Exhibit 1.1
KEY ENERGY SERVICES, INC.
55,000,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
May 4, 1999
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
as Representative of the several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Key Energy Services, Inc., a Maryland corporation (the "Company"),
confirms its agreement with each of the Underwriters listed on Schedule I hereto
(collectively, the "Underwriters"), for whom Friedman, Billings, ▇▇▇▇▇▇ & Co.,
Inc. is acting as representative (in such capacity, the "Representative"), with
respect to (i) the sale by the Company of 55,000,000 shares (the "Initial
Shares") of Common Stock, par value $0.10 per share, of the Company ("Common
Stock") and the purchase by the Underwriters, acting severally and not jointly,
of the respective number of shares of Common Stock set forth opposite the names
of the Underwriters in Schedule I hereto, and (ii) the grant of the option
described in Section 1(b) hereof to purchase all or any part of 6,300,000
additional shares of Common Stock to cover overallotments (the "Option Shares"),
if any. The 55,000,000 shares of Common Stock to be purchased by the
Underwriters and all or any part of the 6,300,000 shares of Common Stock subject
to the option described in Section l(b) hereof are hereinafter called,
collectively, the "Shares".
The Company understands that the Underwriters propose to make a public
offering of the Shares on the terms set forth in the Prospectus (defined below)
as soon as the Underwriters deem advisable after this Agreement has been
executed and delivered.
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.
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 Closing Time (as defined below), "Registration Statement"
shall refer to such registration statement as so amended. As used herein, the
term "Preliminary Prospectus Supplement" means the prospectus included in the
Registration Statement in the form filed with the Commission on April 16, 1999
under paragraph (3) of Rule 424(b) under the Securities Act Regulations (the
"Base Prospectus"), as supplemented by the Preliminary Prospectus Supplement
dated April 16, 1999 in the form filed with the Commission on April 16, 1999
under paragraph (2) of Rule 424(b) of the Securities Act Regulations and the
term "Prospectus" means the Base Prospectus and any amendments thereof or
supplements thereto relating to the offering in the form first filed with the
Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Securities Act
Regulations. The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus.
The Company and the Underwriters agree as follows:
1. Sale and Purchase:
a) Initial Shares. Upon the basis of the warranties and
representations and other terms and conditions herein set forth, at
the purchase price per share of $2.85, the Company agrees to sell to
the Underwriters the number of Initial Shares, and each Underwriter
agrees, severally and not jointly, to purchase from the Company the
number of Initial Shares set forth in Schedule I opposite such
Underwriter's name, plus any additional number of Initial Shares which
such Underwriter may become obligated to purchase pursuant to the
provisions of Section 8 hereof, subject in each case, to such
adjustments among the Underwriters as the Representative in its sole
discretion shall make to eliminate any sales or purchases of
fractional shares. The Underwriters may from time to time increase or
decrease the public offering price after the initial public offering
to such extent as the Underwriters may determine.
b) Option Shares. In addition, upon the basis of the warranties
and representations and other terms and conditions herein set forth,
at the purchase price per share set forth in paragraph (a), the
Company hereby grants an option to purchase to the Underwriters,
acting severally and not jointly, up to an additional 6,300,000
Shares, plus any additional number of Option Shares which such
Underwriter may become obligated to purchase pursuant to the
provisions of Section 8 hereof. The option hereby granted will expire
30 days after the date hereof and may be exercised in whole or in part
from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of
the Initial Shares upon notice by the Representative to the Company
setting forth the number of Option Shares as to which the several
Underwriters are then exercising the option and the time and date of
payment and delivery for such Option Shares. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the
Representative, but shall not be later than three full business days
(or earlier, without the consent of the Company, than two full
business days) after the exercise of said option, nor in any event
prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Shares, the Company
will sell that number of Option Shares, and each of the Underwriters,
acting severally and not jointly, will purchase that proportion of the
total number of Option Shares then being purchased which the number of
Initial Shares set forth in Schedule I opposite the name of such
Underwriter bears to the total number of Initial Shares, subject in
each case to such adjustments among the Underwriters as the
Representative in its sole discretion shall make to eliminate any
sales or purchases of fractional shares. The Underwriters may from
time to time increase or decrease the public offering price of the
Option Shares after the initial public offering to such extent as the
Underwriters may determine.
