__________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8038
KEY ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland 04-2648081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Livingston Ave., New Brunswick, NJ 08901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908)247-4822
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has filed
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
Common Shares outstanding at April 19, 1996: 10,413,513
______________________________________________________________
KEY ENERGY GROUP, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 19
Item 2. Changes in Securities. 19
Item 3. Defaults Upon Senior Securities. 19
Item 4. Submission of Matters to a Vote of Security
Holders. 19
Item 6. Exhibits and Reports on Form 8-K. 19
Signatures. 21
Key Energy Group,Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
March 31, June 30,
(Thousands, except share and per share data) 1996 1995
ASSETS
Current Assets:
Cash $1,598 $865
Restricted cash 1,705 410
Restricted marketable securities 267 267
Accounts receivable, net 19,183 8,133
Prepaid expenses 1,793 358
Inventories 1,764 1,257
Total Current Assets 26,310 11,290
Property and Equipment:
Oilfield service equipment 64,091 23,726
Oil and gas well drilling equipment 4,682 2,014
Motor vehicles 1,041 526
Oil and gas properties and other
related equipment,successful efforts 10,270 7,652
Furniture and equipment 1,367 332
Buildings and land 5,026 2,086
86,477 36,336
Accumulated depreciation & depletion (7,334) (4,394)
Net Property and Equipment 79,143 31,942
Other Assets 5,190 2,011
Total Assets $110,643 $45,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $9,562 $3,930
Accrued interest 305 145
Other accrued liabilities 9,539 2,612
Accrued income taxes 49 174
Deferred tax liability 118 118
Current portion of long-term debt 4,245 2,249
Total Current Liabilities 23,818 9,228
Long-term debt, less current portion 37,073 13,700
Accrued casualty insurance 4,909 -
Deferred income taxes 3,333 2,204
Minority interest 1,151 -
Commitments and contingencies
Stockholders' equity:
Common stock, $.10 par value; 25,000,000
shares authorized, 10,413,513 and 6,913,513 shares
issued and outstanding at March 31, 1996 and
June 30, 1995, respectively 1,041 691
Additional paid-in capital 32,763 15,186
Retained earnings 6,555 4,234
Total Stockholders' Equity 40,359 20,111
Total Liabilities and Stockholders' Equity $110,643 $45,243
See the accompanying notes which are an integral part of these consolidated
financial statements.
Key Energy Group, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
March 31, March 31,
(Thousands, except per share data) 1996 1995 1996 1995
REVENUES:
Oilfield services $11,916 $10,145 $31,064 $31,068
Oil and gas revenues 1,016 695 2,743 1,772
Oil and gas well drilling 1,370 - 5,029 -
Other revenues, net - 209 258 171
14,302 11,049 39,094 33,011
COSTS AND EXPENSES
Oilfield services direct costs 8,655 7,784 22,808 24,134
Oil and gas direct costs 316 182 935 613
Oil and gas well drilling 1,151 - 3,886 -
Depreciation and depletion expense 1,146 642 2,940 1,887
General and administrative expense 1,219 1,174 3,609 2,996
Interest expense 571 370 1,448 997
13,058 10,152 35,626 30,627
Income before minority interest and
and income taxes 1,244 897 3,468 2,384
Minority interest 18 - 18 -
Income tax expense 399 266 1,129 742
NET INCOME $827 $631 $2,321 $1,642
EARNINGS PER SHARE :
Primary:
Income before minority interest
and income taxes $0.18 $0.14 $0.50 $0.36
Net income $0.12 $0.10 $0.33 $0.25
Assuming full dilution:
Income before minority interest
and income taxes $0.18 $0.14 $0.50 $0.36
Net income $0.12 $0.10 $0.33 $0.25
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary 6,981 6,637 6,981 6,637
Assuming full dilution 6,986 6,637 6,986 6,637
See the accompanying notes which are an integral part of these consolidated
financial statements.
Key Energy Group, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
March 31, March 31,
(Thousands) 1996 1995 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $827 $631 $2,321 $1,642
Adjustments to reconcile income
from operations to net cash
provided by operations:
Depreciation, depletion and
amortization 1,146 642 2,940 1,887
Deferred income taxes 399 266 1,129 742
Minority interest net income 18 - 18 -
Change in assets and liabilities,
net of effects from acquisitions:
(Increase) decrease in accounts
receivable 26 (148) (193) (1,108)
(Increase) decrease in other current
assets (184) (654) (94) (725)
Decrease in accounts payable and
accrued expenses 191 107 (616) (1,457)
(Decrease) increase in accrued
interest (1) 27 22 11
(Decrease) increase in accrued
taxes (75) - (125) -
(Increase) decrease in other
assets (75) (1) (84) (1)
Net cash provided by operating
activities 2,272 870 5,318 991
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - Oilwell
service operations (878) (385) (2,605) (2,284)
Capital expenditures - Oil and
gas operations - (16) (7) (23)
Capital expenditures - Oil and
gas well drilling operations (90) - (450) -
Expenditures for oil and gas
properties (382) (78) (2,532) (1,289)
Net cash used in investing
activities (1,350) (479) (5,594) (3,596)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term
debt (259) (471) (1,677) (1,518)
Cash received from purchase
of WellTech 1,168 - 1,168 -
Borrowings under line-of-credit 41 (1,377) 13 (406)
Proceeds from long-term debt 476 1,310 2,800 4,176
Net cash provided by (used in)
financing activities 1,426 (538) 2,304 2,252
Net increase (decrease) in cash
and restricted cash 2,348 (147) 2,028 (353)
Cash and restricted cash at
beginning of period 955 967 1,275 1,173
Cash and restricted cash at end
of period $3,303 $820 $3,303 $820
Supplemental cash flow disclosures:
Interest paid $434 $343 $1,288 $986
Supplemental schedule of non-cash
investing and financing transactions:
Fair value of Common Stock and Warrants
issued WellTech West Texas $- $- $- $8,647
Fair value of Common Stock issued for
Clint Hurt Drilling $- $23 $- $23
Issuance of note payable in Clint
Hurt Drilling acquisition $- $725 $725 $-
See the accompanying notes which are an integral part of these consolidated
financial statements.
Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial information in this report includes
the accounts of Key Energy Group, Inc. ("Key") and its
wholly-owned subsidiaries and was prepared in conformity with
accounting policies used in the Annual Report on Form 10-K
furnished for the preceding fiscal year.
The consolidated financial information in this report includes
the four operating subsidiaries of the Company; Yale E. Key,
Inc. ("Yale E. Key") and WellTech Eastern, Inc. ("WellTech")
(which was acquired in March 1996 after the merger of WellTech,
Inc. "Old WellTech" into Key, see Note 2) which are both
involved in oilwell service operations, Odessa Exploration Inc.
("OEI") which is involved in the production and exploration of
oil and natural gas and Key Energy Drilling, Inc. d/b/a Clint
Hurt Drilling ("Clint Hurt Drilling") which is involved in the
drilling for oil and natural gas. In addition, as a result of
the WellTech merger, (see Note 2) the Company acquired a 63%
ownership in Servicios WellTech, S.A. ("Servicios"), an
Argentinean corporation, which is accounted for using the
consolidation with a minority interest method.
OEI utilizes the successful efforts method of accounting for its
oil and gas properties. Under this method, all costs associated
with productive wells and nonproductive development wells are
capitalized, while nonproductive exploration costs and
geological and geophysical costs (if any) are expensed.
Capitalized costs relating to proved properties are depleted
using the unit-of-production method based on proved reserves
expressed as net equivalent Bbls as reviewed by independent
petroleum engineers. The carrying amounts of properties sold or
otherwise disposed of and the related allowance for depletion
are eliminated from the accounts and any gain/loss is included
in results of operations.
OEI's aggregate oil and gas properties are stated at cost, not
in excess of total estimated future net revenues net of related
income tax effects.
In the opinion of Key, the accompanying unaudited condensed
consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position
as of March 31, 1996, the statement of cash flows for the three
and nine months ended March 31, 1996 and 1995, and the results
of operations for the three and nine month periods then ended.
The consolidated financial statements of Key have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principals for complete financial
statements. Operating results for interim periods are not
necessarily indicative of the results that may be expected for
the full year.
2. ACQUISITIONS
WellTech, Inc.
In March 1996, Key acquired, through a merger, Old WellTech.
Key was the surviving entity in the merger. Net consideration
for the merger was 3,500,000 shares of Key Common Stock and
warrants to purchase 500,000 additional shares. In the merger,
Old WellTech stockholders received an aggregate of 4,929,962 shares of Key
Common Stock and warrants to purchase 750,000 shares of Key
Common Stock at $6.75 per share. As part of the merger,
1,429,962 of the 1,635,000 shares of Key Common Stock owned by
Old WellTech and previously issued warrants to purchase 250,000
shares of Key Common Stock at $5.00 per share were cancelled.
WellTech's principal line of business is oil and gas well
servicing and it operates in the Mid-Continent and Northeast
areas of the United States and in Argentina. Until November
1995, Old WellTech also conducted certain operations in Russia.
On March 26, 1996, Key shareholders approved the merger. The
acquisition was accounted for using the purchase method.
Odessa Exploration Properties
In April of 1996, the Company announced that OEI had agreed to
purchase approximately $7.1 million of oil and gas producing
properties from two unrelated companies. The properties to be
acquired include production in 264 gross (79 net) wells with
daily average net production of 240 barrels of oil and 1.5 mmcf
of natural gas. The reserves are approximately equally divided
between oil and natural gas. Financing for the acquisition is
expected to come from bank financing. The acquisition will be
accounted for using the purchase method.
Clint Hurt Drilling
On March 30, 1995, Key and Clint Hurt Associates, Inc. ("CHA")
entered into an Asset Purchase Agreement pursuant to which CHA
sold to Key all of its assets in West Texas. Such assets mainly
consisted of four oil and gas drilling rigs and related
equipment. As consideration for the acquisition, Key paid CHA
$1,725,000, of which $1,000,000 was paid in cash and the balance
in the form of a $725,000 note payable to CHA (the note was paid
in full in July 1995). Mr. Clint Hurt entered into consulting
and noncompetition agreements with Key in consideration for
which Key issued 5,000 shares of Key Common Stock. The
acquisition was accounted for using the purchase method and the
results of operations of Clint Hurt Drilling have been included
in those of Key since April 1, 1995.
3. LONG-TERM DEBT
In January 1996, prior to the completed merger described in Note
2, Key, Yale E. Key, Clint Hurt and Old WellTech entered into
new separate credit facilities with The C.I.T. Group/Credit
Finance, Inc. ("C.I.T.) totaling approximately $35 million (the
combined maximum credit limit). As a result of the new separate
credit facilities, the interest rate for Yale E. Key was lowered
from two and one-half to one and one-quarter percent over the
stated prime rate (8.25% at March 31, 1996). In addition, the
interest rate for the Old WellTech debt was lowered from an
aggregate of three and one-half percent to one and one-quarter
percent over the stated prime rate (8.25% at March 31, 1996).
Each of the C.I.T. term notes require principal and interest
payments, due the first day of each month beginning February 1,
1996, plus a final payment of the unpaid balance of the note due
December 31, 1998. The expiration of each of the lines of
credit are December 31,1998. The proceeds of the initial
borrowings were used to repay substantially all of the debt of
Key (other than that of OEI) and Old WellTech. Key believes
that such a facility will provide sufficient funds to finance
its operating and capital expenditure needs for the foreseeable
future. The indebtedness, which is currently being modified to
reflect the Welltech merger, will be the obligation of Key and
Key's subsidiaries, Yale E. Key, Clint Hurt and WellTech. At
March 31, 1996, the Company (on a combined basis) had approximately
$2 million in term and credit-line availability.
The Yale E. Key C.I.T. term note, ($9,885,000 approximate
principal balance at March 31, 1996), as amended, requires
monthly principal payments of approximately $119,000, plus
interest, while the Yale E. Key C.I.T. line of credit,
($2,792,000 approximate principal balance at March 31, 1996),as
amended, requires monthly payments of interest. The note is
collateralized by all of the assets (including equipment and
inventory) of Yale E. Key, while the line of credit is
collateralized by the accounts receivable of Yale E. Key. Both
the term note and the line of credit will be guaranteed by Key.
At March 31, 1996, there was approximately $500,000 of credit
line availability.
The Clint Hurt Drilling C.I.T. term note, ($1,208,000
approximate principal balance at March 31, 1996), requires
monthly principal payments of approximately $14,643, plus
interest, while the Clint Hurt Drilling C.I.T. line of credit,
($588,000 approximate principal balance at March 31, 1996),as
amended, requires monthly payments of interest The note is
collateralized by all of the assets (including equipment and
inventory) of Clint Hurt Drilling while the line of credit is
collateralized by the accounts receivable of Clint Hurt
Drilling. Both the term note and the line of credit will be
guaranteed Key. At March 31, 1996, there was no credit line
availability.
The WellTech C.I.T. term note, ($12,125,000 approximate
principal balance at March 31, 1996), as amended, requires
monthly principal payments of approximately $141,000, plus
interest, while the WellTech C.I.T. line of credit, ($5,121,000
approximate principal balance at March 31, 1996),as amended,
requires monthly payments of interest. The note is
collateralized by all of the assets (including equipment and
inventory) of WellTech while the line of credit is
collateralized by the accounts receivable of WellTech. Both the
term note and the line of credit will be guaranteed by Key. At
March 31, 1996, there was no credit line availability.
The agreement with C.I.T. includes certain restrictive and
financial covenants, which include, though not limited to;
certain financial ratios, annual capital expenditure maximums,
and restrictions on cash distributions and declarations of
dividends on common stock.
The OEI loan agreement, as amended, with Norwest Bank Texas,
N.A. ("Norwest") provides for a $7.5 million revolving line of
credit note subject to a borrowing base limitation
(approximately $7.0 million at March 31, 1996). The borrowing
base is redetermined on at least a semi-annual basis. The
borrowing base is reduced by approximately $60,000 per month
through October 1997; the maturity of the note. The note's
interest rate is Norwest's prime rate (8.5% at March 31, 1996)
plus one-half percent. The note is secured by substantially all
of the oil and gas properties of OEI. The note is also guaranteed by Key.
