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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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KEY ENERGY GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Maryland 04-2648081
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OF INCORPORATION OR ORGANIZATION)
TWO TOWER CENTER, 20TH FLOOR, EAST BRUNSWICK, NEW JERSEY
(732) 247-4822
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OR REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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Francis D. John
Key Energy Group, Inc.
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
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Copies to:
Jack D. Loftis, Jr. Samuel N. Allen
Key Energy Group, Inc. Porter & Hedges, L.L.P.
Two Tower Center, 20th Floor 700 Louisiana, Suite 3500
East Brunswick, New Jersey 08816 Houston, Texas 77002
(732) 247-4822 (713) 226-0600
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement, as
determined by the Selling Securityholders.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or reinvestment plans, please check the following box. [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Share Aggregate Offering Price(1) Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7% Convertible
Debentures Due 2003 $3,000,000 ---- $3,234,000(2) $954.00
- -------------------------------------------------------------------------------------------------------------------------
Common Stock, Par
Value $.10 per share 186,286(3) $19.00 $353,894 $105.00(4)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Pursuant to Rule 457(i), the proposed offering price is calculated
on the basis of the offering price of the convertible debentures
plus an additional $234,000, which represents the aggregate
offering price of 12,000 shares of Common Stock, based on the
average of the high and low sales prices of the Common Stock on
December 29, 1997 on the American Stock Exchange of $19.00,
which may be issued to the holders of the 7% Convertible
Debentures due 2003 ("Debentures") as additional consideration
upon conversion of the Debentures.
(3) An intermediate number of shares of Common Stock issuable upon
conversion of the Debentures also is being registered hereby.
(4) Pursuant to Rule 457(c), the registration fee is calculated on the
basis of the high and low sale prices for the Common Stock on the
American Stock Exchange on December 29, 1997. Pursuant to Rule
457(i), no registration fee is payable in connection with the Common
Stock issuable upon conversion of the Debentures.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JANUARY 6, 1998
PROSPECTUS
KEY ENERGY GROUP, INC.
$3,000,000
7% CONVERTIBLE SUBORDINATED DEBENTURES
505,979 SHARES OF COMMON STOCK
Certain selling securityholders of the Company (the "Selling
Securityholders") are hereby offering for resale up to $3,000,000 aggregate
principal amount of 7% Convertible Subordinated Debentures due 2003 (the
"Debentures") of Key Energy Group, Inc., a Maryland corporation (the
"Company"), along with an indeterminate number of shares of the common stock,
par value $.10 per share, of the Company ("Common Stock") issuable upon
conversion of the Debentures. In addition, certain Selling Securityholders are
offering for sale 186,286 shares of Common Stock. The Company will not receive
any of the proceeds from the sale of the Debentures or Common Stock offered
hereby.
The Common Stock is listed on the American Stock Exchange (the "AMEX")
under the symbol KEG. On December 19, 1997, the closing price of the Common
Stock, as reported on the AMEX, was $19.50 per share. The Debentures are not
listed on any securities exchange, but are traded in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market of the
National Association of Securities Dealers, Inc.
The Debentures and the Common Stock may be offered and sold from time
to time by the Selling Securityholders named under "Selling Securityholders" or
named in a Prospectus Supplement through underwriters, dealers or agents or
directly to one or more purchasers in fixed price offerings, in negotiated
transactions, at market prices prevailing at the time of sale or at prices
related to such market prices. The terms of the offering and sale of the
Debentures and the Common Stock in respect of which this Prospectus is being
delivered, including any initial public offering price, any discounts,
commissions or concessions allowed, reallowed or paid to underwriters, dealers
or agents, the purchase price of the Debentures and the Common Stock and the
proceeds to the Selling Securityholders, and any other material terms shall be
as set forth in the applicable Prospectus Supplement. See "Plan of
Distribution" for indemnification arrangements, including indemnification of
agents, dealers and underwriters.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is January , 1998.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are hereby incorporated in this Prospectus and specifically made a part
hereof by reference: (i) the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997, as amended; (ii) the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997; (iii) the
Company's Proxy Statement dated November 28, 1997; (iv) the Company's Current
Reports on Form 8-K dated June 25, 1997, as amended, September 1, 1997, as
amended, September 25, 1997, as amended, October 1, 1997, as amended, and
October 9, 1997; and (v) the description of the Common Stock contained in the
Company's Form 8-A filed on May 21, 1981, as amended on January 27, 1986 and
October 19, 1989. All other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and before the termination of the offering of the Common Stock
covered by this Prospectus shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the respective dates of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein, or in any other subsequently filed document
that also is or is deemed to be incorporated herein by reference, modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such
exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates). Requests for such copies
should be made to the Company at its principal executive offices, Two Tower
Center, 20th Floor, East Brunswick, New Jersey 08816, telephone number (732)
247-4822, Attn: Jack D. Loftis.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus and the documents that are incorporated in this
Prospectus by reference contain certain statements that are "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Exchange Act. Those
statements include, among other things, the discussions of the Company's
business strategy and expectations concerning market position, future
operations, margins, profitability, liquidity and capital resources, and
statements concerning the integration of the operations acquired and
achievement of certain benefits in connection therewith. Forward Looking
Statements are included in the sections captioned "Risk Factors," "The
Company," and elsewhere in this Prospectus and in documents that are
incorporated in this Prospectus by reference. Although the Company believes
that the expectations reflected in such Forward Looking Statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Generally, these statements relate to business plans or strategies,
projected or anticipated benefits or other consequences of such plans or
strategies, projected or anticipated benefits from acquisitions made by or to
be made by the Company, or projections involving anticipated revenues,
expenses, earnings, levels of capital expenditures or other aspects of
operating results. The Company's operations are subject to uncertainties,
risks and other influences, many of which are outside of the Company's control
and any one of which, or a combination of which, could materially adversely
affect the results of the Company's operations and whether the Forward Looking
Statements prove to be accurate. Important factors that could cause actual
results to differ materially from the Company's expectations are disclosed in
"Risk Factors" and elsewhere in this Prospectus.