2. Payment and Delivery:
a) Initial Shares. Payment of the purchase price for the
Initial Shares shall be made to the Company by wire transfer of
immediately available funds at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ located
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (unless another place
shall be agreed upon by the Representative and the Company) against
delivery of the certificates for the Initial Shares to the
Representative for the respective accounts of the Underwriters. Such
payment and delivery shall be made at 9:30 a.m., New York City time,
on the third (fourth, if pricing occurs after 4:30 p.m., New York City
time) business day after the date hereof (unless another time, not
later than ten business days after such date, shall be agreed to by
the Representative and the Company). The time at which such payment
and delivery are actually made is hereinafter sometimes called the
"Closing Time." Certificates for the Initial Shares shall be delivered
to the Representative in definitive form registered in such names and
in such denominations as the Representative shall specify. For the
purpose of expediting the checking of the certificates for the Initial
Shares by the Representative, the Company agrees to make such
certificates available to the Representative for such purpose at least
one full business day preceding the Closing Time.
b) Option Shares. In addition, payment of the purchase price
for the Option Shares shall be made to the Company by wire transfer of
immediately available funds at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ located
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (unless another place
shall be agreed upon by the Representative and the Company), against
delivery of the certificates for the Option Shares to the
Representative for the respective accounts of the Underwriters. Such
payment and delivery shall be made at 9:30 a.m., New York City time,
on each Date of Delivery determined pursuant to Section 1(b) above.
Certificates for the Option Shares shall be delivered to the
Representative in definitive form registered in such names and in such
denominations as the Representative shall specify. For the purpose of
expediting the checking of the certificates for the Option Shares by
the Representative, the Company agrees to make such certificates
available to the Representative for such purpose at least one full
business day preceding the relevant Date of Delivery.
3. Representations and Warranties of the Company: The Company
represents and warrants to the Underwriters that:
a) the Company has an authorized capitalization as set forth in
the Prospectus under the caption "Capitalization;" 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 of each of the Subsidiaries
(which capitalized term is defined to include only those subsidiaries
of the Company that are listed in Schedule III 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 of
the Subsidiaries are directly or indirectly owned of record and
beneficially by the Company; except as disclosed in Schedule II
hereto, 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) the Company and its subsidiaries each has been duly formed
and is validly existing in good standing under the laws of its
respective jurisdiction of incorporation with full 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 contemplated hereby, except where
the failure 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 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 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 the purchase agreement dated April 15, 1999 by and between the
Company and ▇▇▇▇▇-▇▇▇▇ Group LLC, ZPG Securities, L.L.C. and DFG
Corporation (the "▇▇▇▇▇-▇▇▇▇ Purchase Agreement") and consummation of
the transactions contemplated hereby and thereby 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) assuming no purchaser from the Underwriters
purchases more than 50% of the Common Stock of the Company, 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 and, assuming due execution and delivery by
the Underwriters, is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles equity, and except to the extent
that the indemnification and contribution provisions of Section 9
hereof may be limited by federal or state securities laws and public
policy considerations in respect thereof;
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 Closing Time or the
relevant Date of Delivery, as the case may be, under the Securities
Act, (B) such approvals as have been obtained, or will have been
obtained at the Closing Time, 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 Registration Statement and 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 Preliminary Prospectus and the Registration Statement
comply and the Prospectus and any further amendments or supplements
thereto will, when they have become effective or are filed with the
Commission, as the case may be, 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
Preliminary Prospectus Supplement does not, 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 Closing Time and on each
Date of Delivery (if any), 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
(that information being set forth in the last sentence of the first
paragraph of Section 9(c) hereof);
l) the Preliminary Prospectus was, and the Prospectus delivered
to the Underwriters for use in connection with this offering will be,
identical in all material respects to the versions of the Preliminary
Prospectus and Prospectus created to be transmitted to the Commission
for filing via the Electronic Data Gathering Analysis and Retrieval
System ("▇▇▇▇▇"), except to the extent permitted by Regulation S-T;
m) 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 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, included in the Registration Statement 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 Prospectus under the caption
"Selected Financial Data" 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 Registration
Statement; the unaudited pro forma financial information (including
the related notes) included in the Prospectus or any Preliminary
Prospectus complies as to form in all material respects to the
applicable accounting requirements of Regulation S-X, and management
of the Company believes that the pro forma adjustments are reasonable;
such pro forma adjustments have been properly applied to the
historical amounts in the compilation of the information and such
information fairly presents with respect to the Company and the
Subsidiaries, the financial position, results of operations and other
information purported to be shown therein at the respective dates and
for the respective periods specified;
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 Registration Statement and 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 respective 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 Registration
Statement and the Prospectus;
s) 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;
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 Representative or legal counsel for the
Representative 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 each
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 note 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 the 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 Registration Statement 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 Registration Statement or 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 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 dates as of which information is provided in the
Prospectus, neither the Company nor any of its Subsidiaries has
violated, or received notice of any violation with respect to: (i) any
applicable environmental, safety or similar law applicable to the
business of the Company or any of its Subsidiaries; (ii) any federal
or state law relating to discrimination in the hiring, promotion or
pay of employees; (iii) any applicable federal or state wages and
hours law or; (iv) nor any provisions of the Employee Retirement
Income Security Act or the rules and regulations promulgated
thereunder, the violation of any of which would reasonably be expected
to have a Material Adverse Effect;
ff) to the knowledge of the Company after due inquiry, 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;
gg) 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;
hh) 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;
ii) in connection with this offering, the Company has not
offered and will not offer its Common Stock or any other securities
convertible into or exchangeable or exercisable for Common stock in a
manner in violation of the Securities Act. 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, the Preliminary Prospectus Supplement and the
Prospectus;
jj) 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;
kk) 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 and the
Prospectus and which is not so described;
ll) 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 (the "Investment Company Act");
mm) 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
nn) except as otherwise described in the Prospectus or as would
not reasonably be expected to have a Material Adverse Effect, all
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, is year 2000 compliant.