The loan agreement contains various restrictive covenants and
compliance requirements, including covenants which (a) prohibit
OEI from declaring or paying dividends on OEI's common stock,
(b) limit the incurrence of additional indebtedness by OEI and,
(c) limit the disposition of assets and various other financial
covenants.
4. CASH FLOW DISCLOSURES OF WELLTECH ACQUISITION
During March 1994, Key completed an acquisition of WellTech (see
Note 2). The acquisition of WellTech,accounted for using the
purchase method, resulted in the following noncash investing
activities(in thousands):
Recorded amounts of assets acquired,
including cash acuired of $1,168 ............ $ 58,829
Liabilities assumed .......................... (40,902)
----------
Fair value of Key Common Stock issued........... $ 17,927
=====
The liabilities assumed include amounts recorded for litigation
and certain other preacquisition contingencies of WellTech.
5. COMMITMENTS AND CONTINGENCIES
Various suits and claims arising in the ordinary course of
business are pending against Key and its subsidiaries.
Management does not believe that the disposition of any of
these suits or claims will result in a material adverse impact
on the consolidated financial position of Key.
During August 1995, Key entered into employment agreements with
certain of its officers. These employment agreements generally
run to June 30, 1998, but will automatically be extended on a
yearly basis unless terminated by Key or the applicable officer.
In addition to providing a base salary for each officer, the
employment agreements provide for severance payments for each
officer varying from 12 to 36 months of the officer's base
salary. The current annual base salaries for the officers
covered under such employment agreements total approximately
$800,000.
KEY ENERGY GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
QUARTER ENDED MARCH 31, 1996 VERSUS QUARTER ENDED MARCH 31, 1995
Overview
The following discussion provides information to assist in the
understanding of Key Energy Group, Inc.'s ("Key") financial
condition and results of operations. It should be read in
conjunction with the financial statements and related notes
appearing elsewhere in this report.
Operating results for the three and nine months ended March 31,
1996 include Key's oilfield well service operations conducted by
its wholly-owned subsidiaries, Yale E. Key, Inc. ("Yale E.
Key"), its oil and natural gas exploration and production
operations conducted by its wholly-owned subsidiary, Odessa
Exploration Inc. ("OEI") and Key Energy Drilling, Inc. d/b/a
Clint Hurt Drilling ("Clint Hurt Drilling") which is engaged in
oil and natural gas well contract drilling and was acquired in
March 1995. Also included are the operating results of WellTech,
Inc. ("WellTech") for the period of March 26, 1996 (the date of
the merger, see Note 2) to March 31, 1996.
Historically, fluctuations in oilfield well service operations
and oil and gas well contract drilling activity have been
closely linked to fluctuations in crude oil and natural gas
prices. However, Key, through acquisitions, customer alliances
and agreements, and diversification of services, seeks to
minimize the effects of such fluctuations on Key's results of
operations and financial condition.
Results of Operations
The Company or Key
Revenues of Key for the three months ended March 31, 1996
increased $3,253,000 or 29% to $14,302,000 from $11,049,000 for
the comparable fiscal 1995 quarter, while net income of $827,000
increased $196,000 or 31% from the comparable fiscal 1995
quarter total of $631,000. The increase in revenues was
primarily due to the addition of Clint Hurt Drilling on April 1,
1995, whose operations were not included in the comparable 1995
quarter results, increased oil and gas revenues from OEI,
increased oilwell service equipment utilization and the
acquisition of WellTech (see Note 2). The improvement in
quarterly net income is partially attributable to the inclusion
of Clint Hurt Drilling, but is also a result of an increase in
oilwell service equipment utilization and a decrease in total
consolidated Key costs and expenses as a percent of total
revenues.
Oilfield Services
Oilfield services are performed by Yale E. Key and WellTech.
Yale E. Key conducts oilfield services primarily in West Texas,
while WellTech conducts oilfield services in the Mid-Continent
region of the United States (primarily in Oklahoma) through its
operating division; WellTech Mid-Con, and in the Northeastern
United States (primarily in Michigan, Pennsylvania and West
Virginia) through its operating division; WellTech Eastern. In
addition, WellTech conducts oilfield services in Argentina
through its 63% ownership in Servicios WellTech, S.A.
("Servicios"), an Argentinean corporation.
Oilfield service revenues for the quarter ended March 31, 1996
increased $1,771,000 or 17% from $10,145,000 for the quarter
ended March 31, 1995 to $11,916,000 for the current quarter
ending March 31, 1996. The increase in revenues is primarily
attributable to higher equipment utilization as the result of an
increase in demand for oilfield services and the acquisition of
WellTech whose operating results are included for the period of
March 26, 1996 (the date of the merger, see Note 2) to March 31,
1996. Yale E. Key averaged a 90% equipment utilization for the
current quarter compared to 81% for the comparable quarter of
last year. In addition, Yale E. Key continues the
diversification of oilfield services into higher margin business
segments such as oilfield frac tanks, oilfield fishing tools and
trucking operations.
Oil and Natural Gas Exploration and Production
Oil and natural gas exploration and production operations are
performed by Odessa Exploration Inc. Revenues from oil and gas
activities increased $321,000 or 46% from $695,000 during the
quarter ended March 31, 1995 to $1,016,000 for the current
quarter. The increase in revenues was primarily the result of
increased production of oil and natural gas as several oil and
natural gas wells which were drilled began production during the
1996 quarter as well as higher oil and natural gas prices for
the quarter.
Of the total $1,016,000 of revenues for the quarter ended March
31, 1996, approximately $820,000 was from the sale of oil and
gas - 21,826 barrels of oil at an average price of $20.28 per
barrel and 232,049 MCF of natural gas at an average price of
$1.63 per MCF. The remaining $196,000 of revenues represented
primarily administrative fee income and other miscellaneous
income.
Oil and Natural Gas Well Drilling
Oil and natural gas well drilling operations are performed by
Clint Hurt Drilling which was acquired in March 1995.
Comparable numbers for the prior years quarter are, therefore,
not available. Revenues for the quarter ended March 31, 1996
were $1,370,000.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization expense for Key
increased $504,000 or 79% from $642,000 to $1,146,000 during the
three months ended March 31, 1996 as compared with the prior
period. The increase is primarily due to oilfield service
depreciation expense, which is the result of increased capital
expenditures for the current quarter versus the prior quarter
ended March 31, 1995, and the addition of Clint Hurt Drilling
and WellTech (see Note 2). In addition, depletion expense
generated by OEI increased for the current quarter due to the
increase in the production of oil and natural gas.
Interest Expense
Interest expense for Key increased $201,000 or 54% from $370,000
during the three months ended March 31, 1995 to $571,000 for
the current quarter. The increase is primarily the result of
the Clint Hurt and WellTech acquisitions (see Note 2) and the
addition of certain oil and gas properties purchased by OEI.
General and Administrative Expenses
General and administrative expenses include those of Key as well
as Yale E. Key, WellTech, OEI and Clint Hurt Drilling. These
expenses increased $45,000 or 32% from $1,174,000 for the
quarter ending March 31, 1995 to $1,219,000 for the current quarter. The
increase can be primarily attributed to the acquisition and
subsequent inclusion of Clint Hurt Drilling's and WellTech's
general and administrative expenses.
Income Tax Expense
Income tax expense for Key for the three months ended March 31,
1996 and 1995 was $399,000 and $266,000 respectively.
Minority Interest
The minority interest of $18,000 is that portion of net income
from Servicios WellTech attributable to the minority
shareholders (37%) for the period of acquisition until March 31,
1996 (see Note 2).
Net Income
Net income before minority interest and income taxes was
$1,244,000 for the three months ended March 31, 1996, which was
an increase of $347,000 or 39% over the comparable quarter
ending March 31, 1995 amount of $897,000. The increase in net
income before minority interest and income taxes was primarily
due to the addition of Clint Hurt Drilling and WellTech (see
Note 2), increased oil and gas revenues and higher oilfield
service equipment utilization. Net income for the three months
ended March 31, 1996 was $827,000, which was a $196,000 or 31%
increase from $631,000 for the three months ended March 31, 1995.
Cash Flow
Net cash provided by operations increased $1,402,000 from
$870,000 during the three months ended March 31, 1995 to
$2,272,000 in net cash provided by operations for the current
quarter. The increase is attributable primarily to lower
increase in other assets and accrued expenses and higher net
income and depreciation expense over the same period last year.
Net cash used in investing activities increased $871,000 from
$479,000 for the three months ended March 31, 1995 to $1,350,000
for the current quarter. The increase is primarily the result
of increased expenditures for oil and gas properties and oilwell
service operations. In addition, net cash used in investing
activities for the current quarter included $90,000 used in the
oil and gas well drilling operations.
Net cash provided by financing activities was $1,426,000 for the
three months ended March 31, 1996 as compared to $538,000 in net
cash used by financing activities for the comparable quarter.
The increase is primarily the result of net cash received from
the WellTech purchase (see Note 2) during the current quarter
and a decrease in proceeds from long-term debt during the
current quarter. Such proceeds were primarily used for the oil
and natural gas drilling program conducted by OEI.
Cash increased $2,348,000 for the three months ended March 31,
1996, as compared to a net decrease in cash of $147,000 for the
three months ended March 31, 1995.
NINE MONTHS ENDED MARCH 31, 1996 VERSUS NINE MONTHS ENDED MARCH 31, 1995
Results of Operations
The Company or Key
Revenues of Key for the nine months ended March 31, 1996
increased $6,083,000 or 18% to $39,094,000 from $33,011,000 for
the comparable fiscal 1995 period, while net income increased
$679,000 or 41% to $2,321,000 from $1,642,000 for the comparable
fiscal 1995 nine month total of $1,642,000. The increase in
revenues was primarily due to the addition of Clint Hurt
Drilling on April 1, 1995, whose operations were not included in
the prior year results, the increase in oil and gas revenues and
the acquisition of WellTech (see Note 2). The improvement in
net income is partially attributable to the inclusion of Clint
Hurt Drilling, but is also a result of an increase in oil and
gas revenues, the addition of WellTech (see Note 2) and a
decrease in total consolidated Key costs and expenses as a
percent of total revenues.
Oilfield Services
Oilfield services are performed by Yale E. Key and WellTech.
Oilfield service revenue declined $4,000 from $31,068,000 for
the prior nine month period ending March 31, 1995 to $31,064,000
for the current nine month period ending March 31, 1996. The
decline is primarily attributable to curtailed equipment
utilization as the result of adverse weather conditions and a
slight decline in demand during the first and second quarters of
the Company's fiscal year. This decline in oilfield service
revenues is largely offset by an increase in oilfield service
revenues during the current quarter ended March 31, 1996. Yale
E. Key averaged an 86% equipment utilization for the nine
months; and due to lower expenses, the continued
diversification of services into higher margin business segments
such as oilfield frac tanks, oilfield fishing tools and trucking
operations, the gross margin increased from 21% to 24% of
revenues for the nine months ended March 31, 1996.
Oil and Natural Gas Exploration and Production
Oil and natural gas exploration and production are performed by
Odessa Exploration, Inc. Revenues from oil and gas activities
increased $971,000 or 55% from $1,772,000 in the 1995 period to
$2,743,000 for the current nine month period despite relatively
constant crude oil and lower natural gas prices during the first
and second quarters of the fiscal year. The increase in revenues
was primarily the result of increased production of oil
and natural gas as several oil and natural gas wells which were
drilled began production during the 1996 period.
Of the total $2,743,000 of revenues for the nine months ended
March 31, 1996, approximately $2,313,000 was from the sale of
oil and gas - 66,177 barrels of oil at an average price of
$17.54 per barrel and 711,198 MCF of natural gas at an average
price of $1.62 per MCF. The remaining $430,000 of revenues
represented primarily administrative fee income and other
miscellaneous income.
Oil and Natural Gas Well Drilling
Oil and natural gas well drilling operations are performed by
Clint Hurt Drilling which was acquired in March 1995. Comparable
numbers for the prior nine month period ending March 31, 1995
are, therefore, not available. Revenues for the nine months
ended March 31, 1996 were $5,029,000.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization expense for Key
increased $1,053,000 or 56% from $1,887,000 to $2,940,000 during
the nine months ended March 31, 1996 as compared with the prior
fiscal 1995 nine month period. The increase is primarily due to
oilfield service depreciation expense, which is the result of
increased oilfield service capital expenditures for the current
period versus the prior period and the addition of WellTech and
Clint Hurt Drilling (see Note 2). In addition, depletion
expense generated by OEI increased for the period due to the
increase in the production of oil and natural gas.
Interest Expense
Interest expense for Key increased $451,000 or 45% from $997,000
during the nine months ended March 31, 1995 to $1,448,000 for
the current period. The increase is primarily the result of
acquisitions and the addition of certain oil and gas properties
by OEI.
General and Administrative Expenses
General and administrative expenses include those of Key as well
as Yale E. Key, WellTech, OEI and Clint Hurt Drilling. These
expenses increased $613,000 or 20% to $3,609,000 during the nine
months ended March 31, 1996 as compared to $2,996,000 for the
nine months ended March 31, 1995. The increase can be primarily
attributed to the acquisition and subsequent inclusion of Clint
Hurt Drilling's general and administrative expenses as well as
the acquisition of WellTech (see Note 2).
Income Tax Expense
Income tax expense for Key for the nine months ended March 31,
1996 and 1995 was $1,129,000 and $742,000 respectively.
Minority Interest
The minority interest of $18,000 is that portion of net income
from Servicios WellTech attributable to the minority
shareholders (37%) for the period of acquisition until March 31,
1996 (see Note 2).
Net Income
Net income before minority interest and income taxes was
$3,468,000 for the nine months ended March 31, 1996, which was
an increase of $1,084,000 or 45% over the comparable period of
$2,384,000. The increase in net income before minority interest
and income taxes was primarily due to the addition of Clint Hurt
Drilling and other oilwell service acquisitions (see Note 2),
increased oilfield service equipment utilization during the
third quarter of fiscal 1996 and increased oil and gas revenues.
Net income for the nine months ended March 31, 1996 was
$2,321,000, which was a $679,000 or 41% increase from $1,642,000
for the nine months ended March 31, 1995.
Cash Flow
Net cash provided by operations increased $4,327,000 from
$991,000 during the nine months ended March 31, 1995 to
$5,318,000 for the current period. The increase is attributable
primarily to lower decrease in accounts payable and accrued
expenses and higher net income and depreciation expense over
the same period last year.