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THE COMPANY
Key Energy Group, Inc. (the "Company") operates approximately 795 well
service rigs, 623 fluid hauling and other trucks and 38 drilling rigs in the
Permian Basin, the Mid-Continent region, the Ark La Tex region, Michigan, the
Appalachian Basin, the Rocky Mountain region, the Four Corners area of the
Southwest and Argentina. The Company believes it operates the largest combined
fleet of active well service rigs and fluid hauling and other trucks onshore
the continental United States and the second largest fleet in Argentina. The
Company provides a full range of maintenance and workover services to major and
independent oil and gas companies in all of its operating regions. In addition
to maintenance and workover services, the Company provides services that
include the completion of newly drilled wells, the recompletion of existing
wells (including horizontal recompletions) and the plugging and abandonment of
wells at the end of their useful lives. Other services include oilfield fluid
and equipment transportation, storage and disposal services, frac tank rentals,
fishing and rental tools, wireline services, air drilling and hot oiling. In
addition, the Company is engaged in contract drilling in West Texas, the Ark La
Tex region, the Four Corners area, Michigan and Argentina and owns and produces
oil and natural gas in the Permian Basin.
The Company believes it has a distinctive business strategy designed to
take advantage of growth opportunities within the fragmented but consolidating
well service industry. The strategy emphasizes a decentralized management
philosophy that encourages decision making at the local level. The strategy has
resulted in growth through the enhancement of services and strategic
acquisitions and control of overhead and operating expenses. The Company's
strategy also is designed to minimize the business risks associated with
unexpected downturns in one or more of its business segments. As a result, the
Company has become a leader in its domestic markets by establishing a
reputation for competitive and comprehensive services, including high quality
equipment and well-trained crews that operate within stringent safety
guidelines.
Enhancement of Services: The Company has implemented a strategy to
provide its customers with a single source of well services and
equipment. The Company's ability to provide an increasing array of
services, along with the Company's reputation for reliability and
safety, has enabled the Company to increase its market share in its
primary areas of operations.
Acquisition Strategy: The Company's acquisition strategy focuses
on companies or equipment that either expand the range of services that
the Company provides or present opportunities to expand its business
into new markets. The Company attempts to acquire businesses with
strong customer relationships, a history of superior customer service
and the potential to be assimilated efficiently into the Company's
existing regional management structure with a minimal increase in
overhead costs. In the last two years, the Company has acquired 32 well
servicing operations, several oil and gas properties and three drilling
operations. In addition, an agreement for the acquisition of one well
service company and three drilling companies are pending.
Decentralized Operations: The Company's decentralized management
philosophy is consistent with the regional nature of the well service
business. This structure allows the Company's senior management to
establish the Company's policies, and permits the Company's regional
managers to implement those policies in each of the Company's business
segments and markets. As a result, local managers are better able to
deal efficiently with local and time-sensitive issues, thereby allowing
them to be more responsive to customer needs.
Low Operating Costs: Because of its cost controls and low
corporate overhead, among other factors, the Company has one of the
lowest general and administrative costs to revenue ratios and one of
the highest EBITDA to revenue ratios in the well service industry.
The Company's principal offices are located at Two Tower Center, 20th
Floor, East Brunswick, New Jersey 08816, and its telephone number is (732)
247-4822.
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RISK FACTORS
The following should be considered carefully with the information
provided elsewhere in this Prospectus and the documents incorporated by
reference herein in reaching a decision regarding an investment in the Common
Stock offered hereby.
DEPENDENCE ON OIL AND GAS INDUSTRY; INDUSTRY CONDITIONS
The Company's business is substantially dependent upon conditions in
the oil and gas industry and, specifically, the production expenditures of oil
and gas companies. The demand for well servicing and workover activities is
directly influenced by oil and gas prices, expectations about future prices,
the cost of producing and delivering oil and gas, government regulation,
including environmental regulations, local and international political and
economic conditions, and governmental policies regarding exploration and
development of oil and gas reserves. The demand for well servicing and related
services in the United States was severely depressed for most of the last
decade due in large part to prolonged weakness and uncertainty of oil and gas
prices. As a consequence, diminished demand during that period led to lower day
rates and lower use of available equipment. Demand for well services has
stabilized over the last two years, and prices for such services have
stabilized or increased during that period. Nonetheless, there can be no
assurance that periods of diminished demand in the well service industry will
not occur.
RISKS ASSOCIATED WITH ACQUISITIONS
One of the Company's business strategies is to pursue acquisitions of
businesses that are complementary to those of the Company. In the last 20
months, the Company has acquired 29 well servicing operations, several oil and
gas properties and one drilling operation. Integrating the acquired businesses
and personnel requires significant management time and skill. Management of the
Company's growth will require continued expansion of the Company's operational
and financial control systems, which could place a significant strain on the
Company's resources. Acquisitions of companies involve financial, operational
and legal risks, including the difficulty of assimilating operations and
personnel of the acquired companies and of maintaining uniform standards,
controls, procedures and policies. There can be no assurance that the Company
will be successful in making additional acquisitions or be effective in
integrating such acquisitions. Any failure to effectively integrate future
acquisitions could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company
competes and will continue to compete with other buyers for acquisitions. As a
result, if the prices sellers seek were to rise, the Company could find fewer
acceptable acquisition opportunities.