4. Certain Covenants: The Company hereby agrees with each
Underwriter:
a) to furnish such information as may be required and otherwise
to cooperate in qualifying the Shares for offering and sale under the
securities or blue sky laws of such states as the Representative may
designate and to maintain such qualifications in effect as long as
required for the distribution of the Shares, provided that the Company
shall not be required to qualify as a foreign corporation or to
consent to the service of process under the laws of any such state
(except service of process with respect to the offering and sale of
the Shares);
b) to prepare the Prospectus in a form approved by the
Underwriters and file such Prospectus with the Commission pursuant to
Rule 424(b) not later than 10:00 a.m. (New York City time), on the day
following the execution and delivery of this Agreement or the day
following the date on which the price for the Shares is determined,
whichever is later, and to furnish promptly (and with respect to the
initial delivery of such Prospectus, not later than 5:00 p.m. (New
York City time) on the day following the execution and delivery of
this Agreement) to the Underwriters as many copies of the Prospectus
as the Underwriters may reasonably request for the purposes
contemplated by the Securities Act Regulations, which Prospectus and
any amendments or supplements thereto furnished to the Underwriters
will be identical in all material respects to the version created to
be transmitted to the Commission for filing via ▇▇▇▇▇, except to the
extent permitted by Regulation S-T, and the Company agrees to notify
the Underwriters promptly of any such material errors or omissions of
which it becomes aware and to promptly correct the same;
c) to advise the Representative promptly and (if requested by
the Representative) to confirm such advice in writing, when any
post-effective amendment to the Registration Statement becomes
effective under the Securities Act Regulations;
d) to advise the Representative immediately, confirming such
advice in writing, of (i) the receipt of any comments from, or any
request by, the Commission for amendments or supplements to the
Registration Statement or Prospectus or for additional information
with respect thereto, or (ii) the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or of any order preventing or suspending the use of the Preliminary
Prospectus Supplement or the Prospectus, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceedings for any of such
purposes and, if the Commission or any other government agency or
authority should issue any such order, to make every reasonable effort
to obtain the lifting or removal of such order as soon as possible; to
advise the Representative promptly of any proposal to amend or
supplement the Registration Statement or Prospectus and to file no
such amendment or supplement to which the Representative shall
reasonably object in writing;
e) to furnish to the Underwriters, at their request, for a
period of five years from the date of this Agreement (i) as soon as
available, copies of all annual, quarterly and current reports or
other communications supplied to holders of shares of Common Stock,
(ii) as soon as practicable after the filing thereof, copies of all
reports filed by the Company with the Commission, the NASD or any
securities exchange and (iii) such other information as the
Underwriters may reasonably request regarding the Company and its
Subsidiaries;
f) to advise the Underwriters promptly of the happening of any
event known to the Company within the time during which a Prospectus
relating to the Shares is required to be delivered under the
Securities Act Regulations which, in the judgment of the Company,
would require the making of any change in the Prospectus then being
used so that the Prospectus would not include 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, and,
during such time, to prepare and furnish, at the Company's expense, to
the Underwriters promptly such amendments or supplements to such
Prospectus as may be necessary to reflect any such change and to
furnish to the Underwriters a copy of such proposed amendment or
supplement before filing any such amendment or supplement with the
Commission;
g) to furnish promptly upon the request of the Representative a
signed copy of the Registration Statement, as initially filed with the
Commission, and of all amendments or supplements thereto (including
upon request all exhibits filed therewith or incorporated by reference
therein) and such number of conformed copies of the foregoing as the
Representative may reasonably request;
h) to furnish to the Representative, not less than two business
days before filing with the Commission subsequent to the effective
date of the Prospectus and during the period referred to in paragraph
(f) above, a copy of any document proposed to be filed with the
Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act;
i) to apply the net proceeds of the sale of the Shares in
accordance with its statements under the caption "Use of Proceeds" in
the Prospectus;
j) to make generally available to its security holders as soon
as practicable, but in any event not later than the end of the fiscal
quarter first occurring after the first anniversary of the effective
date of the Registration Statement an earnings statement complying
with the provisions of Section 11(a) of the Securities Act (in form,
at the option of the Company, complying with the provisions of Rule
158 of the Securities Act Regulations,) covering a period of 12 months
beginning after the effective date of the Registration Statement;
k) to use its reasonable best efforts to effect and maintain
the listing of the Shares on the New York Stock Exchange and to file
with the New York Stock Exchange all documents and notices required by
the New York Stock Exchange;
l) to engage and maintain, at its expense, a registrar and
transfer agent for the Shares;
m) after the expiration of the Underwriters' overallotment
option as described in section 1(b) hereof, to prepare and distribute
bound volumes of transaction documents for the Representative and its
legal counsel;
n) to not itself and to use its reasonable best efforts to
cause its officers, directors and affiliates not to, (i) take,
directly or indirectly prior to termination of the underwriting
syndicate contemplated by this Agreement, any action designed to
stabilize or manipulate the price of any security of the Company, or
which may cause or result in, or which might in the future reasonably
be expected to cause or result in, the stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or
resale of any of the Shares, (ii) sell, bid for, purchase or pay
anyone any compensation for soliciting purchases of the Shares or
(iii) pay or agree to pay to any person any compensation for
soliciting any order to purchase any other securities of the Company;
and
o) if at any time during the period after the date of this
Agreement and until the distribution of the Shares by the Underwriters
has been completed, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in the
reasonable opinion of the Representative the market price of the
Common Stock has been materially affected (regardless of whether such
rumor, publication or event necessitates a supplement to or amendment
of the Prospectus) and after written notice from the Representative
advising the Company to the effect set forth above, to forthwith
prepare, consult with the Representative concerning the substance of,
and disseminate a press release or other public statement, reasonably
satisfactory to the Representative and not inconsistent with the
Company's obligations under New York Stock Exchange rules and
applicable law, responding to or commenting on such rumor, publication
or event.