Net cash used in investing activities increased $1,998,000 from
$3,596,000 for the nine months ended March 31, 1995 to
$5,594,000 for the current period. The increase is primarily
the result of increased expenditures for oil and gas properties.
In addition, net cash used in investing activities for the
current period included $450,000 used in the oil and gas well
drilling operations.
Net cash provided by financing activities was $2,304,000, a
$52,000 increase, for the nine months ended March 31, 1996 as
compared to $2,252,000 for the comparable period. The increase
is primarily the result of cash received from the purchase of
WellTech during the current period, which is partially offset by
a decrease in proceeds from long-term debt during the current
quarter. Such proceeds were primarily used for the oil and
natural gas drilling program conducted by OEI.
Cash increased $2,028,000 for the nine months ended March 31,
1996, as compared to a net decrease in cash of $353,000 for the
nine months ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, Key had $3,303,000 in cash and restricted
cash as compared to $1,275,000 in cash and restricted cash at
June 30, 1995.
Yale E. Key has projected $3.0 million for oilwell service
capital expenditures over the 1996 fiscal year as compared to
$2.8 million for the fiscal year ended June 30, 1995. Capital
expenditures are expected to be primarily capitalized
improvement costs (totaling over $5,000) to existing equipment
and machinery. Financing of capital expenditures is expected
to come from the operating cash flows of Yale E. Key. Capital
expenditures were $2,605,000 for the nine months ended March 31,
1996.
OEI has forecasted approximately $3 million in oil and gas
property acquisitions for fiscal 1996 as compared to $2.8
million during fiscal 1995 (which does not include the
acquisition described in Note 2). Financing of oil and gas
acquisitions is expected to come from borrowings. Oil and gas
acquisitions were $2,532,000 for the nine months ended March 31,
1996. Financing of oil and gas acquisitions is expected to be
obtained from bank financing and/or private investors.
Bank Financing
In January 1996, prior to the completed merger described in Note
2, Key, Yale E. Key, Clint Hurt and Old WellTech entered into
new separate credit facilities with The C.I.T. Group/Credit
Finance, Inc. ("C.I.T.) totaling approximately $35 million (the
combined maximum credit limit). As a result of the new separate
credit facilities, the interest rate for Yale E. Key was lowered
from two and one-half to one and one-quarter percent over the
stated prime rate (8.25% at March 31, 1996). In addition, the
interest rate for the Old WellTech debt was lowered from an
aggregate of three and one-half percent to one and one-quarter
percent over the stated prime rate (8.25% at March 31, 1996).
Each of the C.I.T. term notes require principal and interest
payments, due the first day of each month beginning February 1,
1996, plus a final payment of the unpaid balance of the note due
December 31, 1998. The expiration of each of the lines of
credit are December 31,1998. The proceeds of the initial
borrowings were used to repay substantially all of the debt of
Key (other than that of OEI) and Old WellTech. Key believes
that such a facility will provide sufficient funds to finance
its operating and capital expenditure needs for the foreseeable
future. The indebtedness, which is currently being modified to
reflect the Welltech merger, will be the obligation of Key and
Key's subsidiaries, Yale E. Key, Clint Hurt and WellTech. At
March 31, 1996, the Company (on a combined basis) had approximately
$2 million in term and credit-line availability.
Acquisitions
WellTech, Inc.
In March 1996, Key acquired, through a merger, Old WellTech.
Key was the surviving entity in the merger. Net consideration
for the merger was 3,500,000 shares of Key Common Stock and
warrants to purchase 500,000 additional shares. In the merger, Old WellTech
stockholders received an aggregate of 4,929,962 shares of Key
Common Stock and warrants to purchase 750,000 shares of Key
Common Stock at $6.75 per share. As part of the merger,
1,429,962 of the 1,635,000 shares of Key Common Stock owned by
Old WellTech and previously issued warrants to purchase 250,000
shares of Key Common Stock at $5.00 per share were cancelled.
WellTech's principal line of business is oil and gas well
servicing and it operates in the Mid-Continent and Northeast
areas of the United States and in Argentina. Until November
1995, Old WellTech also conducted certain operations in Russia.
On March 26, 1996, Key shareholders approved the merger. The
acquisition was accounted for using the purchase method.
Odessa Exploration Properties
In April of 1996, the Company announced that OEI had agreed to
purchase approximately $7.1 million of oil and gas producing
properties from two unrelated companies. The properties to be
acquired include production in 264 gross (79 net) wells with
daily average net production of 240 barrels of oil and 1.5 mmcf
of natural gas. The reserves are approximately equally divided
between oil and natural gas. Financing for the acquisition is
expected to come from bank financing. The acquisition will be
accounted for using the purchase method.
Clint Hurt Drilling
On March 30, 1995, Key and Clint Hurt Associates, Inc. ("CHA")
entered into an Asset Purchase Agreement pursuant to which CHA
sold to Key all of its assets in West Texas. Such assets mainly
consisted of four oil and gas drilling rigs and related
equipment. As consideration for the acquisition, Key paid CHA
$1,725,000, of which $1,000,000 was paid in cash and the balance
in the form of a $725,000 note payable to CHA (the note was paid
in full in July 1995). Mr. Clint Hurt entered into consulting
and noncompetition agreements with Key in consideration for
which Key issued 5,000 shares of Key Common Stock. The
acquisition was accounted for using the purchase method and the
results of operations of Clint Hurt Drilling have been included
in those of Key since April 1, 1995.
Impact of SFAS 121
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 - Accounting
for Long-Lived Assets and for Long-Lived Assets to be Disposed
Of ("SFAS 121") regarding the impairment of long-lived assets,
identifiable intangibles and goodwill related to those assets.
SFAS 121 is effective for financial statements for fiscal years
beginning after December 15, 1995, although earlier adoption is
encouraged. The application of SFAS 121 will require periodic
determination of whether the book value of long-lived assets
exceeds the future cash flows expected to result from the use of
such assets and, if so, will require reduction of the carrying
amount of the "impaired" assets to their estimated fair values.
Key estimates that the implementation of SFAS 121 will not have
a material effect on Key's financial position. Key will adopt
SFAS 121 for the fiscal year beginning July 1, 1996.
Impact of Inflation on Operations
Although in a complex environment it is extremely difficult to
make an accurate assessment of the impact of inflation on Key's
operations, management is of the opinion that inflation has not
had a significant impact on it business.
Cautionary Statement for Purposes of The "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of
1995.
Key desires to take advantage of the new "safe harbor"
provisions of the Private Securities Litigation Reform Act of
1995. Key's Report on Form 10-Q contains statements which may
be considered "forward-looking statements" including statements
concerning projections, plans, objectives, future events or
performance and underlying assumptions and other statements
which are other than statements of historical fact. Key wishes
to caution readers that the following important factors, among
others, may have affected and could in the future affect Key's
actual results and could cause Key's actual results for
subsequent periods to differ materially from those expressed in
any forward-looking statement made by or on behalf of Key:
Occurrences affecting the need for, timing and extent of Key's
capital expenditures or affecting Key's ability to obtain funds
from operations, borrowings or investments to finance needed
capital expenditures;
Key's ability successfully to identify and finance oil and gas
property acquisitions and its ability successfully to operate
existing and any subsequently acquired properties;
The availability of adequate funds under Key's credit facility
to fund operations for the foreseeable future, or if such funds
are inadequate, the ability of Key to obtain new or additional
financing or to generate adequate funds from operations;
Key is highly leveraged due to the substantial indebtedness Key
has incurred and Welltech, prior to its merger into Key, had
incurred;
Key's ability to enter into and retain profitable oilfield
servicing and drilling contracts with customers which make
timely payments for such services;
The demand for oilfield services, drilling services and for oil
and gas, and the supply of and demand for drilling and servicing
rigs, all of which are subject to fluctuations which could adversely
affect Key's operations;
Key's ability to integrate the management of and operations of
WellTech into the ongoing management and operations of Key;
The existence on many competitors in all of Key's operations,
many of which have financial and other resources greatly in
excess of those available to Key;
The amount and rate of growth in Key's general and
administrative expense, including, but not limited to, the
costs of integrating WellTech's operations into Key.;
The effect of regulations and changes in regulations, including
environmental regulations with which Key must comply, the cost
of such compliance and the potentially material adverse effects
if Key were not in substantial compliance either currently or
in the future;
Key's relationship with its employees and the potential adverse
effect if labor disputes or grievances were to occur;
Uncertainties related to operations and investments outside the
United States;
The costs and other effects of legal and administrative cases
and proceedings and/or settlements, including
but not limited to environmental and workers compensation cases;
The effect of changes in accounting policies and practices or
of changes in Key's organization, compensation and benefit plan,
or of changes in Key's material
agreements of understandings with third parties.
Key undertakes no obligation to release publicly the result of
any revisions to any forward-looking statements which may be
made to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On March 26, 1996, a meeting of the holders of Common Stock,
par value $.10 per share, was held to approve the purchase
of WellTech, Inc. and other related matters. Only holders of
record as of the close of business on March 16, 1996 were
entitled to notice of and to vote at the meeting and at any
adjournment thereof. On the Record Date, the outstanding
number of shares entitled to vote consisted of 6,914,513
shares of Common Stock. The results of the voting were as
follows:
For Against Abstain
Proposal 1
(WellTech Merger) 4,923,496 (71%) 4,752 * 5,399 *
Proposal 2
(Charter Amendment) 4,746,427 (69%) 180,751 (3%) 6,469 *
Proposal 3
(Board of Directors)** 4,759,353 (69%) 174,294 (3%) --
Proposal 4
(1995 Stock
Option Plan) 4,752,583 (69%) 175,010 (3%) 6,054 *
Proposal 5
(Outside Directors
Stock Option Plan) 4,884,489 (71%) 36,257 (1%) 12,901 *
* Less than 1%
** All Directors received the identical votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of the Form
10-Q:
Exhibit
Number Item
* 1.1 Amendment to Merger Agreement dated as of March 21,
1996
* 3.1 Amended and Restated Articles of Incorporation of Key
3.2 Amended and Restated By-Laws of Key. Incorporated
by reference to Amendment No. 2 to Key's Form S-4
Registration Statement (No.333-369).
* 4.1 Common Stock Purchase Warrant to purchase Shares of
Key Common Stock issued in connection with the merger of
WellTech, Inc. ("WellTech") into Key and supplemental
information required by Item 601(a)(4) of Regulation S-K.
4.2 Common Stock Purchase Warrant to purchase 75,000
shares of Key Common Stock issued to CIT Group/Credit
Finance, Inc. ("CIT") In corporated by reference to
Amendment No. 2 to Key's Form S-4 Registration Statement
(No. 333-369).
* 4.3 Form of Registration Rights Agreement between Key
and Certain Holders of Key Common Stock.
4.4 Registration Rights Agreement dated as of January
19, 1996 between Key and CIT. Incorporated by reference
to Amendment No. 2 to Key's Form S-4 Registration
Statement (No. 333-369).
10.1 Second Amended and Restated Loan Agreement and
Security Agreement between Key, Yale E. Key, Inc., Key
Energy Drilling, Inc. d/b/a Clint Hurt Drilling ("Clint
Hurt") and CIT. Incorporated by reference to Amendment No.2
to Key's Form S-4 Registration Statement (No. 333-369).
10.2 Cross-Guaranty and Cross-Collateralization Agreement between Key,
Yale E. Key, Inc., Clint Hurt, Welltech and CIT. Incorporated
by reference to Amendment No. 2 to Key's Form S-4
Registration Statement (No. 333-369).
10.3 Key 1995 Stock Option Plan. Incorporated by reference to
Amendment No. 2 to Key's Form S-4 Registration
Statement (No.333-369).
10.4 Key Outside Directors Stock Option Plan. Incorporated by
reference to Amendment No. 2 to Key's Form S-4
Registration Statement (No.333-369).
* 11 Statement - Computation of per share earnings
* 27(a) Statement - Financial Data Schedule
* Filed herewith as part of the Condensed Consolidated
Financial Statements.
(b) Key filed a report on Form 8-K during the quarter ended
March 31, 1996 which was dated March 26, 1996 relating to the
consummation of the merger of WellTech with Key. The
Form 8-K incorporated by reference the financial statements
of WellTech included in Key's Form S-4 Registration Statement
(No.333-369) as well as the pro-forma financial information
included therein.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEY ENERGY GROUP, INC.
(Registrant)
By /s/ Francis D. John_________
President, Chief Executive Officer
Dated: May 3, 1996 and Chief Financial Officer
By /s/ Danny R. Evatt_________
Dated: May 3, 1996 Vice President and Chief Accounting
Officer
Exhibit 1.1
Key Energy Group, Inc.
255 Livingston Avenue
New Brunswick, New Jersey 08901
As of March 21, 1996
WellTech, Inc.
3535 Briarpark, Suite 200
Houston, Texas 77042
Re: Modification of Agreement and Plan of Merger
Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of
Merger between Key Energy Group, Inc. ("Key") and WellTech, Inc. (the
"Company"), dated as of November 18, 1995, as amended by Amendment
No. 1, dated as of January 18, 1996, and as further amended by
Amendment No. 2, dated as of February 29, 1996 (the "Agreement").
Unless otherwise stated herein, capitalized terms shall have the
meaning given to them in the Agreement.
The purpose of this letter agreement is to modify
the Agreement as follows:
1. Section 2.1(d) is amended by substituting the
phrase "closing Key share price on the day before the Closing"
for the phrase "Key Share Price" in the fifth line thereof.
2. Key and the Company agree that there shall be
no third party designated as an "Exchange Agent" under
Section 2.2 of the Agreement. All references to an "Exchange Agent"
and "Exchange Fund" and provisions relating thereto in the
Agreement are hereby deleted.
3. Section 2.2(a) is hereby deleted in its entirety.
4. At the Closing, the Company shall surrender
and deliver to Key Certificates evidencing the number of Company
Shares held by the shareholders of the Company, and upon receipt
of each Certificate, Key shall deliver the Exchange Merger
Consideration in accordance with Section 2.1(a) to the holder of such
Certificate, it being understood, however, that the failure of the Company
to deliver a certificate shall not delay the Closing. In no event shall Key be
required to deliver Exchange Merger Consideration to a holder of
Company Shares until such holder surrenders his Certificate(s) to Key.