POTENTIAL LABOR SHORTAGE
The Company's ability to maintain its productivity and profitability
depends on its ability to attract and retain skilled workers. Although the
Company's size has increased substantially over the last two years, the Company
historically has experienced a high employee turnover rate, and the Company
continues to need replacement and additional workers, and devotes significant
management time and effort to attracting and retaining workers. The Company
believes that many skilled or trainable workers reside in reasonable proximity
to its facilities; however, there can be no assurance that the Company will be
successful in recruiting and training such workers due to a variety of factors.
Such factors include the potential inability or lack of desire by such workers
to commute to the Company's facilities and job sites or relocate to areas
closer to the Company's areas of operation, and competition for workers from
other industries. Although the Company believes that its wage rates are
competitive and that its relationship with its workforce is good, a significant
increase in the wages other employers pay could result in a reduction in the
Company's
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workforce, increases in the Company's wage rates, or both. If either of these
events occurs, the Company's profitability could be diminished and the
Company's growth potential could be impaired.
OPERATING RISKS; INSURANCE
The Company's operations are subject to many hazards inherent in the
maintenance, workover, drilling and operation of oil and gas wells, the
occurrence of which could result in the suspension of operations, damage to or
destruction of equipment and injury or death to field personnel. These hazards
include explosions, blow-outs, reservoir damage, loss of well control,
cratering and fires. Damage to the environment also could result from the
Company's operations. The Company maintains insurance coverage in such amounts
and against such risks as it believes to be in accordance with normal industry
practice. Such insurance does not, however, provide coverage for all
liabilities (including liabilities for certain events involving pollution), and
there can be no assurance that such insurance will be adequate to cover all
losses or liabilities that the Company might incur in its operations. Moreover,
no assurance can be given that the Company will, in the future, be able to
maintain insurance at levels it deems adequate and at rates it considers
reasonable or that any particular types of coverage will be available.
The well service business also is subject to seasonal risks caused by
adverse weather conditions such as severe winter storms. In addition, the
Company's operations in Northern regions are subject to limitations on
transporting equipment during the spring thaw.
COMPETITION
Competition is intense in all of the Company's markets. The Company
competes on the basis of the quality of its equipment and service, its safety
record and pricing. While management believes that the Company's reputation for
quality of equipment and service and its safety record are among the best in
the industry, certain competitors have access to greater financial and other
resources than the Company, which could allow those companies to price their
services more aggressively than the Company.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws
and regulations including those relating to protection of the environment,
natural resources, health and safety, waste management, and transportation of
hydrocarbons and chemicals. Various operations conducted by the Company,
including waste disposal and the handling of materials which are classified as
wastes, pollutants or hazardous substances, may require permits or other
authorizations. Sanctions for noncompliance with these laws and regulations may
include administrative, civil and criminal penalties, as well as revocation of
permits, and corrective action orders. These laws may impose retroactive
liability and may render a party liable for environmental damage or threats to
human health or the environment without regard to that party's negligence or
fault. Consequently, the Company could be exposed to liability for the conduct
of, or conditions caused by, others, or for acts of the Company that were in
compliance with all applicable laws at the time such acts were performed. Laws
and regulations protecting the environment have been expanded, modified and
reinterpreted over the years, resulting in increasingly stringent requirements.
The application or interpretation of these regulations or the adoption of new
regulations could have a material adverse effect on the Company. In addition,
the modification or interpretation of existing laws or regulations or the
adoption of new laws or regulations curtailing exploratory or development
drilling for oil and gas for economic, environmental or other reasons could
have a material adverse effect on the Company's operations by limiting well
servicing opportunities.
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DEPENDENCE ON KEY PERSONNEL
The Company's business is partially dependent upon the performance of
certain of its executive officers. The Company has entered into employment
agreements with these executive officers that contain non-compete provisions.
Notwithstanding such agreements, there can be no assurance that the Company
will be able to retain such officers or that it will be able to enforce the
non-compete provisions in the event of their departure. Although the Company
maintains key man life insurance on the lives of certain of such officers,
including its Chief Executive Officer, the existence of such insurance does not
mean that the death or disability of one or more of them would not have a
material adverse effect upon the Company.
INTERNATIONAL INVESTMENTS
The Company has investments and may make additional investments in
Argentina. The Company also may make investments in other foreign countries and
in companies located or with significant operations outside the United States.
Such investments are subject to risks and uncertainties relating to the
political, social and economic structures of those countries. Risks may include
fluctuations in currency valuation, expropriation, confiscatory taxation and
nationalization, currency conversion restrictions, increased regulation and
approval requirements and governmental policies limiting returns to foreign
investors.
SUBSTANTIAL LEVERAGE
The Company has substantial indebtedness and is highly leveraged. The
degree to which the Company is leveraged could adversely affect the Company's
ability to obtain additional financing for working capital, acquisitions or
other purposes and could make it more vulnerable to industry downturns and
competitive pressures. At December 17, 1997, the Company's outstanding
long-term debt totaled approximately $292.6 million, consisting of (i) $4.6
million of outstanding 7% Convertible Subordinated Debentures due 2003 (the
"Debentures"), (ii) $216.0 of outstanding 5% Convertible Subordinated Notes due
2004 (the "Notes") and (iii) $72.0 million borrowed under the Company's $250
million revolving credit facility (the "Revolving Credit Facility"). At
October 31, 1997, the Company's ratio of total debt to total capitalization was
approximately 67%. If the Company borrows the entire amount available under
the Revolving Credit Facility (and assuming no conversion of the Debentures or
the Notes), its total long-term debt would be $477.4 and its ratio of total
debt to total capitalization would be approximately 78% (based on the Company's
stockholders' equity at October 31, 1997).