5. Payment of Expenses:
a) Subject to the provisions of paragraph (c) below, the
Company agrees to pay all reasonable and verifiable costs and expenses
actually incurred incident to the performance of its obligations under
this Agreement, including expenses, fees and taxes in connection with
(i) the preparation and filing of the Registration Statement, the
Preliminary Prospectus, the Prospectus, and any amendments or
supplements thereto, and the printing and furnishing of copies of each
thereof to the Underwriters and to dealers (including costs of mailing
and shipment), (ii) the preparation, issuance and delivery of the
certificates for the Shares to the Underwriters, including any stock
or other transfer taxes or duties payable upon the sale of the Shares
to the Underwriters, (iii) the qualification of the Shares for
offering and sale under state laws that the Company and the
Representative have mutually agreed are appropriate (including the
legal fees and filing fees and other disbursements of counsel for the
Underwriters in connection with the blue sky survey and the printing
and furnishing of copies of any blue sky surveys to the Underwriters
and to dealers, (iv) the fees and expenses of any transfer agent or
registrar for the Shares and miscellaneous expenses referred to in the
Registration Statement, (v) the fees and expenses incurred in
connection with the listing of the Shares in the New York Stock
Exchange, (vi) all of its preparation, travel, lodging and other
reasonable and customary expenses incurred by the Company incident to
the road show and (vii) the performance of the Company's other
obligations hereunder. Upon the request of the Representative, the
Company will provide funds in advance for filing fees.
b) Subject to the provisions of paragraph (c) below, the
Underwriters agree to pay all reasonable and verifiable costs and
expenses actually incurred in connection with the performance of their
activities under this Agreement, including, but not limited to, costs
such as printing, facsimile, courier service, direct computer
expenses, accommodations and travel, the fees and expenses of any of
the Underwriters' outside advisors, accountants, appraisers, etc.
(other than the fees and expenses of counsel with respect to state
securities or blue sky laws and obtaining the filing for review of the
public offering of the Shares by the NASD, all of which shall be
reimbursed by the Company pursuant to the provisions of subsection (a)
above).
c) If the transactions contemplated hereunder are consummated,
the Underwriters shall pay all reasonable and verifiable costs and
expenses actually incurred by the Company and the Underwriters in
connection with this offering, including without limitation those
expenses enumerated in paragraphs (a) and (b) above, up to a total of
$500,000 (not including the fees and expenses of counsel to the
Underwriters, which shall be paid by the Underwriters). To the extent
such combined expenses are less than $500,000, the Underwriters agree
to pay to the Company the difference between the actual combined
expenses and $500,000. To the extent such combined expenses exceed
$500,000, the Company agrees to pay to the Underwriters any and all
amounts in excess of $500,000. In making this determination, the
Company will receive credit for any expenses paid to or on behalf of
the Underwriters at the Closing Time, and the Underwriters will
receive credit for any expenses paid to or on behalf of the Company at
the Closing Time. If the transactions contemplated hereunder are not
consummated or this Agreement is terminated, the Company will pay its
expenses pursuant to Section (a) above, the Underwriters will pay
their expenses pursuant to Section (b) above, and all road show
expenses incurred by both parties shall be divided equally between the
Company on the one hand and the Underwriters on the other hand.