WellTech, Inc.
As of March 21, 1996
Page 2
5. Except as set forth in this letter agreement, the exchange
of Certificates for the Exchange Merger Consideration shall be
effectuated in accordance with the Agreement and the Agreement is
ratified and confirmed and remains in full force and effect.
By executing a copy of this letter and returning it to Key,
you will confirm our mutual understanding and agreement set forth above.
Very truly yours,
KEY ENERGY GROUP, INC.
By: ____________________
Francis D. John
President
Accepted and agreed to as of the date first written above.
WELLTECH, INC.
By: ________________________
Exhibit 3.1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
KEY ENERGY GROUP, INC.
Key Energy Group, Inc., a Maryland corporation (the
"Corporation"), certifies to the Maryland Department of Assessments and
Taxation as follows:
(1) The Corporation desires to amend and restate
its Articles of Incorporation as are currently in effect in accordance with
Section 2-609 of the Maryland General Corporation Law.
(2) These Articles of Amendment and Restatement restate, integrate
and amend provisions of Articles of Incorporation of the Corporation,
as heretofore amended.
(3) The Board of Directors of the Corporation, at a meeting held
on November __, 1995, unanimously adopted a resolution that these
Articles of Amendment and Restatement shall be submitted for shareholder
approval as being advisable and in the best interests of the Corporation.
(4) The Articles of Amendment and Restatement were
duly adopted by shareholders in accordance with Section 2-604 of the
Maryland General Corporation Law.
(5) The address of the principal office of the
Corporation is 257 Livingston Avenue, New Brunswick, New Jersey 08901.
(6) The name and the address of the resident agent of
the Corporation within the State of Maryland is The Prentice-Hall
Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202.
The Articles of Incorporation are hereby amended and
restated to read in their entirety as follows:
FIRST: The original Articles of Incorporation of the
Corporation were filed with the State Department of Assessments
and Taxation of the State of Maryland on April 22, 1977, and the
Corporation is duly incorporated under Maryland General Corporation Law.
SECOND: The name of the corporation is:
Key Energy Group, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
Maryland General Corporation Law.
FOURTH: The present address of the principal office of
the Corporation within the State of Maryland is c/o The Prentice-Hall
Corporation System, Maryland, 11 East Chase Street, Baltimore,
Maryland 21202.
FIFTH: (a) The total number of shares of stock of all classes which
the Corporation has authority to issue is Twenty Five Million (25,000,000)
shares of capital stock amounting in aggregate par value to $2,500,000.
All of such shares are initially classified as "Common Stock"
(par value $.10 per share). The Board of Directors may classify and
reclassify any unissued shares of capital stock by setting or changing
in any one or more respects the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such
shares of stock, provided, however, that, notwithstanding
anything to the contrary in these Articles, no such classification
or reclassification shall create a class of stock which
shall (i) have more than one vote per share,
(ii) be issued in connection with any so-called "shareholder rights plan",
"poison pill" or other anti-takeover measure, or (iii) be issued for
consideration which is less than fair consideration as determined in
good faith by the Corporation's Board of Directors.
(b) The following is a description of the preferences,
conversion and other rights, voting powers, restrictions, limitations
as to dividends, qualifications and terms and conditions of redemption
of the Common Stock of the Corporation:
(1) Each share of Common Stock shall have one vote,
and, except as otherwise provided in respect of any class of
stock hereafter classified or reclassified, the exclusive voting power
for all purposes shall be vested in the holders of the Common Stock.
(2) Subject to the provisions of law and any
preferences of any class of stock hereafter classified or
reclassified, dividends,including dividends payable in shares
of another class of the Corporation's stock, may be paid on the
Common Stock of the Corporation at such time and in such amounts as
the Board of Directors may deem advisable.
(3) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary,
the holders of the Common Stock shall be entitled to share ratably
in the net assets of the Corporation remaining after payment or
provision for payment of the debts and other liabilities of the Corporation
and the amount to which the holders of any class of stock hereafter
classified or reclassified having a preference on distributions in
the liquidation, dissolution or winding up of the Corporation
shall be entitled, together with the holders of any other class of
stock hereafter classified or reclassified having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation.
(c) Subject to the foregoing, the power of the Board
of Directors to classify and reclassify any of the shares of
capital stock shall include, without limitation, subject to the
provisions of these Articles of Amendment and Restatement, as from
time to time amended (the "Charter"), authority to classify or
reclassify any unissued shares of such stock into a class or
classes of preferred stock, preference stock, special stock or other
stock, and to divide and classify shares of any class into one or
more series of such class, by determining, fixing, or altering one
or more of the following:
(1) The distinctive designation of such
class or series and the number of shares to constitute such class or
series; provided, however, that, unless otherwise prohibited by the
terms of such or any other class or series, the number of shares of any
class or series may be decreased by the Board of Directors in
connection with any classification or reclassification of unissued shares
and the number of shares of such class or series may be increased
by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted
into shares of Common Stock or any other class or series shall
become part of the authorized capital stock and be subject to
classification and reclassification as provided in this sub-paragraph.
(2) Whether or not and, if so, the rates, amounts and
times at which, and the conditions under which, dividends shall be
payable on shares of such class or series, whether any such dividends
shall rank senior or junior to or on a parity with the dividends
payable on any other class or series of stock, and the status of any
such dividends as cumulative, cumulative to a limited extent or
non-cumulative and as participating or non-participating.
(3) Whether or not shares of such class or
series shall have voting rights, in addition to any voting rights
provided by law and, if so, the terms of such voting rights.
(4) Whether or not shares of such class or
series shall have conversion or exchange privileges and, if so, the
terms and conditions thereof, including provision for adjustment of the
conversion or exchange rate in such events or at such times as the
Board of Directors shall determine.
(5) Whether or not shares of such class or
series shall be subject to redemption and, if so, the terms and
conditions of such redemption, including the date or dates upon or after
which they shall be redeemable and the amount per share payable in case
of redemption, which amount may vary under different conditions
and at different redemption dates; and whether or not there shall be any
sinking fund or purchase account in respect thereof, and if so, the
terms thereof.
(6) The rights of the holders of shares
of such class or series upon the liquidation, dissolution or winding
up of the affairs of, or upon any distribution of the assets of, the
Corporation, which rights may vary depending upon whether such
liquidation, dissolution or winding up is voluntary or involuntary and, if
voluntary, may vary at different dates, and whether such rights shall rank
senior or junior to or on a parity with such rights of any other class or
series of stock.
(7) Whether or not there shall be any limitations
applicable, while shares of such class or series are outstanding,
upon the payment of dividends or making of distributions on, or the
acquisition of, or the use of moneys for purchase or redemption of, any
stock of the Corporation, or upon any other action of the
Corporation, including action under this sub- paragraph, and, if so, the
terms and conditions thereof.
(8) Any other preferences, rights, restrictions,
including restrictions on transferability, and qualifications
of shares of such class or series, not inconsistent with the Maryland
General Corporation Law or any other statutory or decisional law of the
State of Maryland, now or hereafter in force ("Maryland Law") and the
Charter.
(d) For the purposes hereof and of any articles supplementary
to the Charter providing for the classification or reclassification
of any shares of capital stock or of any other charter document of the
Corporation (unless otherwise provided in any such articles or
document), any class or series of stock of the Corporation shall be
deemed to rank:
(1) prior to another class or series either as
to dividends or upon liquidation, if the holders of such class or
series shall be entitled to the receipt of dividends or of amounts
distributable on liquidation, dissolution or winding up, as the
case may be, in preference or priority to holders of such other class
or series;
(2) on a parity with another class or
series either as dividends or upon liquidation, whether or not the
dividend rates, dividend payment dates or redemption or liquidation
price per share thereof be different from those of such others, if the
holders of such class or series of stock shall be entitled to receipt
of dividends or amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective
dividend rates or redemption or liquidation prices, without preference
or priority over the holders of such other class or series; and
(3) junior to another class or series either
as to dividends or upon liquidation, if the rights of the holders
of such class or series shall be subject or subordinate to the rights
of the holders of such other class or series in respect of the receipt
of dividends or the amounts distributable upon liquidation, dissolution
or winding up, as the case may be.
(e) Anything in this Article FIFTH to the contrary
notwithstanding, in no event shall any shares of capital stock entitle
the holder thereof, and the Board of Directors shall have no power or
authority to authorize the issue of any shares of capital stock entitling
the holder thereof, to more than (1) vote per share.
SIXTH: The number of directors of the Corporation
shall be five, which number may be increased or decreased pursuant
to the By-Laws of the Corporation, but shall never be less than the
minimum number permitted by Maryland Law. The names of the directors
who will serve until the next annual meeting and until their successors
are elected and qualify are as follows:
Francis D. John
Van D. Greenfield
William Manly
Morton Wolkowitz
D. Kirk Edwards
SEVENTH: (a) The following provisions are hereby
adopted for the purpose of defining, limiting and regulating the
powers of the Corporation and of the directors and stockholders.
(1) The Board of Directors is hereby
empowered to authorize the issuance from time to time of shares of the
Corporation's stock of any class, whether now or hereafter authorized,
or securities convertible into or exchangeable for, or evidencing
the right to purchase or otherwise acquire, shares of the Corporation's
stock of any class or classes, whether now or hereafter
authorized, for such consideration as may be deemed advisable by the Board
of Directors and without any action by the stockholders.
(2) No holder of any stock or any other securities
of the Corporation, whether now or hereafter authorized, shall have
any preemptive right to subscribe for or purchase any stock or any other
securities of the Corporation other than such, if any, as the Board of
Directors, in its sole discretion, may determine and at such price or
prices and upon such other terms as the Board of Directors, in its sole
discretion, may fix; and any stock or other securities which the Board
of Directors may determine to offer for subscription may, as the Board
of Directors in its sole discretion shall determine, be offered to the
holders of any class, series or type of stock or other securities at
the time outstanding to the exclusion of the holders of any or all
other classes, series or types of stock or other securities at the time
outstanding.
(3) The Board of Directors of the Corporation shall,
consistent with Maryland Law, have power in its sole discretion to
determine from time to time in accordance with sound accounting
practice or other reasonable valuation methods what constitutes annual
or other net profits, earnings, surplus or net assets in excess of
capital; to fix and vary from time to time the amount to be reserved as
working capital, or determine that retained earnings or surplus shall
remain in the hands of the Corporation; to set apart out of any funds
of the Corporation such reserve or reserves in such amount or amounts
and for such proper purpose or purposes as it shall determine and to
abolish any such reserve or any part thereof; to distribute and pay
distributions or dividends in stock, cash or other securities or
property, out of surplus or any other funds or amounts legally
available therefor, at such times and to the stockholders of record on
such dates as it may, from time to time, determine; and to determine
whether and to what extent and at what times and places and under and
subject to what conditions and regulations the books, accounts and
documents of the Corporation, or any of them, shall be open to the
inspection of stockholders, except as otherwise provided by law or by
the By-Laws, and, except as so provided, no stockholder shall have any
right to inspect any book, account or document of the Corporation
unless authorized so to do by resolution of the Board of Director.
(4) Notwithstanding any provision of
Maryland Law requiring the authorization of any action by a greater proportion
than a majority of the total number of shares of all classes of capital
stock or of the total number of shares of any class of capital stock,
such action shall be valid and effective if authorized by the
affirmative vote of the holders of a majority of the total number of shares
of all classes outstanding and entitled to vote thereon, except as
provided in the Charter.
(5) The Corporation shall indemnify (A) its directors
and officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the Maryland Law,
including the advance of expenses under the procedures and to the full
extent permitted by law and (B) other employees and agents to such
extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which
those seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from
time to time such by-laws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be
permitted by Maryland Law.
(6) No director or officer of this
Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director or an officer, except to the extent that exculpation from
liability is not permitted under Maryland Law as in effect when such breach
occurred. No amendment of the Charter or repeal of any of its provisions
shall limit or eliminate the limitations on liability provided to
directors and officers hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
(7) The power to adopt, alter and repeal the
By-Laws of the Corporation shall be vested in the Board of
Directors of the Corporation, subject to the rights of stockholders to
adopt, alter and repeal the By-Laws of the Corporation.
(8) The Corporation reserves the right from
time to time to make any amendments to the Charter which may now
or hereafter be authorized by Maryland Law, including any amendments
changing the terms or contract rights, as expressly set forth in any of
the Corporation's outstanding stock by classification, reclassification
or otherwise.
(b) The enumeration and definition of particular powers
of the Board of Directors included in the foregoing shall in no way be limited
or restricted by reference to or inference from the terms of any other
clause of this or any other Article of the Charter, or construed as or
by inference or otherwise in any manner to exclude or limit any powers
conferred upon the Board of Directors under Maryland Law.
EIGHTH: The duration of the Corporation shall be
perpetual.
IN WITNESS WHEREOF, the Corporation has caused
these Articles of Amendment and Restatement to be signed in its
name and on its behalf by its President and witnessed by its
Secretary on __________, 1995.
- ------------------------------ _________________________________
Diane Mack, Secretary Francis D. John, President
THE UNDERSIGNED, President of Key Energy Group, Inc.,
who executed on behalf of the Corporation Articles of Amendment and
Restatement, hereby acknowledges in the name and on behalf of said
Corporation that the foregoing Articles of Amendment and Restatement
are to be the corporate act of said Corporation and hereby certifies
that the matters and facts set forth herein with respect to
authorization and approval thereof are true in all material
respects under the penalties of perjury.
-------------------------------------
Francis D. John, President
Exhibit 4.1
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
THE DISTRIBUTION HEREOF OR OF THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON
EXERCISE HEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE RULES
AND REGULATIONS THEREUNDER. NEITHER THIS WARRANT NOR THE COMMON STOCK OR OTHER
SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933 OR UPON RECEIPT BY THE COMPANY OF AN OPINION SATISFACTORY AS TO FORM, SCOPE
AND SUBSTANCE OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO AN EXEMPTION THEREFROM.