In recent years, cash generated from the Company's operating activities
in conjunction with borrowings and proceeds from private equity issuances has
been sufficient to meet its debt service, acquisition and capital expenditure
requirements. There can be no assurance that cash generated from such sources
will be sufficient to meet its future debt service requirements and to make
anticipated acquisitions, investments and capital expenditures.
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET
PRICES
As of December 17, 1997, the Company had a total of 18,355,296 shares
of Common Stock outstanding, including 416,666 recently purchased by the
Company which the Company intends to convert to treasury shares promptly after
the settlement date for the latest purchase. Of the outstanding shares,
approximately 1,141,451 are "restricted securities" as that term is defined in
Rule 144 under the Securities Act, and as such, are subject to restrictions on
resale in the public markets. However, all but 125,000 shares of such
restricted securities are registered under registration statements under the
Securities Act or are subject to registration under registration rights
agreements. The Company has reserved 532,760 shares (265,000 of which are
underlying warrants) for issuance in connection with
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pending and completed acquisitions which the Company expects to issue in
January 1998, all of which shares are subject to registration rights
agreements. In addition, approximately 8,378,465 shares of Common Stock are
issuable upon the exercise of existing options and warrants and the conversion
of convertible securities, including 471,795 shares currently issuable upon
conversion of the Debentures and 5,610,390 shares issuable upon conversion of
the Notes. All of such shares will be issued in registered transactions, or
have been or will be registered for resale pursuant to a registration rights
agreement. Sales of a substantial number of any of such shares in the public
markets, or the perception that such sales could occur, could adversely affect
the market price of the Common Stock and could impair the Company's future
ability to raise capital through an offering of its equity securities.
SELLING SECURITYHOLDERS
The following table sets forth information concerning the principal
amount of Debentures and number of shares of Common Stock offered by the
Selling Securityholders (the "Shares").
<TABLE>
<CAPTION>
Beneficial Ownership of Beneficial Ownership
Debentures Before Offering(1) of Common Stock(1)
------------------------------- --------------------------------
Principal % of Number of % of
Name Amount Owned Class Shares(2)(3) Class(3)
- --------------------------------------------- ------------ ----------- --------------- -----------
<S> <C> <C> <C> <C>
The Bank of New York $1,000,000 * 102,564 *
- --------------------------------------------- ------------ ----------- --------------- -----------
State Street Bank $2,000,000 * 205,128 *
- --------------------------------------------- ------------ ----------- --------------- -----------
Dennis Hogerheide Trust . . . . . . . . . . . -- -- 37,798 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
Tri-State Wellhead & Valve, Inc.. . . . . . . -- -- 40,335 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
Reo Brownlee. . . . . . . . . . . . . . . . . -- -- 4,214 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
Elvin Brownlee, III . . . . . . . . . . . . . -- -- 1,553 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
Dale Rennels. . . . . . . . . . . . . . . . . -- -- 2,386 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
S&R Cable, Inc. . . . . . . . . . . . . . . . -- -- 11,460 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
White Rhino Drilling, Inc. . . . . . . . . . -- -- 58,440 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
Jordon Exploration Company, L.L.C.. . . . . . -- -- 30,100 (*)
- --------------------------------------------- ------------ ----------- --------------- -----------
</TABLE>
- -------------------
(*) Less than one percent.
(1) No information is given with respect to beneficial ownership after the
Offering because the Company is unable to determine the number of
shares of Common Stock that will be sold in the Offering.
(2) Assumes a conversion price of Debentures of $9.75 per share.
(3) Assumes (i) conversion of all of the Debentures and (ii) no shares
of Common Stock will be issuable as a Premium Protection Payment.
The information in the table with respect to Selling Securityholders
who are holders of Debentures has been prepared based upon information
furnished to the Company by American Stock Transfer & Trust Company (the
trustee under the Indenture pursuant to which the Debentures were issued), by
the Depository Trust Company and by or on behalf of the Selling
Securityholders.
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The per share conversion price and, therefore, the number of shares of
Common Stock issuable upon conversion of the Debentures is subject to
adjustment under certain circumstances. Accordingly, the number of shares of
Common Stock issuable upon conversion of the Debentures may increase or
decrease. As of the date of this Prospectus, the aggregate principal amount of
Debentures outstanding is $4,600,000, $3,000,000 of which have not been resold
in registered transactions and remain "restricted securities". The $3,000,000
of Debentures offered hereby may be converted into 307,693 shares of Common
Stock assuming a conversion rate of $9.75 per share. In addition, holders of
Debentures are entitled to a Premium Protection Payment generally equal to 50%
of the interest otherwise payable on the converted Debentures from the date of
conversion through July 1, 1999, payable in cash or Common Stock at the
Company's option. Since the number of shares potentially issuable as Premium
Protection Payments is based on the market price of the Common Stock at the
time of conversion, the number of shares of Common Stock so issuable cannot be
determined at this time. However, as of the date hereof, assuming that (i) 100%
of the Debentures offered hereby were converted as of 1/1/98, (ii) the Company
determined to pay the entire Premium Protection Payment in Common Stock rather
than cash and (iii) the conversion price relating to the Premium Protection
Payment was $19.50 per share (which was the closing price of the Common Stock
as reported on the AMEX on December 19, 1997), the aggregate number of shares
of Common Stock issuable as Premium Protection Payments would be 8,077 shares.
In addition to these Premium Protection Payment shares, the Company is
requesting the resale of an additional 3,923 shares of Common Stock which it
may issue to the holders of the Debentures offered hereby to induce early
conversion.
The information concerning the Selling Securityholders may change from
time to time and will be set forth in Supplements to this Prospectus. Other
than their ownership of the Company's securities, none of the Selling
Securityholders has had any material relationship with the Company within the
past three years.