6. Conditions of the Underwriters' Obligations: The obligations of
the Underwriters hereunder to purchase Shares at the Closing Time or on the Date
of Delivery, as applicable, are subject to the accuracy of the representations
and warranties on the part of the Company in all material respects on the date
hereof and at the Closing Time and on each Date of Delivery, as applicable, the
performance by the Company of its obligations hereunder in all material respects
and to the satisfaction of the following further conditions at the Closing Time
or on the Date of Delivery, as applicable:
a) The Company shall furnish to the Underwriters at the Closing
Time and on each Date of Delivery an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP,
counsel for the Company and its Subsidiaries, addressed to the
Underwriters and dated the Closing Time and each Date of Delivery and
in form and substance reasonably satisfactory to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel for the Underwriters, stating that:
(1) the Company has an authorized capitalization as set
forth in the Prospectus under the caption "Capitalization"; 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 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 of
the Subsidiaries are directly or indirectly owned of record and
beneficially by the Company; except as disclosed in Schedule III,
to such counsel's knowledge 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;
(2) 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 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;
(3) 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;
(4) 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;
(5) the execution, delivery and performance of this
Agreement and the ▇▇▇▇▇-▇▇▇▇ Purchase Agreement and the
consummation by the Company of the transactions contemplated by
this Agreement and the other agreements listed above 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 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) assuming no purchaser
from the Underwriters purchases more than 50% of the Common Stock
of the Company, 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;
(6) this Agreement has been duly authorized, executed and
delivered by the Company and, assuming due execution and delivery
by the Underwriters, is a valid and binding agreement of the
Company enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and by general principles of equity,
and except that enforceability of the indemnification and
contribution provisions set forth in Section 9 of this Agreement
may be limited by the federal or state securities laws of the
United States or public policy underlying such laws;
(7) 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.;
(8) 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;
(9) 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;
(10) to 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;
(11) the Shares conform in all material respects to the
descriptions thereof contained in the Registration Statement and
Prospectus;
(12) 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;
(13) the Registration Statement has become effective under
the Securities Act 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;
(14) as of the effective date of the Registration Statement,
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;
(15) 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;
(16) 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;
In rendering such opinion, such counsel may (i) with respect to
matters concerning the laws of the State of Maryland rely on the opinion of
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇ and (ii) state that their opinion is limited to
matters governed by the federal laws of the United States of America and the
corporate laws of the State of Delaware.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company, independent
public accountants of the Company, representatives of the Representative, at
which the contents of the Registration Statement and Prospectus were discussed
and, although such counsel is not passing upon and does not assume
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Prospectus (except as and to the
extent stated in subparagraphs (11), (15), and (16) above), they have no reason
to believe that the Registration Statement, the Preliminary Prospectus or the
Prospectus, as of their respective effective or issue dates, and as of the date
of such counsel's opinion, contained or contains an untrue statement of a
material fact or omitted or omits 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 (it being understood
that, in each case, such counsel need express no view with respect to the
financial statements and other financial and statistical data included in the
Registration Statement, Preliminary Prospectus or Prospectus).
b) The Representative shall have received from KPMG LLP,
letters dated, respectively, as of the date of this Agreement, the
Closing Time and each Date of Delivery, as the case may be, addressed
to the Representative, in form and substance reasonably satisfactory
to the Representative, relating to the financial statements, including
any pro forma financial statements, of the Company and its
subsidiaries, and such other matters customarily covered by comfort
letters issued in connection with registered public offerings.
c) The Representative shall have received at the Closing Time
and on each Date of Delivery the favorable opinion of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, dated the Closing Time or such Date of Delivery, addressed to
the Representative and in form and substance satisfactory to the
Representative.
d) No amendment or supplement to the Registration Statement or
Prospectus shall have been filed to which the Underwriters shall have
reasonably objected in writing.
e) Prior to the Closing Time and each Date of Delivery (i) no
stop order suspending the effectiveness of the Registration Statement
or any order preventing or suspending the use of the Prospectus shall
have been issued, and no proceedings for such purpose shall have been
initiated or threatened, by the Commission, and no suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceedings for any of such
purposes, shall have occurred; and (ii) the Registration Statement and
the Prospectus shall not contain an untrue statement of 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 shall not 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 light of the
circumstances under which they were made, not misleading.
f) Between the time of execution of this Agreement and the
Closing Time or the relevant Date of Delivery (i) no change in the
assets, business, operations, earnings, prospects, properties or
condition (financial or otherwise) of the Company and its Subsidiaries
shall occur or become known that would result in a Material Adverse
Effect, and (ii) no transaction which would result in an Material
Adverse Effect shall have been entered into by the Company or any of
its Subsidiaries.
g) The Shares shall have been approved for listing on, subject
to notice of issuance, the New York Stock Exchange.
h) The NASD shall not have raised any objection with respect to
the fairness and reasonableness of the underwriting terms and
arrangements.
i) The Representative shall have received lock-up agreements
from each director of the Company and from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, in the form of Exhibit A attached hereto; and
such agreements shall be in full force and effect.