Common Stock Purchase Warrant
67,910 As of March 28, 1996
[Number of Shares]
KEY ENERGY GROUP, INC., a Maryland corporation (the "Company"),
for value received, hereby certifies that HUDD & CO., or registered
assigns, is entitled to purchase, except to the extent hereinafter
referred to, from the Company 67,910 duly authorized, validly issued,
fully paid and nonassessable shares (the "Warrant Shares") of Common
Stock, par value $.10 per share (the "Common Stock"), of the Company
at the purchase price per share of $6.75 (the "Exercise Price"), at
any time or from time to time prior to 5:00 P.M., Boston, Massachusetts
time, on March 28, 2001 (the "Expiration Date"), all subject to
the terms and conditions set forth below in this Warrant.
This Warrant (this "Warrant" and, together with any such
warrants issued in substitution therefor or issued pursuant to the Asset
Purchase Agreement, the "Warrants") referred to in the Agreement and Plan
of Merger dated as of November 18, 1995 (as from time to time in effect,
the "Asset Purchase Agreement") between the Company and WellTech, Inc.
SECTION 1. Registration. The Company shall number and register
this Warrant (and any other warrants issued in substitution herefor) in a
register as they are issued. The Company may deem and treat the
registered holders of the Warrants as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon
made by anyone) for all purposes and shall not be affected by any notice
to the contrary. Notwithstanding the foregoing, a Warrant, if properly
assigned, may be exercised by a new holder without a new Warrant first
having been issued.
SECTION 2. Registration of Transfer and Exchanges. The Company
shall from time to time register the transfer of the Warrants in a Warrant
register to be maintained by the Company upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
reasonably satisfactory to the Company, duly executed by the registered
holder or holders thereof or by the duly appointed legal representative
thereof or by a duly authorized attorney and upon receipt of any
applicable transfer taxes or evidence satisfactory to the Company that
no such tax is due. Upon any such registration of transfer, a new
Warrant shall be issued to the transferee(s) and the surrendered Warrant
shall be canceled and disposed of by the Company.
If such a transfer is not made pursuant to an effective
Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), the Warrant holder will, if requested by the
Company, deliver to the Company an opinion of counsel, which counsel
and opinion shall be satisfactory in form, scope and substance to
the Company, that the Warrants may be sold publicly
without registration under the Securities Act, as well as:
(a) an investment covenant satisfactory to the Company
signed by the proposed transferee;
(b) an agreement by such transferee to the impression
of the restrictive investment legend set forth at the beginning
of this Warrant; and
(c) an agreement by such transferee to be bound by the
provisions of this Warrant.
This Warrant may be exchanged at the option of the holder(s)
hereof, when surrendered to the Company at its office designated for such
purpose (the address of which is set forth in Section 8) for another
Warrant or other Warrants of like tenor and representing in the
aggregate a like number of Warrants, including, without limitation,
upon an adjustment in the number of Warrant Shares purchasable upon
exercise of this Warrant. Warrants surrendered for exchange shall be
canceled and disposed of by the Company.
SECTION 3. Warrants: Exercise of Warrants. Subject to the terms of
this Warrant, the holder of this Warrants shall have the right,
which may be exercised at any time prior to the Expiration Date, to
receive from the Company the number of fully paid and nonassessable
Warrant Shares which the holder may at the time be entitled to receive
on such exercise and payment of the Exercise Price then in effect for
such Warrant Shares. No adjustments as to dividends will be made
upon exercise of the Warrants.
This Warrant may be exercised upon surrender hereof to the
Company at its office designated for such purpose (the address of
which is set forth in Section 8) with the form of election to purchase
attached hereto duly filled in and signed, upon payment to the Company of
the Exercise Price per Warrant Share, for the number of Warrant Shares
in respect of which this Warrant is then exercised. Payment of the
aggregate Exercise Price shall be made (a) in cash or by certified or bank
cashier's check payable to the order of the Company, or (b) by delivery to
the Company of that number of shares of Common Stock having a Fair
Market Value (as hereinafter defined) equal to the then applicable Exercise
Price multiplied by the number of Warrant Shares then being purchased.
In the alternative, this Warrant may be exercised on a net basis, such that,
without the exchange of any funds, the holder of this Warrant receives
that number of Warrant Shares subscribed to less that number of shares of
Common Stock having an aggregate Fair Market Value at the time of exercise
equal to the aggregate Exercise Price that would otherwise have been
paid by such holder for the number of Warrant Shares subscribed to.
As used herein the term "Fair Market Value", on a per share basis,
means the Closing Price of the Common Stock on the Date of Exercise.
As used herein, the term "Date of Exercise" with respect to any
Warrant means the date on which such Warrant is exercised as provided
herein. For purposes of this Warrant, the "Closing Price" for any date
shall mean the last sale price reported in the Wall Street Journal or
other trade publication regular way or, in case no such reported sale
takes place on such date, the average of the last reported bid and
asked prices regular way, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading on
any national securities exchange or if such national securities exchange
is not the principal market for the Common Stock, the last sale price
as reported by the National Association of Securities Dealers, Inc.
Automated National Market System ("NASDAQ") or its successor, if any,
or if the Common Stock is not so reported, the average of the reported
bid and asked prices in the over-the-counter market, as furnished by
the National Quotation Bureau, Inc., or if such firm is not then
engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business and selected by the Company
or, if there is no such firm, as furnished by any NASD member selected
by the Company or, if the Common Stock is not quoted in the
over-the-counter market, the fair value thereof determined in good faith
by the Company's Board of Directors as of a date which is within fifteen
(15) days of the date as of which the determination is to be made.
Subject to the provisions of Section 4, upon such surrender of
this Warrant and payment of the Exercise Price, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in any event
within three (3) business days) to or upon the written order of the
holder, and in the name of this Warrant holder or its nominee, a
certificate or certificates for the number of full Warrant Shares
issuable upon such exercise together with such other property
(including cash) and securities as may be then deliverable upon such
exercise. Such certificate or certificates shall be deemed to have been
issued and the person so named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender
of this Warrant and payment of the Exercise Price.
This Warrant shall be exercisable, at the election of the
holder hereof, either in full or from time to time in part, and, in the
event that this Warrant is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the
Expiration Date, a new Warrant evidencing the remaining Warrant or
Warrants will be issued and delivered pursuant to the provisions of this
Section and of Section 4.
The Company shall not be required to issue fractional Warrant Shares
on the exercise of Warrants. If more than one Warrant shall be presented
for exercise in full at the same time by the same holder, the number of
full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section, be
issuable on the exercise of any Warrants (or specified portion thereof),
the Company shall pay an amount in cash equal to the Exercise Price on
the day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction.
All Warrants surrendered upon exercise shall be canceled and
disposed of by the Company. The Company shall keep copies of this Warrant
and any notices received hereunder available for inspection by the normal
business hours at its office.
SECTION 4. Payment of Taxes. The Company will pay all stamp
taxes in connection with the issuance, sale, delivery or transfer of the
Warrants, as well as all such taxes attributable to the initial
issuance of Warrant Shares upon the exercise of this Warrant and payment
of the Exercise Price.
SECTION 5. Mutilated or Missing Warrants. In case any of the
Warrants shall be mutilated, lost, stolen or destroyed, upon delivery
of an indemnity agreement or security satisfactory to the Company in form,
scope, substance and amount, the Company shall issue, in exchange
and substitution for and upon cancellation of the mutilated Warrants or
in lieu of and substitution for the Warrant lost, stolen or destroyed,
a new Warrant of like tenor and representing an equivalent number of
Warrants .
SECTION 6. Reservation of Warrant Shares. The Company will at all
times reserve and keep available, free from preemptive or similar rights,
out of the aggregate of its authorized but unissued capital stock or its
authorized and issued capital stock held in its treasury, for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of each class of
capital stock constituting a part of the Warrant Shares which may then
be deliverable upon the exercise of all outstanding Warrants. The
Company shall cause all Warrant Shares of each class of Common Stock or
ther securities reserved for issuance upon exercise of the
Warrants to be listed (or to be listed subject to notice of issuance) on
each securities exchange on which such shares of Common Stock or any
such other securities are listed.
The Company or, if appointed, the transfer agent for shares of
each class of Common Stock (the "Transfer Agent") and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon
the exercise of the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as
shall be required for such purpose. The Company will keep a copy of
this Warrant on file with the Transfer Agent and with every subsequent
transfer agent for any shares of the Company capital stock issuable upon
the exercise of the rights of purchase represented by the
Warrants. The Company will furnish such Transfer Agent a copy of all notices
of adjustments, and certificates related thereto, transmitted to each
holder pursuant to Section 7.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue, be validly issued, fully paid, nonassessable,
free of preemptive or similar rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof.
SECTION 7. Adjustments, Notices and Other Events.
(a) Adjustment of Exercise Price. Subject to the provisions
of this Section 7, the Exercise Price in effect from time to time
shall be subject to adjustment, as follows:
(i) In case the Company shall (x) declare a
dividend or make a distribution on the outstanding shares of its
Common Stock in shares of its Common Stock, (y) subdivide
or reclassify the outstanding shares of its Common Stock into a
greater number of shares, or (z) combine or reclassify the
outstanding shares of its Common Stock into a smaller number
of shares, the Exercise Price in effect immediately after the
record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, of which (A) the numerator shall be the
number of shares of Common Stock outstanding immediately
before such dividend, distribution, subdivision, combination
or reclassification, and of which (B) the denominator shall be
the number of shares of Common Stock outstanding immediately
after such dividend, distribution, subdivision, combination or
reclassification. Any shares of Common Stock of the Company
issuable in payment of a dividend shall be deemed to have been
issued immediately prior to the record date for such dividend
for purposes of calculating the number of outstanding shares
of Common Stock of the Company under Section 7(a)(ii) and
7(a)(iii) hereof. Such adjustment shall be made successively
whether any event specified above shall occur.
(ii) In case the Company shall fix a record
date for the issuance of rights, options, warrants or
convertible or exchangeable securities to all holders of its
Common Stock entitling them (for a period expiring within
forty-five (45) days after such record date) to subscribe
for or purchase shares of its Common Stock at a price per
share less than the Current Market Price (as such term is
defined in Section 7(a)(iv) hereof) of a share of Common
Stock of the Company on such record date, the Exercise Price
shall be adjusted immediately thereafter so that it shall
equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction,
of which (A) the numerator shall be the number of shares
of Common Stock outstanding on such record date plus the
number of shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered
would purchase at the Current Market Price per share,
and of which (B) the denominator shall be the number of shares
of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock offered for subscription
or purchase. Such adjustment shall be made successively
whenever such a record date is fixed. To the extent that any
such rights, options, warrants or convertible or exchangeable
securities are not so issued or expire unexercised, the
Exercise Price then in effect shall be readjusted to the Exercise
Price which would then be in effect if such unissued or
unexercised rights, options, warrants or convertible or
exchangeable securities had not been issuable.
(iii) In case the Company shall fix a
record date for the making of a distribution to all holders of
shares of its Common Stock (A) of shares of any class other than
its Common Stock or (B) of evidences of its indebtedness or (C)
of assets (excluding cash dividends or distributions (other
than extraordinary cash dividends or distributions), and dividends
or distributions referred to in Subsection 7(a)(i) hereof) or
(D) of rights, options, warrants or convertible or
exchangeable securities (excluding those rights, options,
warrants or convertible or exchangeable securities referred to
in Section 7(a)(ii) hereof), then in each such case the
Exercise Price in effect immediately thereafter shall be
determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which (x) the
numerator shall be the total number of shares of Common Stock
outstanding on such record date multiplied by the Current
Market Price (as such term is defined in Section 7(a)(iv)
hereof) per share on such record date, less the aggregate fair
market value as determined in good faith by the Board of
Directors of the Company of said shares or evidences of
indebtedness or assets or rights, options, warrants or
convertible or exchangeable securities so distributed, and of
which (y) the denominator shall be the total number of shares
of Common Stock outstanding on such record date multiplied by
such Current Market Price per share. Such adjustment shall be
made successively whenever such a record date is fixed. In the
event that such distribution is not so made, the Exercise
Price then in effect shall be readjusted to the Exercise Price
which would then be in effect if such record date had not been
fixed.
(iv) For the purpose of any computation under
Section 7(a)(ii) or 7(a)(iii) hereof, the "Current Market Price"
per share at any date (the "Computation Date") shall be deemed to
be the average of the daily Closing Prices of the Common Stock
for twenty (20) consecutive Trading Days ending the Trading
Day immediately preceding the Computation Date; provided,
however, that if there shall have occurred prior to the
Computation Date any event described in Subsection 7(a)(i),
7(a)(ii) or 7(a)(iii) which shall have become effective with
respect to market transactions at any time (the "Market-Effect
Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be
adjusted, for purposes of calculating such average, by
multiplying such Closing Price by a fraction, of which (A) the
numerator shall be the Exercise Price as in effect immediately
prior to the Computation Date and of which (B) the denominator
shall be the Exercise Price as in effect immediately prior to
the Market-Effect Date, it being understood that the purpose
of this proviso is to ensure that the effect of such event on
the market price of the Common Stock shall, as nearly as
possible, be eliminated in order that the distortion in the
calculation of the Current Market Price may be minimized.
(b) No Adjustments to Exercise Price. No adjustment
in the Exercise Price in accordance with the provisions of
Section 7(a)(i), 7(a)(ii) or 7(a)(iii) hereof need be made
unless such adjustment would amount to a change of at least 1%
in such Exercise Price; provided, however, that the amount
by which any adjustment is not made by reason of the provisions
of this Section 7(b) shall be carried forward and taken into
account at the time of any subsequent adjustment in the
Exercise Price.
(c) Adjustment of Number of Shares. Upon each adjustment
of the Exercise Price pursuant to Section 7(a)(i), 7(a)(ii) or
7(a)(iii) hereof, each Warrant shall thereupon evidence the
right to purchase that number of Warrant Shares (calculated to the
nearest hundredth of a share) obtained by multiplying the Exercise
Price in effect immediately prior to the adjustment by the
number of Warrant Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product so
obtained by the Exercise Price in effect immediately after
such adjustment.