PLAN OF DISTRIBUTION
This Prospectus relates to the resale of (i) the Debentures, (ii) the
Common Stock issuable upon conversion of Debentures (including shares payable
as Premium Protection Payments and as an inducement to convert), and (iii) up
to 186,286 shares of Common Stock (the "Resale Shares") owned by certain of the
Company's shareholders. The Debentures were issued by the Company pursuant to
a Purchase Agreement dated June 28, 1996, and were acquired by the Selling
Securityholders in resale transactions pursuant to Rule 144A, Regulation S,
Rule 501(a)(1), (2), (3) or (7) under the Securities Act, or from other holders
acquiring such Debentures from prior holders thereof. The Resale Shares were
issued by the Company in a series of unrelated unregistered transactions
pursuant to the exemption provided in Section 4(2) of the Securities Act. The
Registration Statement of which this Prospectus is a part does not cover the
issuance of Common Stock upon conversion of the Debentures into shares of
Common Stock.
The Company will not receive any of the proceeds from the sale of the
Debentures and the shares of Common Stock offered hereby. The Company has been
advised by the Selling Securityholders that the Selling Securityholders may
sell all or a portion of the Debentures and the shares of Common Stock
beneficially owned by them on any exchange or market on which the Debentures or
the Common Stock are listed or quoted, as applicable, on terms to be determined
at the times of such sales. The Selling Securityholders also may make private
sales directly or through a broker. Alternatively, any of the Selling
Securityholders may from time to time offer the Debentures or the Common Stock
offered hereby through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, commissions or concessions
from the Selling Securityholders.
To the extent not described herein and as otherwise required by law,
the specific amount of the Debentures and Common Stock being offered or
sold, the names of the Selling Securityholders, the respective purchase
prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer or sale will be set forth in an accompanying Prospectus
Supplement or, if appropriate, a post-effective amendment to the Registration
Statement of which this Prospectus is a part.
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<PAGE> 10
In order to comply with the securities laws of certain states, if
applicable, the Debentures and the Common Stock offered hereby will be sold in
such jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Debentures and the shares of Common Stock
offered hereby may not be sold unless they have been offered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and compliance therewith is effected.
The Selling Securityholders and any brokers, dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Debentures and the Common Stock offered hereby may be
deemed to be "underwriters" within the meaning of the Securities Act, in which
event any commissions or discounts received by such brokers, dealers, agents or
underwriters and any profit on the resale of the Debentures and the Common
Stock offered hereby and purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company and the Selling Securityholders have agreed to indemnify
each other against certain liabilities arising under the Securities Act. The
Company has agreed to pay all expenses incident to the offer and sale of the
Debentures and Common Stock pursuant to this Prospectus other than selling
commissions and fees.
The Common Stock issuable upon conversion of the Debentures have been
authorized for listing on the AMEX upon official notice of issuance. The
Debentures are not listed on the AMEX and are not expected to be listed on any
securities exchange. The Debentures are eligible for trading through the
Portal Market.
DESCRIPTION OF COMMON STOCK
The Company is currently authorized to issue 25,000,000 shares of
Common Stock, and the Board of Directors has approved, subject to stockholder
approval, an increase in the authorized capital stock to 100,000,000 shares of
Common Stock. Of the 25,000,000 shares currently authorized, an aggregate of
18,355,296 shares were outstanding, including 416,666 shares recently purchased
by the Company which the Company intends to convert to treasury shares promptly
after the settlement date for the latest purchase. All of the issued and
outstanding shares of Common Stock are fully paid and nonassessable. Each
share is entitled to one vote in the election of directors and other corporate
matters. The holders of Common Stock do not have cumulative voting rights,
which means that the holders of a majority of the votes entitled to be cast by
holders of the outstanding Common Stock are able to elect all of the Company's
directors. The Common Stock has no redemption provisions and the holders
thereof have no preemptive rights. The holders of Common Stock are entitled to
receive dividends in such amounts as may be declared by the Board of Directors,
as permitted by applicable law, and upon liquidation, dissolution, or winding
up of the Company subject to the rights of any preferred stock then
outstanding, the holders of Common Stock are entitled to share ratably in the
Company's assets, according to the number of shares they hold. The Common
Stock is listed on the AMEX. The transfer agent and registrar for the Common
Stock is American Stock Transfer & Trust Company, New York, New York.
The Board of Directors has the power under the Company's Articles of
Incorporation, without the need of any stockholder action, to redesignate all
or any of the authorized and unissued shares of Common Stock into one or more
series of preferred or preference stock and to establish the rights and
preferences (including, without limitation, dividend and liquidity preferences,
voting rights and conversion provisions), except that the Company charter
provides that no such class or series of shares (i) may have more than one vote
per share, (ii) may be issued in connection with any shareholder rights plan,
"poison pill" or other anti-takeover measure, or (iii) may be issued for less
than fair consideration, as determined in good faith by the Board of Directors.
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<PAGE> 11
DESCRIPTION OF DEBENTURES
The Debentures were issued under an indenture (the "Indenture") between
the Company and American Stock & Transfer Trust Company, as trustee (the
"Trustee"). The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to all of the provisions of the Indenture, the Debentures
and the Registration Rights Agreement dated as of July 3, 1996, among the
Company, McMahan Securities Co. L.P. and Rauscher Pierce Refsnes, Inc. (the
"Registration Rights Agreement"), including the definition therein of certain
terms. Wherever particular sections or defined terms of the Indenture are
referred to, such sections or defined terms are incorporated herein by
reference. Copies of the Indenture and Registration Rights Agreement are
available from the Company.
