMENT OF UNDERWRITER'S EXPENSES. If the
Company shall fail to tender the Shares for delivery to the Underwriter 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 Underwriter's 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
Underwriter for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred by the Underwriter 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 Underwriter.
10. MISCELLANEOUS. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of the Underwriter 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 Underwriter 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),
and 6 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriter, the Company and their respective successors and assigns, and, to
the extent expressed herein, for the benefit of persons controlling the
Underwriter, 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 Underwriter merely
because of such purchase.
23
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 Underwriter, c/x Xxxxxx Brothers Inc., 000 Xxxxxx
Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000, Attention: Syndicate Department,
facsimile (000) 000-0000 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., 000 Xxxxx Xxxxx Xxxx, Xxx
Xxxx, Xxxxxxxxxxxx 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.
24
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.
By: /s/ Xxxxx X. Xxxxxx, Xx.
Name: Xxxxx X. Xxxxxx, Xx.
Title: Senior Vice President
25
Schedule I
Significant Subsidiaries ("SUBSIDIARIES")
Yale E. Key, Inc.
Odessa Exploration Incorporated
Key Energy Services - California, Inc.
Xxxxxx Well Servicing, Inc.
Key Four Corners, Inc.
Key Rocky Mountain, Inc.
Key Energy Drilling, Inc.
WellTech Eastern, Inc.
Xxxxxx Production Management, Inc.
Xxxxxx Production Partners, L.P.
WellTech Mid-Continent, Inc.
Schedule I
EXHIBIT A
Form of Director and Executive
Officer Lock-up Agreement
LOCK-UP AGREEMENT
December __, 2001
KEY ENERGY SERVICES, INC.
000 Xxxxx Xxxxx Xxxx
Xxx Xxxx, Xxxxxxxxxxxx 00000
Xxxxxx Brothers Inc.
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
The undersigned understands that Xxxxxx Brothers Inc., (the
"UNDERWRITER"), proposes to enter into an Underwriting Agreement with Key Energy
Services, Inc. (the "COMPANY") providing for the public offering by the
Underwriter, of Common Stock, par value $.10 per share (the "COMMON STOCK"), of
the Company (the "PUBLIC OFFERING").
In consideration of the Underwriter's 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 Underwriter,
he, she or it will not, during the period commencing on the date hereof and
ending 90 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 Underwriter, an agreement whereby
the transferee agrees to be bound by all of the foregoing terms and provisions.
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
Exhibit A
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,
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(Name - Please Type)
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(Address)
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(Social Security or Taxpayer Identification No.)
Exhibit A