(d) Reorganizations. In case of any capital
reorganization, other than in the cases referred to in Section
7(a) hereof, or the consolidation or merger of the Company with
or into another corporation (other than a merger or
consolidation in which the Company is the continuing
corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or
the conversion of such outstanding shares of Common Stock into
shares of other stock or other securities or property), or the
sale or conveyance of the property of the Company as an entirety
or substantially as an entirety (collectively such actions
being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant
(in lieu of the number of Warrant Shares theretofore
deliverable) the number of shares of stock or other securities
or property to which a holder of the number of Warrant Shares which
would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if
such Warrant had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate
adjustment, as determined in good faith by the Board of
Directors of the Company, shall be made in the application
of the provisions herein set forth with respect to the rights
and interests of the holder of this Warrant so that the
provisions set forth herein shall thereafter be applicable, as
nearly as possible, in relation to any shares or other property
thereafter deliverable upon exercise of the Warrants. Any such
adjustments shall be made by and set forth in a supplemental
agreement prepared by the Company or any successor thereto,
between the Company, or any successor thereto, and shall for all
purposes hereof conclusively be deemed to be an appropriate
adjustment. The Company shall not effect any such
Reorganization, unless upon or prior to the consummation thereof
the successor corporation, or if the Company shall be the
surviving corporation in any such Reorganization and is not the
issuer of the shares of stock or other securities or property
to be delivered to holders of shares of the Common Stock
outstanding at the effective time thereof, then such issuer,
shall assume by written instrument the obligation to deliver
to the holder of any Warrants such shares of stock, securities,
cash or other property as such holder shall be entitled to
purchase in accordance with the foregoing provisions.
(e) Verification of Computation. The Company shall select
a firm of independent accountants, which selection (i) may be its
regular firm of independent accountants and (ii) may be changed
from time to time, to verify each computation and/or adjustment
made in accordance with this Section 7. The certificate, report or
other written statement of any such firm shall be conclusive
evidence of the correctness of any computation made under this
Section 7. Promptly upon its receipt of such certificate,
report or statement from such firm of independent accountants,
the Company shall deliver a copy thereof to the holder of
this Warrant.
(f) Notice of Certain Actions. In the event the
Company shall:
(i) declare any dividend payable in stock
to the holders of its Common Stock or make any other
distribution in property other than cash to the holders of
its Common Stock; or
(ii) offer to the holders of its Common Stock
rights to subscribe for or purchase any shares of any
class of stock or any other rights or options; or
(iii) effect any reclassification of its Common
Stock (other than a reclassification involving
merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization
or any consolidation or merger (other than a merger
in which no distribution of securities or other
property is made to holders of Common Stock), or any
sale, transfer or other disposition of its property,
assets and business substantially as an entirety, or
the liquidation, dissolution or winding up of the Company;
then in each such case, the Company shall cause notice of such
proposed action to be mailed to the holder of this Warrant as
hereinafter set forth in this Section 7(f). Such notice shall
specify the date on which the books of the Company shall
close, or a record be taken, for determining the holders of
Common Stock entitled to receive such stock dividend or other
distribution or such rights or options, or the date on which
such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, dissolution, winding
up or exchange shall take place or commence, as the case may be,
and the date as of which it is expected that holders of record of
Common Stock shall be entitled to receive securities or other
property deliverable upon such action, if any such date has been
fixed. Such notice shall be mailed in the case of any action
covered by paragraph (i) or (ii) of this Section 7(f), at least
ten (10) days prior to the record date for determining holders of
the Common Stock for purposes of receiving such payment or offer,
and, in the case of any action covered by paragraph (iii), at
least ten (10) days prior to the earlier of the date upon
which such action is to take place or any record date to
determine holders of Common Stock entitled to receive such
securities or other property.
(g) Certificate of Adjustments. Whenever any adjustment is
to be made pursuant to this Section 7, the Company shall
prepare a Certificate executed by the Chief Financial Officer of
the Company, setting forth such adjustment to be mailed to the
holder of this Warrant at least fifteen (15) days prior thereto,
such notice to include in reasonable detail (i) the events
precipitating the adjustment, (ii) the computation of any
adjustments, and (iii) the Exercise Price and the number of shares
or the securities or othe property purchasable upon exercise of
each Warrant after giving effect to such adjustment. Such
Certificate shall be accompanied by the accountant's verification
required by Section 7(e) hereof.
SECTION 8. Notices. Any notice or demand authorized by the Warrants
to be given or made by the registered holder of any Warrant to or on the
Company shall be sufficiently given or made when received at the office of
the Company expressly designated by the Company at its office for purposes
of the Warrants (until Warrant holders are otherwise notified in accordance
with this Section by the Company), as follows:
Key Energy Group, Inc.
255 Livingston Avenue
New Brunswick, NJ 08901
Attention: Francis D. John, President
Any notice pursuant to the Warrants to be given by the Company to
the registered holder(s) of any Warrant shall be sufficiently given when
received by such holder at the address appearing on the Warrant register
of the Company (until the Company is otherwise notified in accordance with this
Section by such holder).
SECTION 9. Cash Distributions and Dividends. If the Company pays
a dividend or makes a distribution to the holders of its Common Stock
of any securities (other than Common Stock) or property (including cash and
securities of other companies) of the Company, or any rights, options or
warrants to purchase securities (other than Common Stock) or property
(including securities of other companies) of the Company, then,
simultaneously with the payment of such dividend or the making of such
distribution, and as a condition precedent to its right to do so, the
Company will pay or distribute to the holders of the Warrants an amount of
property (including without limitation cash) and/or securities
(including without limitation securities of other companies) of the
Company as would have been received by such holders had they exercised
(whether or not the Warrants were then exercisable) all of the Warrants
immediately prior to the record date (or other applicable date) used for
determining stockholders of the Company entitled to receive such dividend
or distribution.
SECTION 10. No Rights or Liabilities as Stockholder; Information.
Nothing contained in this Warrant shall be construed as conferring upon
the holder hereof the right to vote or to consent as stockholders in respect
of the meetings of stockholders or the election of members of the Board of
Directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as
a stockholder sf the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding
the foregoing, the Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally
by the Company to its stockholders or otherwise filed pursuant to the
provisions of the Securities Act or the Securities
Exchange Act of 1934, as amended. The Company shall give to each Warrant
holder written notice of any determination to register any of its Common
Stock at the same time that it gives notice to any holder of
securities of the Company entitled to rights to register securities under
the Securities Act.
SECTION 11. Amendment and Modification; Waiver. This Warrant may not
be amended or modified except by a written instrument signed by the Company and
the registered holder of this Warrant at the time such amendment or
modification is sought. Any waiver of any term or condition of this Warrant
in any one instance shall not operate as or be deemed to be or construed as
a further or continuing waiver of such term or condition, nor shall any
failure at any time or times to enforce or require performance of any
provision hereof operate as a waiver of or affect in any manner any
party's right at a later time to enforce or require performance of such
provision or any other provision hereof.
SECTION 12. Severability. If any provision of this Warrant shall
be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflict of any provision with any constitution or statute or rule of
public policy, or for any other reason, such circumstance shall not have
the effect of rendering the provision or provisions in question
invalid, inoperative or unenforceable in any other jurisdiction or in
any other case or circumstance or if rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable
to the extent that such other provisions are not themselves actually in
conflict with such constitution, statute or rule of public policy, but this
Warrant shall be reformed and construed in any such jurisdiction or case as
if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision were formed so that it would be valid,
operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case.
SECTION 13. Successors. All the covenants and provisions of
this Warrant by or for the benefit of the Company or the Warrant holder
shall bind and inure to the benefit of their respective successors and
assigns.
SECTION 14. Governing Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York,
without giving effect to principles or conflicts of laws.
SECTION 15. Headings. The headings contained in this Warrant
are inserted for convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signature of its duly authorized officer and the corporate seal hereunto
affixed.
KEY ENERGY GROUP, INC.
By:_____________________
[Seal] Francis D. John, President
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of Warrant)
The undersigned holder hereby represents that he, she or it is
the registered holder of this Warrant, and hereby irrevocably elects to exercise
the right, represented by this Warrant, to receive shares of Common Stock,
$.10 par value, of KEY ENERGY GROUP, INC., and herewith tenders payment
for such shares, to the order of KEY ENERGY GROUP, INC., the amount
of $_____________ in accordance with the terms hereof. The undersigned
requests that a certificate for such shares be registered in the name of
the undersigned or nominee hereinafter set forth, and further that such
certificate be delivered to the undersigned at the address hereinafter
set forth or to such other person or entity as is hereinafter set forth.
If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant
representing the remaining balance of such shares be registered in
the name of the undersigned or nominee hereinafter set forth, and further
that such certificate be delivered to the undersigned at the address
hereinafter set forth or to such other person or entity as is hereinafter
set forth.
Certificate to be registered as follows:
Certificate to be delivered as follows:
Date:_________________________
______________________________________
(Signature must conform in
all respects to the name of
the holder as specified on
the face of the Warrant,
unless Form of Assignment
has been executed)
FORM OF ASSIGNMENT
[To be executed upon Transfer of Warrant]
For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfers unto the right represented
by such Warrant to purchase ________ shares of Common Stock of
KEY ENERGY GROUP, INC. (the "Company") to which such Warrant relates, and
appoints its Attorney to make such transfer on the books of the Company
maintained for such purpose, with full power of substitution in the premises.
------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
Warrant)
-------------------------------------
(Street Address)
------------------------------------
(City), (State) (Zip Code)
Exhibit 4.1
The following table shows the Warrants which
were issued by Key simultaneously with the Warrant included as
Exhibit 4.1. The only differences are the identities of the holders of
the Warrants and the number of shares of Key Common Stock to which the
Warrants relate.
Number of Shares of
Key Common Stock
Identity of Warrant Holder to which Warrant Relates
Goldman Sachs & Co. 50,205
Dol & Co. 351,436
Kristin Morsman 1,062
Ingrid Morsman 2,513
Emily Appleton 1,910
Natalie B. Thompson, Defined Benefit Pension Plan, 2,448
FBO Natalie B. Thompson
American Oil and Gas Corporation 11,175
I.A. O'Shaughnessy Trust, FBO Gerald E 3,710
O'Shaughnessy, O'S Holding, Inc., Trustee
Whitney Morsman 1,062
Gerald E. O'Shaughnessy 1976 Family Trust, FBO 11,130
The O'Shaughnessy Children, Stephen M
O'Shaughnessy, Trustee
L.G. O'Shaughnessy Trust, FBO Gerald E 3,710
O'Shaughnessy, O'S Holding, Inc., Trustee
Sabine Ruhfus 7,420
Rolf E. Ruhfus 7,420
Patrick E. O'Shaughnessy 3,710
Stephen B. Aycock 2,441
William Herbert Hunt Trust Estate, d/b/a Horizontal 11,623
Rentals, J.W. Beavers, Jr., Trustee
CCF/WellTech, L.P. 60,010
Jupiter Management Company, Inc. 8,461
Duane O. Nelson and Alice Lynn Nelson 922
Susan McAvoy 21
Arik Y. Prawer 357
Roughneck Partners II, L.P. 9,381
Cudd & Co. 20,743
Neptune Partners--1989A, L.P. 33,679
Neptune 1989 Investors Limited 22,053
Neptune 1989C Offshore Investors Limited 23,616
Roughneck Partners, L.P. 29,860
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated
as of January 19, 1996, by and between Key Energy Group,
Inc., a Maryland corporation (the "Company"), and the Holder
(as hereinafter defined) executing the signature page hereto.
This Agreement is contemplated by that certain
Secured Amended and Restated Loan and Security Agreement
dated as of January 19, 1996 (the "Agreement") by and
between the Company and The CIT Group/Credit Finance, Inc.
("CIT").
The parties hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall
have the following meanings:
"Advice" has the meaning set forth in Section 5.
"Affiliate" means, with respect to any specified
Person, any other Person who, directly or indirectly,
controls, is controlled by, or is under common control with
such specified Person.
"Business Day" means any day other than a day on
which banks are authorized or required to be closed in the
State of New York.
"Closing Date" means the closing date as defined
in that certain Agreement and Plan of Merger, dated as of
November 18, 1995, by and between the Company and WellTech, Inc.
(the "Merger Agreement").
"Commission" means the Securities and Exchange
Commission.
"Common Stock" means the common stock, par value $.10
per share, of the Company.
"Company" has the meaning set forth in the preamble
and shall include the Company's successors by merger,
acquisition, reorganization or otherwise.
"Controlling Persons" has the meaning set forth in
Section 8(a).
"Demand Registration" has the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute,
and the rules and regulations of the Commission promulgated
thereunder.
"Holder" means the holder of record of Registrable Securities.
"Inspectors" has the meaning set forth in Section 4(m).
"Lock-up Request" has the meaning set forth in Section 10.
"NASD" has the meaning set forth in Section 4(q).
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or other
agency or political subdivision thereof.
"Piggy-Back Registration" has the meaning set forth in Section 3(a).
"Prospectus" means the prospectus included in any
Registration Statement (including, without limitation, a prospectus
that discloses information previously omitted from a prospectus filed as
part of an effective registration statement in reliance upon Rule
430A promulgated under the Securities Act), as amended or supplemented
by any prospectus supplement, including a prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by a Shelf Registration Statement, and by all other
amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by
reference or deemed to be incorporated by reference in such prospectus.
"Records" has the meaning set forth in Section 4(m).
"Registrable Securities" means, collectively, the Common Stock
to be issued upon exercise of the Warrant (as hereafter defined) until
such time as (i) a Registration Statement covering such Registrable
Securities has been declared effective and such Registrable
Securities have been disposed of pursuant to such effective
Registration Statement, (ii) such Registrable Securities are transferred
to any Person other than a Holder pursuant to Rule 144 (or any
similar provision then in force, but not Rule 144A) under
the Securities Act, including a sale pursuant to the provisions
of Rule 144(k), or (iii) such Registrable Securities shall
cease to be outstanding.
"Registration Expenses" has the meaning set forth in Section 7.
"Registration Statement" means any registration
statement of the Company that covers any of the Registrable
Securities pursuant to the provisions of this Agreement
(including any Shelf Registration Statement), and all
amendments and supplements to any such registration
statement, including post-effective amendments, in each case
including the Prospectus, all exhibits, and all material
incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 144A" has the meaning set forth in Section 9(b).
"Securities Act" means the Securities Act of 1933, as
amended from time to time, or any successor statute, and
the rules and regulations of the Commission promulgated
thereunder.
"Shelf Registration" has the meaning set forth in
Section 2(a).
"Shelf Registration Statement" has the meaning set
forth in Section 2(a).
"Suspension Notice" has the meaning set forth in Section 5.
"Target Effective Period" has the meaning set forth in Section 2(a).