GENERAL
The Debentures are unsecured obligations of the Company, are $4,600,000
in aggregate principal amount outstanding and mature on July 1, 2003. The
Debentures are subordinated in right of payment to certain other obligations of
the Company. See "--Subordination." The Debentures bear interest at the rate
7% per annum from the date of original issuance of Debentures pursuant to the
Indenture or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semiannually on July 1 and January 1 of each
year, commencing January 1, 1997 to the Person in whose name the Debentures
(or any predecessor Debenture) is registered at the close of business on the
preceding June 15 or December 15, as the case may be. Interest on the
Debentures will be paid on the basis of a 360-day year of twelve 30-day
months.
Principal of, premium on, if any, and interest on, the Debentures will
be payable (i) in respect of Debentures held of record by the Depository Trust
Company ("DTC") or its nominee in same day funds on or before the payment dates
with respect to such amounts and (ii) in respect of Debentures held of record
by holders other than DTC or its nominee, at the office of the Trustee in New
York, New York. The Debentures may be surrendered for transfer, exchange or
conversion at the office of the Trustee in New York, New York. In addition,
with respect to Debentures held of record by holders, other than DTC or its
nominee, payment of interest may be made, at the option of the Company, by
check mailed to the address of the persons entitled thereto as they appear in
the register for the Debentures on the Regular Record Date for such interest.
The Debentures have been issued only in registered form, without
coupons and in denominations of $1,000 or any integral multiple thereof. No
service charge will be made for any transfer or exchange of the Debentures, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge and any other expenses (including the fees and expenses of
the Trustee) payable in connection therewith. The Company is not required (i)
to register the transfer of or exchange any Debentures for a period of 15 days
before a selection of Debentures to be redeemed, or (ii) to register the
transfer of or exchange any Debenture selected for redemption in whole or in
part.
All moneys paid by the Company to the Trustee or any Paying Agent for
the payment of principal of and premium and interest on any Debenture which
remain unclaimed for two years after such principal, premium or interest become
due and payable may be repaid to The Company. Thereafter, the Holder of such
Debenture may, as an unsecured general creditor, look only to the Company for
payment thereof.
The Indenture does not contain any financial covenants or restrictions
on payment of dividends or any provisions that would provide protection to
Holders of the Debentures against a sudden and dramatic decline in credit
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<PAGE> 12
quality of the Company resulting from any takeover, recapitalization or similar
restructuring, except as described below under "--Certain Rights to Require
Repurchase of Debentures."
CONVERSION RIGHTS
The Debentures are convertible into Common Stock prior to redemption or
final maturity, currently at a conversion price equal to $9.75 per share. In
addition, if conversion occurs before July 1, 1999, Holders are entitled to
receive a payment (the "Premium Protection Payment") generally equal to 50% of
the interest otherwise payable on the converted Debentures from the date of
conversion through July 1, 1999, payable in cash or Common Stock, at the
Company's option; provided, however, that no Premium Protection Payments will
be made if an all cash tender offer for the Common Stock is consummated at a
price per share representing a 40% or greater premium above the conversion
price. The right to convert Debentures which have been called for redemption
will terminate at the close of business on the date fixed for redemption or the
second trading day preceding a Change in Control Payment Date, as the case may
be. See "-- Optional Redemption" below.
The conversion price is subject to adjustment upon the occurrence of
any of the following events: (i) the Company pays a dividend, or makes a
distribution, in shares of its Common Stock on its Common Stock; (ii) the
Company subdivides its outstanding Common Stock into a greater number of shares
or combines its Common Stock into a smaller number of shares; (iii) the
Company grants rights or warrants to all holders of Common Stock entitling
them to subscribe for or purchase Common Stock at a price less than the Current
Market Price per share; (iv) the Company distributes to all holders of its
Common Stock any shares of capital stock of the Company (other than Common
Stock) or evidences of its indebtedness or assets (excluding cash dividends or
other distributions to the extent paid from its retained earnings or current
earnings) or rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in (iii) above); (v) the Company, by
dividend or otherwise, distributes to all holders of its Common Stock cash in
an aggregate amount that, combined together with (A) the aggregate amount of
any other distributions to all holders of its Common Stock made exclusively in
cash within the 12 months preceding the date of payment of such distribution
and in respect of which no adjustment pursuant to this section (v) has been
made and (B) the aggregate of any cash plus the fair market value of
consideration payable in respect of any tender offer by the Company or its
Subsidiaries for all or any portion of the Common Stock concluded with the 12
months preceding the date of payment of such distribution and in respect of
which no adjustment pursuant to section (vi) has been made, exceeds 10% of The
Company's market capitalization (being the product of the Current Market Price
times the number of shares of Common Stock then outstanding); and (vi) a tender
offer made by the Company or any Subsidiary for all or any portion of the
Common Stock shall expire and such tender offer shall require payment to
stockholders of an aggregate consideration having a fair market value that
combined with (Y) the aggregate of the cash plus the fair market value, as of
the expiration of such tender offer of consideration payable in respect of any
other tender offer by the Company or any Subsidiary for all or any portion of
the Common Stock expiring within the 12 months preceding the expiration of such
tender offer and in respect of which no adjustment to this section (vi) has
been made and (Z) the aggregate amount of any distributions to all holders of
Common Stock made exclusively in cash within 12 months preceding the expiration
of such tender offer and in respect of which no adjustment pursuant to section
(v) has been made, exceeds 10% of the product of the current market price per
share to the Common Stock as of the last time tenders could have been made
pursuant to such tender offer times the number of shares of Common Stock
outstanding (including tendered shares). No adjustment of the conversion price
will be required to be made unless such adjustments amount to at least one
percent of the conversion price, as last adjusted. Any adjustment that would
otherwise be required to be made shall be carried forward and taken into
account in any subsequent adjustment.