j) The Company will, at the Closing Time and on each Date of
Delivery, deliver to the Underwriters a certificate of its Chairman of
the Board, Chief Executive Officer and President, and its Executive
Vice President and Chief Financial Officer, to the effect that, to
each of such officer's knowledge, the representations and warranties
of the Company set forth in this Agreement are true and correct and
the conditions set forth in paragraphs (g), (h) and (i) have been
satisfied, in each case as of such date.
k) The Company shall have furnished to the Underwriters such
other documents and certificates as to the accuracy and completeness
of any statement in the Registration Statement and the Prospectus, the
representations, warranties and statements of the Company contained
herein, and the performance by the Company of its covenants contained
herein, and the fulfillment of any conditions contained herein, as of
the Closing Time or any Date of Delivery as the Underwriters may
reasonably request.
l) The Company shall have performed such of its obligations
under this Agreement as are to be performed by the terms hereof at or
before the Closing Time or the relevant Date of Delivery.
7. Termination: The obligations of the several Underwriters
hereunder shall be subject to termination in the absolute discretion of the
Representative, at any time prior to the Closing Time or any Date of Delivery,
(i) if any of the conditions specified in Section 6 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, or (ii) if
there has been since the respective dates as of which information is given in
the Registration Statement, any material adverse change in or affecting the
assets, business, operations, earnings, prospects, properties, condition
(financial or otherwise) or management of the Company or any Subsidiary, whether
or not arising in the ordinary course of business, or (iii) if there has
occurred outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic, political or other
conditions the effect of which on the financial markets of the United States is
such as to make it, in the reasonable judgment of the Representative,
impracticable to market the Shares or enforce contracts for the sale of the
Shares, or (iv) if trading in any securities of the Company has been suspended
by the Commission or by the New York Stock Exchange, or if trading generally on
the New York Stock Exchange or in the Nasdaq over-the-counter market has been
suspended, or limitations on prices for trading (other than limitations on hours
or numbers of days of trading) have been fixed, or maximum ranges for prices for
securities have been required, by such exchange or the NASD or Nasdaq or by
order of the Commission or any other governmental authority, or (v) after the
date hereof any federal or state statute, regulation, rule or order of any court
or other governmental authority has been enacted, published, decreed or
otherwise promulgated which in the reasonable opinion of the Representative, has
or would have a Material Adverse Effect, or (vi) any action has been taken after
the date hereof by any federal, state or local government or agency in respect
of its monetary or fiscal affairs which in the reasonable opinion of the
Representative has a material adverse effect on the securities markets in the
United States.
If the Representative elects to terminate this Agreement as provided
in this Section 7, the Company and the Underwriters shall be notified promptly
by telephone, promptly confirmed by facsimile.
If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply in all material respects with any of the terms of this
Agreement, the Company shall not be under any obligation or liability under this
Agreement (except to the extent provided in Sections 5 and 9 hereof) and the
Underwriters shall be under no obligation or liability to the Company under this
Agreement (except to the extent provided in Section 9 hereof) or to one another
hereunder.
8. Increase in Underwriters' Commitments: If any Underwriter shall
default at the Closing Time or on a Date of Delivery in its obligation to take
up and pay for the Shares to be purchased by it under this Agreement on such
date the Representative shall have the right, within 36 hours after such
default, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Shares which such Underwriter shall have agreed but failed to take up and
pay for (the "Defaulted Shares"). Absent the completion of such arrangements
within such 36 hour period, (i) if the total number of Defaulted Shares does not
exceed 10% of the total number of Shares to be purchased on such date, each
non-defaulting Underwriter shall take up and pay for (in addition to the number
of Shares which it is otherwise obligated to purchase on such date pursuant to
this Agreement) the portion of the total number of Shares agreed to be purchased
by the defaulting Underwriter on such date in the proportion that its
underwriting obligations hereunder bears to the underwriting obligations of all
non-defaulting Underwriters; and (ii) if the total number of Defaulted Shares
exceeds 10% of such total, the Representative may terminate this Agreement by
notice to the Company, without liability to any non-defaulting Underwriter.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that the
Company will not sell any Shares hereunder on such date unless all of the Shares
to be purchased on such date are purchased on such date by the Underwriters (or
by substituted Underwriters selected by the Representative with the approval of
the Company or selected by the Company with the approval of the Representative).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter in accordance with the foregoing provision, the Company or the
non-defaulting Underwriters shall have the right to postpone the Closing Time or
the relevant Date of Delivery for a period not exceeding five business days in
order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.
The term Underwriter as used in this Agreement shall refer to and
include any Underwriter substituted under this Section 8 with the like effect
as, if such substituted Underwriter had originally been named in this Agreement.