"Warrant" mean the warrant to purchase up to 75,000
shares of Common Stock held by CIT.
Section 2. Shelf Registration.
(a) Filing: Effectiveness. (i) If, as of the Closing
Date, a shelf registration statement (the "Shelf Registration
Statement") on the appropriate form for an offering to be made
on a continuous basis pursuant to Rule 415 under the Securities
Act (or such successor rule or similar provision then in
effect) covering all of the Registrable Securities (a "Shelf
Registration") is not effective or the effectiveness
thereof has been suspended, or (ii) if the Closing Date has
not occurred by June 30, 1995 and the Holder requests the
Company to do so then the Company shall use its reasonable
business efforts to cause such Shelf Registration Statement to
be effective as soon as practicable. Once the Shelf
Registration Statement is effective, the Company shall use its
reasonable business efforts to keep such Shelf
Registration Statement continuously effective for a period
(the "Target Effective Period") ending with the earlier of (x)
the sale of all Registrable Securities and (y) 24 months
following the Closing Date or, if later, the date on
which such Shelf Registration Statement is declared
effective. The Company further agrees, if necessary, to
supplement or amend the Shelf Registration Statement, as
required by the registration form used by the Company for
such Shelf Registration Statement or by the instructions
applicable to such registration form or by the Securities Act
or as reasonably requested (which request shall result in the
filing of a supplement or amendment) by a Holder of
Registrable Securities to which such Shelf Registration
Statement relates (but only to the extent that such request by
such Holder relates to information with respect to such Holder),
and the Company agrees to furnish the Holder, Holders' counsel
and any managing underwriter copies of any such supplement or
amendment prior to its being used and/or filed with the
Commission. The Holder shall be permitted to withdraw all or
any part of the Registrable Securities from a Shelf
Registration Statement (i) at any time prior to the effective
date of such Shelf Registration Statement and (ii) in the
event that on or after the effective date of such Shelf
Registration Statement the Holder receives a Lock-up
Request and such withdrawing Holder elects to exercise its
rights to a Piggy-Back Registration pursuant to Section 3
hereof. The Company further agrees that if during the Target
Effective Period, the Holder has not sold all Registrable
Securities, then upon demand made by the Holder at any time
within three years after the expiration of the Target
Effective Period, the Company shall promptly file a
registration statement on the appropriate form for an offering
to be made by the Holder of all of the Registrable Securities
then held by Holder (the "Demand Registration") and shall
use reasonable business efforts to have such registration
statement declared effective provided, however, that: (i)
the Demand Registration need not be a Shelf Registration; (ii)
the Holder shall be entitled to only one Demand Registration
during said three year period; and (iii) the Holder's right to
such Demand Registration shall terminate upon the first to
occur of (y) expiration of such three year period of (z) sale
of such Registrable Securities by the Holder.
(b) Effective Registration. A registration will not
be deemed to have been effected as a Shelf Registration or a
Demand Registration unless the Shelf Registration Statement or
Registration Statement filed upon demand, as the case may be,
with respect thereto has been declared effective by the
Commission and the Company has complied in all material
respects with its obligations under this Agreement with
respect thereto. If a Shelf Registration or Demand
Registration is deemed not to have been effected, then the
Company shall continue to be obligated to effect a
Shelf Registration or a Demand Registration, as the case
may be, pursuant to this Section 2.
Section 3. Piggy-Back Registration.
(a) Request for Registration. Each time the Company
proposes to file a registration statement under the Securities
Act with respect to an offering by the Company for its own
account or for the account of any of its security holders of
any class of equity security (other than (i) a registration
statement on Form S-4 or S-8 (or any substitute form that is
adopted by the Commission) or (ii) a registration statement
filed in connection with an exchange offer or offering of
securities solely to the Company's existing security holders),
and the form of registration statement to be used permits
the registration of Registrable Securities, then the
Company shall give written notice of such proposed filing to
the Holders of Registrable Securities as soon as practicable
(but in no event less than 20 days before the anticipated
effective date), and such notice shall offer such Holders
the opportunity to register such Registrable Securities
as each such Holder may request (which request shall specify
the Registrable Securities intended to be disposed of by such
Holder and the intended method of distribution thereof) within
10 days after the date such notice is received by such
Holder from the Company (a "Piggy-Back Registration").
The Company shall cause the managing underwriter or underwriters
of a proposed underwritten offering to permit the
Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions
as any similar securities of the Company or any other
security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance
with the intended method of distribution thereof. Any
Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration
statement pursuant to this Section 3 by giving written
notice to the Company of such withdrawal no later than five
days prior to the anticipated effective date. The Company may
withdraw a Piggy-Back Registration at any time prior to the
time it becomes effective, provided that the Company shall
give prompt notice of such withdrawal to the Holders of
Registrable Securities requested to be included in such
Piggy-Back Registration.
(b) Reduction of Offering. If the managing underwriter
or underwriters of an underwritten offering with respect to
which Piggy-Back Registration has been requested as provided
in Section 3(a) shall have informed the Company, in writing,
that in the opinion of such underwriter or underwriters the
total number of shares which the Company, Holders of
Registrable Securities and any other Persons participating
in such registration intend to include in such offering is
such as to materially and adversely affect the success of
such offering (including without limitation any material
decrease in the proposed public offering price), then the
number of shares to be offered for the account of all Persons
(other than the Company) participating in such registration
shall be reduced or limited (to zero if necessary) pro rata
in proportion to the respective number of shares requested
to be registered by such Persons to the extent necessary to
reduce the total number of shares requested to be included in
such offering to the number of shares, if any, recommended by
such managing underwriter or underwriters.
No registration effected under this Section 3, and no
failure to effect a registration under this Section 3 shall
relieve the Company of its obligation to effect a Shelf
Registration or a Demand Registration pursuant to Section 2.
No failure to effect a registration under this Section 3 and
to complete the sale of Registrable Securities in connection
therewith shall relieve the Company of any other obligation
under this Agreement, including without limitation, the
Company' s obligations under Sections 7 and 8.
Section 4. Registration Procedures.
In connection with the obligations of the Company to
effect or cause the registration of any Registrable
Securities pursuant to the terms and conditions of this
Agreement, the Company shall use its reasonable business
efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended
method of distribution thereof as quickly as practicable,
and in connection therewith:
(a) The Company shall prepare and file with
the Commission a Registration Statement on the appropriate form
under the Securities Act, which form shall comply as to form in all
materials respects with the requirements of the applicable form and
include all financial statements required by the Commission to be
filed therewith, and use its reasonable business efforts to cause such
Registration Statement to become effective and remain effective in
accordance with the provisions of this Agreement.
(b) The Company shall promptly prepare and file
with the Commission such amendments and post-effective amendments
to each Registration Statement as may be necessary to keep such
Registration Statement effective for as long as such registration is
required to remain effective pursuant to the terms hereof; shall cause
the Prospectus to be supplemented by any required Prospectus supplement,
and, as so supplemented, to be filed pursuant to Rule 424 under the
Securities Act; and shall comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition by the
Holders set forth in such Registration Statement or supplement to
the Prospectus;
(c) The Company shall promptly furnish to any Holder
and the underwriters, if any, without charge, such number of conformed
copies of each Registration Statement and any post-effective amendment
thereto and such number of copies of the Prospectus (including
each preliminary Prospectus) and any amendments or supplements thereto,
any documents incorporated by reference therein and such other documents
as such Holder or underwriter may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities being sold by such Holder.
(d) The Company shall, on or prior to the date on
which a Registration Statement is declared effective, (i) use its
reasonable business efforts to register or qualify the Registrable
Securities covered by such Registration Statement under such other
securities or "blue sky" laws of such states of the United States as
any Holder or underwriter requests; (ii) do any and all other acts and
things which may be necessary or advisable to enable such Holder to consummate
the disposition of such Registrable Securities owned by such Holder; (iii)
use its reasonable business efforts to keep each such registration or
qualification (or exemption therefrom) effective during the period
which the Registration Statement is required to be kept
effective in accordance with the provisions of this Agreement; and
(iv) do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of such
Registrable Securities; provided, however, that the Company shall
not be required (x) to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 4(d), (y) to file any general consent to service of process, or
(z) to subject itself to taxation in any jurisdiction where it would not
otherwise be subject to taxation.
(e) The Company shall cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the
Holders to consummate the disposition of such Registrable Securities.
(f) The Company shall promptly notify each Holder,
Holders' counsel and any underwriter in writing, (i) when a Prospectus
or any Prospectus supplement or post-effective amendment has been filed and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by
the Commission or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus
or for additional information after the Registration Statement has
become effective, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement or
the initiation or threatening of any proceedings for that purpose,
(iv) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or exemption
from qualification of any of the Registrable Securities under state
securities or "blue sky" laws or the initiation of any proceedings for
that purpose, (v) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities
covered thereby, the representations and warranties of the Company
contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to the offering cease to be
true and correct in all material respects, and (vi) of the
happening of any event which makes any statement made
in a Registration Statement or related Prospectus
untrue or which requires the making of any changes in
such Registration Statement or Prospectus so that they will
not contain any untrue statement of a material fact
or omit to state any 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. Immediately following
expiration of any Suspension Period, the Company
shall prepare and file with the Commission and
furnish a supplement or amendment to such Prospectus so
that, as thereafter deliverable to the purchasers of such
Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
(g) The Company shall make generally
available to the Holders an earnings statement
satisfying the provisions of Section 11(a) of the
Securities Act no later than 45 days (90 days in the event it
relates to a fiscal year) after the end of the 12-month
period beginning with the first day of the Company's
first fiscal quarter commencing after the effective
date of a Registration Statement, which earnings
statement shall cover said 12-month period, and which
requirement will be deemed to be satisfied if the
Company timely files complete and accurate
information on forms 10-Q, 10-K and 8-K under the Exchange Act
and otherwise complies with Rule 158 under the Securities
Act.
(h) The Company shall promptly use its
reasonable business efforts to prevent the
issuance of any order suspending the
effectiveness of a Registration Statement, and if one is issued
use its reasonable business efforts to obtain the
withdrawal of any order suspending the effectiveness
of a Registration Statement at the earliest
possible moment.
(i) The Company shall, if requested
by the managing underwriter or underwriters, if any,
Holders' counsel, or any Holder promptly incorporate
in a Prospectus supplement or post-effective
amendment such information as such managing underwriter or
underwriters reasonably requests, or Holders' counsel
reasonably requests, to be included therein,
including, without limitation, with respect to the
Registrable Securities being sold by such Holder to such
underwriter or underwriters, the purchase price
being paid therefor by such underwriter or
underwriters and with respect to any other terms of an
underwritten offering of the Registrable Securities to be sold
in such offering, and promptly make all required
filings of such Prospectus supplement or post-effective
amendment.
(j) The Company shall, as promptly as
practicable after filing with the Commission any
document which is incorporated by reference into a
Registration Statement (in the form in which it was
incorporated), deliver a copy of each such document to
each of the Holders and to Holders' counsel.
(k) The Company shall cooperate with the
Holders and the managing underwriter or underwriters,
if any, to facilitate the timely preparation and
delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law)
representing securities sold under a Registration
Statement, and enable such securities to be in such
denominations and registered in such names as the
managing underwriter or underwriters, if any, or such Holders
may reasonably request and keep available and make
available to the Company's transfer agent prior
to the effectiveness of such Registration
Statement a supply of such certificates.
(l) The Company shall enter into such
customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such
other actions as the Holders or the underwriters retained
by the Holders participating in an underwritten public
offering, if any, may reasonably request in order to
expedite or facilitate the disposition of Registrable
Securities.
(m) The Company shall promptly make available
to each Holder, any underwriter participating in
any disposition pursuant to a Registration
Statement, and any attorney, accountant or other agent or
representative retained by any such Holder or
underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate
documents and properties of the Company
(collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers,
directors and employees to supply all information
reasonably requested by any such Inspector in connection
with such Registration Statement; provided that, unless the
disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such
Registration Statement or the release of such Records
is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, the Company shall
not be required to provide any information under this
paragraph (1) if the Company believes, after
consultation with counsel for the Company and counsel for the
Holders, that to do so would cause the Company to
forfeit an attorney-client privilege that was
applicable to such information or (2) if either (i) the
Company has requested and been granted from the
Commission confidential treatment of such information
contained in any filing with the Commission or
documents provided supplementally or otherwise or
(ii) the Company reasonably determines in good faith that such
Records are confidential and so notifies the Inspectors
in writing unless prior to furnishing any such
information with respect to (i) or (ii) such Holder of
Registrable Securities requesting such information agrees to
enter into a confidentiality agreement in customary form
and subject to customary exceptions; and provided,
further that each Holder of Registrable Securities
agrees that it will, upon learning that
disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and
allow the Company at its expense, to undertake
appropriate action and to prevent disclosure of the
Records deemed confidential.
(n) In the case of any underwritten public
offering, the Company shall furnish to each Holder
and to each underwriter a signed counterpart, addressed
to such Holder or underwriter, of (i) an opinion or
opinions of counsel to the Company, and (ii) a comfort
letter or comfort letters from the Company's independent
public accountants, each in customary form and
covering such matters of the type customarily covered
by opinions or comfort letters, as the case may be, as the
managing underwriter therefor reasonably requests.
(o) The Company shall cause the shares
of Common Stock included in a Registration Statement
to be listed on the American Stock Exchange or such
other securities exchange on which similar securities
issued by the Company are then listed.
(p) The Company shall provide a CUSIP
number for all Registrable Securities covered by a
Registration Statement not later than the effective
date of such Registration Statement.
(q) The Company shall cooperate with each
Holder and each underwriter participating in the
disposition of Registrable Securities and their
respective counsel in connection with any filings required to
be made with the National Association of Securities
Dealers, Inc. ("NASD").
(r) The Company shall, during the period
when the Prospectus is required to be delivered under
the Securities Act, promptly file all documents required
to be filed with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act.
(s) The Company shall appoint a transfer
agent and registrar for all the shares of Common Stock
covered by a Registration Statement not later than the
effective date of such Registration Statement.
(t) In connection with an underwritten
offering, the Company will participate, to the extent
reasonably requested by the managing underwriter for
the offering or the Holders, in customary efforts to
sell the securities under the offering, including without
limitation, participating in "road shows."
Section 5. Suspension Period.