In addition to the foregoing adjustments, the Company is permitted to
reduce the conversion price as it considers to be advisable in order that any
event treated for federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the holders of the Common Stock or, if that is
not possible, to diminish any income taxes that are otherwise payable because
of such event or for any other reason. In the case of any consolidation or
merger of the Company with any other corporation (other than one in which no
change is made in the Common Stock), or any sale
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<PAGE> 13
or transfer of all or substantially all of the assets of the Company, the
Holder of any Debenture then outstanding will, with certain exceptions, have
the right thereafter to convert such Debenture only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
such Debenture might have been converted immediately prior to such
consolidation, merger, sale or transfer, and adjustments will be provided for
events subsequent thereto that are as nearly equivalent as practical to the
conversion price adjustments described above.
Fractional shares of Common Stock, including fractional shares issued
as Premium Protection Payments, will not be issued upon conversion, but, in
lieu thereof, the Company will pay a cash adjustment based upon the Closing
Price at the close of business on the day of conversion. If any Debentures are
surrendered for conversion during the period from the close of business on the
record date for any Interest Payment Date to the opening of business on such
Interest Payment Date (except any such Debentures called for redemption), such
Debentures when surrendered for conversion must be accompanied by payment in
funds acceptable to the Company of an amount equal to the interest otherwise
payable on such Interest Payment Date on the principal amount being converted.
Except as described in the preceding sentence and except for Premium Protection
Payments, no interest will be payable by the Company on converted Debentures
with respect to any Interest Payment Date subsequent to the date of conversion.
No other payment or adjustment for interest or dividends is to be made upon
conversion.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on
the Debentures are, to the extent set forth in the Indenture, subordinated in
right of payment to the prior payment in full of all Senior Indebtedness. If
there is any distribution (which may consist of cash, securities or other
property) to creditors in a liquidation, dissolution, or winding up, or in a
bankruptcy, reorganization, insolvency, receivership or similar proceedings of
The Company, the holders of Senior Indebtedness shall be entitled to receive
payment in full, in cash or in a manner satisfactory to the holders of such
Senior Indebtedness, of all Senior Indebtedness before Holders shall be
entitled to receive any payments of principal of or premium, if any, or
interest on Debentures, and until the Senior Indebtedness is so paid, any
distributions to which Holders would have been entitled but for the
subordination shall be made to holders of Senior Indebtedness as their
interests may appear, except that Holders may receive securities that are
subordinated to Senior Indebtedness to at least the same extent as the
Debentures. In the event of the maturity of any Senior Indebtedness, all
principal thereof, premium, if any, and interest thereon and any other amounts
owing in respect thereof must be paid in full, or provisions for such payment
in cash or in a manner satisfactory to the holders of such Senior Indebtedness,
before the Holders of the Debentures will be entitled to receive any payment
for the principal of or premium, if any, or interest on the Debentures. No
payments on account of principal of or premium, if any, or interest on the
Debentures or payments to acquire any of the Debentures may be made if there
has occurred a default with respect to Senior Indebtedness, permitting holders
of to accelerate the maturity thereof (and if the default is other than default
in payment of the principal of, premium, if any, or interest on or any other
amount owing in respect of such Senior Indebtedness, upon written notice
thereof given to the Company and the Trustee by the holders of the Senior
Indebtedness) unless such default has been cured or waived, or has ceased to
exist.
Senior Indebtedness is defined in the Indenture as (a) the principal or
interest (including, to the extent permitted by applicable law, interest on or
after the commencement of any bankruptcy proceeding whether or not representing
an allowed claim in such proceeding) and premium, if any, on and any other
amount owing with respect to (i) any indebtedness of The Company, now or
hereafter outstanding, in respect of borrowed money (other than the
Debentures), (ii) any indebtedness of The Company, now or hereafter
outstanding, evidenced by a bond, note, debenture, capitalized lease, letter of
credit or other similar instruments, (iii) any other written obligations of the
Company, now or hereafter outstanding, to pay money issued or assumed as all or
part of the consideration for the acquisition of property, assets
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<PAGE> 14
or securities and (iv) any guarantee or endorsement (other than for collection
or deposit in the ordinary course of business) or discount with recourse of, or
other agreement (contingent or otherwise) to purchase, repurchase or otherwise
acquire, to supply or advance funds or to become liable with respect to
(directly or indirectly), any indebtedness or obligation of any Person of the
type referred to in the preceding subclauses (i), (ii) and (iii) now or
hereafter outstanding; and (b) any refundings, renewals or extensions of any
indebtedness or other obligation described in clause (a).
The Debentures are obligations exclusively of the Company. A portion
of the operations of the Company are currently conducted through Subsidiaries,
which are separate and distinct legal entities and likewise no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Debentures or
to make any funds available therefor, whether by dividends, loans or other
payments (except for Subsidiaries acting as Subsidiary Guarantors as described
below under "--Subsidiary Guarantees"). In addition, the payment of dividends
and certain loans and advances to the Company by such Subsidiaries may be
subject to certain statutory or contractual restrictions, are contingent upon
the earnings of such Subsidiaries and are subject to various business
considerations.
The Debentures are effectively subordinated to all Senior Indebtedness
of the Company's Subsidiaries. Any right of the Company to receive assets of
any such Subsidiary upon the liquidation or reorganization of any such
Subsidiary (and the consequent right of the Holders of the Debentures to
participate in those assets) will be effectively subordinated to the claims of
that Subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such Subsidiary, in which case the claims of the
Company would still be subordinate to any security interest in the assets of
such Subsidiary and any indebtedness of such Subsidiary senior to that held by
the Company.