9. Indemnity and Contribution by the Company and the Underwriters:
a) The Company agrees to indemnify, defend and hold harmless
each Underwriter and any person who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any loss, expense, liability, damage or
claim (including the reasonable cost of investigation) which, jointly
or severally, any such Underwriter or controlling person may incur
under the Securities Act, the Exchange Act or otherwise, insofar as
such loss, expense, liability, damage or claim arises out of or is
based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment
thereof) or in the Prospectus, or arises out of or is based upon any
omission or alleged omission to state a material fact required to be
stated in either such Registration Statement or Prospectus or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, except
insofar as any such loss, expense, liability, damage or claim arises
out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained
in and in conformity with information furnished in writing by the
Underwriters through the Representative to the Company expressly for
use in such Registration Statement or such Prospectus, provided,
however, that the indemnity agreement contained in this subsection (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
Closing Time 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 4(b)
above).
b) If any action is brought against an Underwriter or
controlling person in respect of which indemnity may be sought against
the Company pursuant to subsection (a) above, such Underwriter shall
promptly notify the Company in writing of the institution of such
action, and the Company shall assume the defense of such action,
including the employment of counsel and payment of expenses; provided,
however, that any failure or delay to so notify the Company will not
relieve the Company of any obligation hereunder, except to the extent
that its ability to defend is actually impaired by such failure or
delay. Such Underwriter or controlling person shall have the right to
employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Underwriter
or such controlling person unless the employment of such counsel shall
have been authorized in writing by the Company in connection with the
defense of such action, or the Company shall not have employed counsel
to have charge of the defense of such action within a reasonable time
or such indemnified party or parties shall have reasonably concluded
(based on the advice of counsel) that there may be defenses available
to it or them which are different from or additional to those
available to the Company (in which case the Company shall not have the
right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and
expenses shall be borne by the Company and paid as incurred (it being
understood, however, that the Company shall not be liable for the
expenses of more than one separate firm of attorneys for the
Underwriters or controlling persons in any one action or series of
related actions in the same jurisdiction (other than local counsel in
any such jurisdiction) representing the indemnified parties who are
parties to such action). Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of
any such claim or action effected without its written consent.
c) Each Underwriter agrees, severally and not jointly, to
indemnify, defend and hold harmless the Company, the Company's
directors, the Company's officers that signed the Registration
Statement, and any person who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any loss, expense, liability, damage or claim
(including the reasonable cost of investigation) which, jointly or
severally, the Company, or any such person may incur under the
Securities Act, the Exchange Act or otherwise, but only insofar as
such loss, expense, liability, damage or claim arises out of or is
based upon any untrue statement or alleged untrue statement of a
material fact contained in and in conformity with information
furnished in writing by such Underwriter through the Representative to
the Company expressly for use in the Registration Statement (or in the
Registration Statement as amended by any posteffective amendment
thereof by the Company) or in a Prospectus, or arises out of or is
based upon any omission or alleged omission to state a material fact
in connection with such information required to be stated either in
such Registration Statement or Prospectus or necessary to make such
information, in the light of the circumstances under which made, not
misleading. The statements set forth (i) in the last paragraph on the
cover page and (ii) under the caption "Underwriting" in the
Preliminary Prospectus and the Prospectus (to the extent such
statements relate to the Underwriters) constitute the only information
furnished by or on behalf of any Underwriter through the
Representative to the Company for purposes of Section 3(k) and this
Section 9.
d) If any action is brought against the Company or any such
person in respect of which indemnity may be sought against any
Underwriter pursuant to the foregoing paragraph, the Company or such
person shall promptly notify the Representative in writing of the
institution of such action and the Representative, on behalf of the
Underwriters, shall assume the defense of such action, including the
employment of counsel and payment of expenses. The Company or such
person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the
expense of the Company or such person unless the employment of such
counsel shall have been authorized in writing by the Representative in
connection with the defense of such action or the Representative shall
not have employed counsel to have charge of the defense of such action
within a reasonable time or such indemnified party or parties shall
have reasonably concluded (based on the advice of counsel) that there
may be defenses available to it or them which are different from or
additional to those available to the Underwriters (in which case the
Representative shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by such Underwriter and
paid as incurred (it being understood, however, that the Underwriters
shall not be liable for the expenses of more than one separate firm of
attorneys in any one action or series of related actions in the same
jurisdiction (other than local counsel in any such jurisdiction)
representing the indemnified parties who are parties to such action).
Anything in this paragraph to the contrary notwithstanding, no
Underwriter shall be liable for any settlement of any such claim or
action effected without the written consent of the Representative.
e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under subsections (a), (b) and (c)
of this Section 9 in respect of any losses, expenses, liabilities,
damages or claims referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, expenses, liabilities, damages or
claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Underwriters from
the offering of the Shares or (ii) if (but only 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 and of the Underwriters in connection with the
statements or omissions which resulted in such losses, expenses,
liabilities, damages or claims, as well as any other relevant
equitable considerations. The relative benefits received by the
Company and the Underwriters shall be deemed to be in the same
proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses)
received by the Company bear to the underwriting discounts and
commissions received by the Underwriters. The relative fault of the
Company and of the Underwriters shall be determined by reference to,
among other things, whether the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission relates
to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any claim or action.
f) The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in subsection (e)(i) and, if applicable (ii), above.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several in proportion to their
respective underwriting commitments and not joint.