In the case of a Shelf Registration Statement,
each Holder, upon receipt of any notice (a "Suspension
Notice") from the Company of the happening of any event of the
kind described in Section 4(f)(vi) or of any event which, in the
Company's reasonable business judgment, could become such an
event, shall forthwith discontinue disposition of the
Registrable Securities pursuant to the Shelf Registration
Statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(f) or until it is
advised in writing (the "Advice") by the Company that the use
of the Prospectus may be resumed, and has received copies of
any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so
directed by the Company, such Holder will, or will request
the managing underwriter or underwriters, if any, to,
deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such
notice. In the event that the Company shall give any Suspension
Notice, (i) the Company shall use its reasonable business
efforts and take such actions as are reasonably necessary to
render the Advice and end the suspension period as promptly
as practicable and (ii) the time periods for which a Shelf
Registration Statement is required to be kept effective pursuant
to Section 2 hereof shall be extended by the number of days
during the suspension period.
Section 6. Holder Information.
If any Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the
Company, then such Holder shall have the right, to the extent
permitted by law, to require (i) the insertion therein of
language, in form and substance reasonably satisfactory to
such Holder, to the effect that the holding by such Holder of
such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply
that such Holder will assist in meeting any future financial
requirements of the Company, or (ii) in the event that such
reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal or
state "blue sky" statute and the rules and regulations
thereunder then in force, the deletion of the reference to such
Holder.
Section 7. Registration Expenses.
Any and all expenses incident to the Company's
performance of or compliance with this Agreement, including
without limitation all Commission and securities exchange,
NASDAQ or NASD registration and filing fees, all fees and
expenses incurred in connection with compliance with state
securities or "blue sky" laws (including reasonable fees and
disbursements of counsel for any underwriters in connection
with "blue sky" qualifications of the Registrable Securities),
printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all
salaries and expenses of the Company's officers and employees
performing legal or accounting duties), all expenses for
word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to
the performance of and compliance with this Agreement, the fees
and expenses incurred in connection with the listing of the
Registrable Securities, the fees and disbursements of counsel
for the Company and of the independent certified public
accountants of the Company (including the expenses of any
comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter
or comfort letter requested pursuant to Section 4(n)) Securities
Act liability insurance (if the
Company elects to obtain such insurance), and the reasonable
fees and expenses of any special experts or other Persons
retained by the Company in connection with any
registration, (all such expenses being herein called
"Registration Expenses"), will be borne by the Company whether
or not the Registration Statement to which such expenses relate
becomes effective provided, however, that Registration
Expenses shall not include (i) underwriting discounts and
commissions and transfer taxes, if any, relating to the sale
or disposition of Registrable Securities or (ii) any fees or
expenses of any counsel, accountants or other persons
retained or employed by the Holders.
Section 8. Indemnification and Contribution.
(a) Indemnification bv the Company. The Company agrees
to indemnify and hold harmless, to the full extent permitted by
law, each Holder, its partners, officers, directors, trustees,
stockholders, employees, agents and investment advisers, and
each Person who controls such Holder within the meaning of
either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is
controlled by, such Holder, together with the partners,
officers, directors, trustees, stockholders, employees and
agents of such controlling Person (collectively, the
"Controlling Persons"), from and against all losses, claims,
damages, liabilities and expenses (including without limitation
any legal or other fees and expenses reasonably incurred by
any Holder or any such Controlling Person in connection
with defending or investigating any action or claim in
respect thereof) (collectively, the "Damages") to which such
Holder, its partners, officers, directors, trustees,
stockholders, employees, agents and investment advisers,
and any such Controlling Person may become subject under
the Securities Act or otherwise, insofar as such Damages (or
proceedings in respect thereof) arise out of or are based upon
any untrue or alleged untrue statement of material fact
contained in any Registration Statement (or any amendment
thereto) pursuant to which Registrable Securities were
registered under the Securities Act, including all documents
incorporated therein by reference, or caused by any
omission or alleged omission to state therein a material
fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or
caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or
supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which
they were made not misleading, except insofar as such Damages
arise out of or are based upon any such untrue statement or
omission based upon information relating to such Holder
furnished in writing to the Company by such Holder expressly for
use therein. In connection with an underwritten offering,
the Company will indemnify the underwriters thereof, their
officers and directors and each Person who controls such
underwriters (within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification
of the Holders of Registrable Securities except with
respect to information provided by the underwriter
specifically for inclusion therein.
(b) Indemnification bv the Holders. Each Holder agrees
to indemnify and hold harmless the Company, its directors,
officers and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent
as the foregoing indemnity from the Company to such
Holder, but only with reference to information relating to
such Holder furnished to the Company in writing by such selling
Holder expressly for use in any Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or
supplement thereto); provided, however, that such selling
Holder shall not be obligated to provide such indemnity to
the extent that such Damages result from the failure of the
Company to promptly amend or take action to correct or
supplement any such Registration Statement or Prospectus on
the basis of corrected or supplemental information provided in
writing by such selling Holder to the Company expressly for
such purpose. In no event shall the liability of any Holder of
Registrable Securities hereunder be greater in amount than the
amount of the proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such
indemnification obligation.
(c) Indemnification Procedures. In case any
proceeding (including any governmental investigation) shall be
instituted involving any Person in respect of which indemnity
may be sought pursuant to either paragraph (a) or (b) above,
such Person (the "indemnified party") shall promptly notify
the Person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party
shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and
any others the indemnifying party may designate in such
proceedings and shall pay the fees and disbursements of such
counsel relating to such proceeding. In any such
proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel,
or (ii) the indemnifying party fails promptly to assume the
defense of such proceeding or fails to employ counsel
reasonably satisfactory to such indemnified party or parties,
or (iii) (A) the named parties to any such proceeding
(including any impleaded parties) include both such
indemnified party or parties and any indemnifying party or
an Affiliate of such indemnified party or parties or of any
indemnifying party, (B) there may be one or more defenses
available to such indemnified party or parties or such
Affiliate of such indemnified party or parties that are
different from or additional to those available to any
indemnifying party or such Affiliate of any indemnifying
party and (C) such indemnified party or parties shall have been
advised by such counsel that there may exist a conflict of
interest between or among such indemnified party or parties
or such Affiliate of such indemnified party or parties
and any indemnifying party or such Affiliate of any
indemnifying party, in which case, if such indemnified party or
parties notifies the indemnifying party or parties in writing
that it elects to employ separate counsel of its choice at
the expense of the indemnifying parties, the indemnifying
parties shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the indemnifying
parties, it being understood, however, that unless there exists
a conflict among indemnified parties, the indemnifying
parties shall not, in connection with any one such proceeding or
separate but substantially similar or related proceedings in
the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for such indemnified
party or parties. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its
written consent but, if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party or parties
from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect
of which such indemnified party is a party, and indemnity could
have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) Contribution. To the extent that the
indemnification provided for in paragraph (a) or (b) of this
Section 8 is unavailable to an indemnified party or insufficient
in respect of any Damages, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such Damages in such
proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Holders on the other
hand in connection with the statements or omissions that
resulted in such Damages, as well as any other relevant
equitable considerations. The relative fault of the Company on
the one hand and of the Holders on the other hand shall be
determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the
Holders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such statement or omission.
Notwithstanding the provisions of this Section 8(d), no
Holder shall be required to contribute any amount in excess
of the amount by which the total price at which the Registrable
Securities of such Holder were offered to the public (less
any underwriting discounts and commissions) exceeds the amount
of any damages which such Holder has otherwise been required
to pay by reason of such untrue statement or omission. Each
Holder's obligation to contribute pursuant to this Section
8(d) is several in the proportion that the proceeds of the
offering received by such Holder bears to the total proceeds of
the offering received by all the Holders and not joint.
If indemnification is available under paragraph
(a) or (b) of this Section 8, the indemnifying parties shall
indemnify each indemnified party to the full extent provided
in such paragraphs without regard to the relative fault of said
indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 8(d).
The Company and each Holder agrees that it would
not be just or equitable if contribution pursuant to this
Section 8(d) were determined by pro rata allocation or by any
other method of allocation that does not take account of the
equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the Damages
referred to in this Section 8 shall be deemed to include,
subject to the limitations set forth above, any legal or
other expenses reasonably incurred (and not otherwise
reimbursed) by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty
of fraudulent misrepresentation (within the meaning of
Section ll(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this
Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified
party at law or in equity.
Section 9. Rule 144 and Rule 144A.
(a) Rule 144. The Company covenants that it will
file any reports required to be filed by it under the
Securities Act and the Exchange Act (or, if the Company is not
required to file such reports, it will, upon the request of
any Holder, make publicly available other information so long
as necessary to permit sales under Rule 144 under the
Securities Act), and it will take such further action as any
Holder may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder, the
Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
(b) Rule 144A. Upon the request of any Holder, the
Company shall deliver to such holder within 10 days following
receipt by the Company of such request, the information
required by Section (d)(4) of Rule 144A under the Securities
Act, as such rule may be amended from time to time or any
similar rule or regulation hereafter adopted by the Commission
("Rule 144A"), and will take such further action as any Holder
may reasonably request, all to the extent required from time to
time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the
limitations or the exemptions provided by Rule 144A. All
information shall be "reasonably current" as defined in Rule
144A.
Section 10. Restrictions on Sale by the Company and Others.
In the event of an underwritten public offering for
the account of the Company with respect to which the Holders
have the right to exercise their rights to Piggy-Back
Registration pursuant to Section 3 hereof, upon the written
request (the "Lock-up Request") of the managing underwriter (or
underwriters) of such offering, which request shall be made
at least 20 days prior to the anticipated effective date of
the Registration Statement for such offering, each Holder agrees
not to effect any public sale or distribution of any
securities similar to those being registered in such offering
(other than pursuant to such offering), including without
limitation, through sales of Registrable Securities pursuant to
the Shelf Registration Statement, during the 10 days prior to,
and during the 90-day period beginning on, the effective date
of the Registration Statement relating to such offering.
Section 11. Miscellaneous.
(a) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of the
Holder (or if there is more than one Holder, of the Holders of
a majority in interest) of the Registrable Securities then
outstanding.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally
or sent by telecopier, registered or certified mail (return
receipt requested), postage prepaid or courier to the parties
at their respective addresses set forth on the signature pages
hereof (or at such other address for any party as shall be
specified by like notice, provided that notices of a change of
address shall be effective only upon receipt thereof). All
such notices and communications shall be deemed to have been
received: at the time delivered by hand, if personally
delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when receipt is
acknowledged, if telecopied; and on the next business day if
timely delivered to a courier guaranteeing overnight delivery.
(c) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the parties, including,
without limitation and without the need for an express
assignment, subsequent Holders. If any transferee of any
Holder shall acquire Registrable Securities in any manner,
whether by operation of law or otherwise, such Registrable
Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable
Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such person shall be entitled
to receive the benefits hereof.
(d) Counterparts. This Agreement may be executed
in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of law.
(g) Severabilitv. In the event that any one or more
of the provisions contained herein, or the application
thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every
other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(h) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and is
intended to be the complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between
the parties with respect to such subject matter.
(i) Attornevs' Fees. In any action or proceeding
brought to enforce any provision of this Agreement or where any
provision hereof is validly asserted as a defense, the
successful party shall, to the extent permitted by applicable
law, be entitled to recover reasonable attorneys' fees and
expenses in addition to any other available remedy.
(j) Further Assurances. Each party shall cooperate and
take such action as may be reasonably requested by another
party in order to carry out the provisions and purposes of
this Agreement and the transactions contemplated hereby.
(k) Remedies. In the event of a breach or a
threatened breach by any party to this Agreement of its
obligations under this Agreement, any party injured or to be
injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in
this Agreement and granted by law. The parties agree that the
provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at
law, including monetary damages, is inadequate and that any
objection in any action for specific performance or
injunctive relief that a remedy at law would be adequate is
waived.
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed by their
respective officers hereunto duly authorized, as of the day
and year first above written.
KEY ENERGY GROUP, INC.
By: /s/ Francis D. John
Name: Francis D. John
Title: Chief Executive Officer
Address: 257 Livingston Avenue
New Brunswick, New Jersey 08901
Telecopier: (908) 247-5148
EXHIBIT 11(a)
KEY ENERGY GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
NINE AND THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Nine Months Ended Nine Months Ended
March 31, 1996 March 31, 1995
Fully Fully
(thousands, except per share data) Primary Diluted Primary Diluted
Net income $ 2,321 $ 2,321 $ 1,642 $ 1,642
Shares outstanding at
beginning of period 6,914 6,914 5,274 5,274
Other dilutive securities:
Common shares issued for acquisition
of WellTech, Inc. * 67 67 - -
Warrants to purchase Common Stock * - 5 - -
Common shares issued for acquisition
of WellTech West Texas operations - - 1,363 1,363
Average common shares outstanding 6,981 6,981 6,637 6,637
Earnings per share: $0.33 $0.33 $0.25 $0.25
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
Fully Fully
(thousands, except per share data) Primary Diluted Primary Diluted
Net income $ 827 $ 827 $ 631 $ 631
Shares outstanding at
beginning of period 6,914 6,914 5,274 5,274
Other dilutive securities:
Common shares issued for acquisition
of WellTech, Inc. * 67 67 - -
Warrants to purchase Common Stock * - 5 - -
Common shares issued for acquisition
of WellTech West Texas operations - - 1,363 1,363
Average common shares outstanding 6,981 6,986 6,637 6,637
Earnings per share: $0.12 $0.12 $0.10 $0.10
* - Weighted average.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,303
<SECURITIES> 267
<RECEIVABLES> 19,183
<ALLOWANCES> 0
<INVENTORY> 1,764
<CURRENT-ASSETS> 26,310
<PP&E> 86,477
<DEPRECIATION> (7,334)
<TOTAL-ASSETS> 110,643
<CURRENT-LIABILITIES> 23,818
<BONDS> 0
0
0
<COMMON> 1,041
<OTHER-SE> 32,763
<TOTAL-LIABILITY-AND-EQUITY> 110,643
<SALES> 0
<TOTAL-REVENUES> 39,094
<CGS> 0
<TOTAL-COSTS> 35,626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,448
<INCOME-PRETAX> 3,468
<INCOME-TAX> 1,129
<INCOME-CONTINUING> 2,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,321
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