10. Survival: The indemnity and contribution agreements contained in
Section 9 and the covenants, warranties and representations of the Company
contained in Sections 3, 4 and 5 of this Agreement shall remain in full force
and effect regardless of any investigation made by or on behalf of any
Underwriter, or any person who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, or by or on
behalf of the Company, its directors and officers, or any person who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and shall survive the sale and delivery of the Shares. The
Company and each Underwriter agree promptly to notify the others of the
commencement of any litigation or proceeding against it and, in the case of the
Company, against any of the Company's officers and directors, in connection with
the sale and delivery of the Shares, or in connection with the Registration
Statement or Prospectus.
11. Notices: Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered to Friedman,
Billings, ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Syndicate Department; if to the Company, shall be sufficient in all
respects if delivered to the Company at the offices of the Company at Key Energy
Services, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
12. Governing Law; Headings: THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES. The section headings in this Agreement have
been inserted as a matter of convenience of reference and are not a part of this
Agreement.
13. Parties in Interest: The Agreement herein set forth has been and
is made solely for the benefit of the Underwriters, the Company and the
controlling persons, directors and officers referred to in Sections 9 and 10
hereof, and their respective successors, assigns, executors and administrators.
No other person, partnership, association or corporation (including a purchaser,
as such purchaser, from any of the Underwriters) shall acquire or have any right
under or by virtue of this Agreement.
14. Counterparts and Facsimile Signatures: This Agreement may be
signed by the parties in counterparts which together shall constitute one and
the same agreement among the parties. A facsimile signature shall constitute an
original signature for all purposes.
If the foregoing correctly sets forth the understanding among the
Company and the Underwriters, please so indicate in the space provided below for
the purpose, whereupon this Agreement shall constitute a binding agreement among
the Company and the Underwriters.
Very truly yours,
KEY ENERGY SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
and Chief Financial Officer
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Managing Director
For itself and as Representative of the other
Underwriter named on Schedule II hereto.
Schedule I
Number of Initial
Shares to be
Underwriter Purchased
--------------------------------------------------------------------------------
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc................................33,000,000
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a division
▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated......................................22,000,000
----------
Total......................................................55,000,000
==========
Schedule II
Shares of Common Stock Issuable Upon Exercise or Conversion of
Outstanding Options, Warrants or Other Convertible Securities
WARRANTS
WellTech - Merger (@ 6.75) 119,056
▇▇▇▇▇▇ Industries, Inc. - ▇.▇. ▇▇▇▇▇▇ Acquisition (@ 18.00) 265,000(1)
Units Offering (@ 4.88125) 2,032,565(2)
---------
TOTAL WARRANTS 2,416,621
EMPLOYEE AND DIRECTOR STOCK OPTIONS
TOTAL EMPLOYEE AND DIRECTOR STOCK OPTIONS 3,086,316(3)
SHARES UNDERLYING 7% CONVERTIBLE SUBORDINATED DEBENTURES (@ $9.75) 471,795
SHARES UNDERLYING 5% CONVERTIBLE SUBORDINATED NOTES (@ $38.50) 5,610,390
---------
TOTAL SHARES OF COMMON STOCK ISSUABLE 11,585,121
---------------
(1) As a result of the offering, the Nabors warrant will be adjusted as
follows: (i) the exercise price will be reduced to $2.85 per share and (ii)
the number of shares issuable upon exercise shall be increased to an amount
equal to 1,673,684 shares for a net increase of 1,408,684 shares.
(2) As a result of the adjustment to the Nabors warrants, the warrants issued
in the units offering will be adjusted as follows: the total number of
shares issuable upon exercise of the warrant shall increase to 2,173,433
shares for a net increase of 140,868 shares.
(3) The Board plans to issue up to 3,000,000 additional options at or above the
public offering price.
Schedule III
Significant Subsidiaries ("Subsidiaries")
Yale E. Key, Inc.
Odessa Exploration Incorporated
Key Energy Services - California, Inc.
Key Energy Services - South Texas, Inc.
Key Four Corners, Inc.
Key Rocky Mountain, Inc.
Key Energy Drilling, Inc.
WellTech Eastern, Inc.
▇▇▇▇▇▇ Production Management, Inc.
▇▇▇▇▇▇ Production Partners, L.P.
EXHIBIT A
Form of Director and Executive
Officer Lock-up Agreement
LOCK-UP AGREEMENT
May __, 1999
KEY ENERGY SERVICES, INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Friedman, Billings, ▇▇▇▇▇▇ & Co.
As Representative of the
several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned understands that Friedman, Billings, ▇▇▇▇▇▇ & Co., as
Representative (the "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 Friedman,
Billings, ▇▇▇▇▇▇ & Co., he, she or it will not, during the period commencing on
the date hereof and ending 180 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 Friedman, Billings, ▇▇▇▇▇▇ & Co.,
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 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.)