The Indenture does not limit or prohibit the incurrence of Senior
Indebtedness. The Company expects to incur Senior Indebtedness from time to
time in the future.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Debentures are jointly and
severally guaranteed (the "Subsidiary Guarantees") by the Subsidiary
Guarantors. The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee are limited to the maximum amount that will not constitute a
fraudulent conveyance under state or federal law.
The Indenture provides that in the event of a sale or other disposition
of all or substantially all of the assets of any Subsidiary Guarantor
(including, if applicable, all of the capital stock of any Subsidiary
Guarantor), by way of merger, consolidation or otherwise, such Subsidiary
Guarantor (in the event of a sale or other disposition of all of the Capital
Stock of such Subsidiary Guarantor) or the corporation acquiring the property
(in the event of a sale or other disposition of all or substantially all of the
assets of such Subsidiary Guarantor) shall be released and relieved of any
obligations under its Subsidiary Guarantee provided that such surviving or
acquiring entity is not a Subsidiary of the Company.
OPTIONAL REDEMPTION
The Debentures are redeemable, at the Company's option, in whole or
from time to time in part, at any time on or after July 15, 1999, upon not less
than 15 nor more than 60 days' notice mailed to each Holder of Debentures to be
redeemed at its address appearing in the Security Register and prior to
Maturity at the following Redemption Prices (expressed as percentages of the
principal amount) plus accrued interest to the Redemption Date (subject to the
right
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<PAGE> 15
of Holders of record on the relevant Regular Record Date to receive interest
due on an Interest Payment Date that is on or prior to the Redemption Date).
If redeemed during the 12-month period beginning July 15, in the year
indicated, the redemption price shall be:
<TABLE>
<CAPTION>
REDEMPTION
----------
YEAR PRICE
---- -----
<S> <C>
1999 . . . . . . 104%
2000 . . . . . . 103%
2001 . . . . . . 102%
2002 . . . . . . 101%
</TABLE>
No sinking fund is provided for the Debentures.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, convey, transfer or
lease all or substantially all of its properties and assets to any Person
(other than a merger between the Company and any wholly-owned Subsidiary of the
Company), unless (a) the Company survives such merger or such Person is a
corporation, organized and validly existing under the laws of the United States
or any state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations under the Debentures and the
Indenture, (b) immediately after consummating such consolidation, merger,
transfer or lease, no Default or Event of Default will occur and be continuing,
(c) immediately after giving effect to such transaction, the consolidated net
worth of the resulting surviving corporation is not less than that of the
Company immediately before the transaction, and the Company has delivered to
the Trustee an Officer's Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease and, if
applicable, such supplemental indenture complies with the provisions of the
Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF DEBENTURES
In the event of any Change in Control occurring after the date of
issuance of the Debentures and on or prior to Maturity, each Holder of
Debentures has the right, at the Holder's option, to require the Company to
repurchase all or any part of the Holder's Debentures on the date (the
"Repurchase Date") that is no later than 60 days following the date of the
Repurchase Event as described below at a price (the "Repurchase Price") equal
to 100% of the principal amount thereof, together with accrued and unpaid
interest to the Repurchase Date. On or prior to the Repurchase Date, the
Company shall deposit with the Trustee or a Paying Agent an amount of money
sufficient to pay the Repurchase Price of the Debentures which are to be repaid
on or promptly following the Repurchase Date.
Failure by the Company to provide timely notice of a Change in
Control, as provided for below, or to repurchase the Debentures when required
under the preceding paragraph will result in an Event of Default under the
Indenture whether or not such repurchase is permitted by the subordination
provisions of the Indenture.
The Company is obligated to mail to all Holders of Debentures, a
notice no less than 30 days nor more than 45 days before any Repurchase Date,
of the occurrence of such Change in Control, the Repurchase Date, the date by
which the repurchase right must be exercised, the Repurchase Price for
Debentures and the procedures which the Holder must follow to exercise this
right. To exercise the repurchase right, the Holder of a Debenture must
deliver, on or before the close of business on the Repurchase Date, irrevocable
written notice to the Company (or an agent designated by the
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<PAGE> 16
Company for such purpose) and to the Trustee of the Holder's exercise of such
right, together with the certificates evidencing the Debentures with respect to
which the right is being exercised, duly endorsed for transfer. Such written
notice is irrevocable.
A "Change in Control" shall occur when: (i) all or substantially all
of the Company's assets are directly or indirectly, leased, exchanged or
otherwise transferred or sold to any Person or related group of Persons; (ii)
there shall be consummated any consolidation or merger of the Company with the
effect that immediately after such transaction the stockholders of the Company
hold less than a majority of the combined voting power of the then outstanding
voting stock of the Person surviving such transaction; or (iii) any Person, or
any Persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act, together with any affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Exchange Act) at least 50%
of the total voting power of the then outstanding voting stock and warrants or
options to acquire such voting stock calculated on a fully-diluted basis, of
the Company.
The right to require the Company to repurchase Debentures as a result
of the occurrence of a Change in Control could create an event of default under
Senior Indebtedness of the Company, as a result of which any repurchase could,
absent a waiver, be blocked by the subordination provisions of the Debentures.
See "-- Subordination." Failure by the Company to repurchase the Debentures
when required will result in an Event of Default with respect to the Debentures
whether or not such repurchase is permitted by the subordination provisions.
The Company's ability to pay cash to the Holders of Debentures upon a Change in
Control may be limited by certain financial covenants contained in the
Company's Senior Indebtedness. In addition, there can be no assurance that the
Company will have the cash necessary to satisfy its repurchase obligation.
The foregoing provisions would not necessarily afford Holders of the
Debentures protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders. In addition, the
foregoing provisions may discourage open market purchases of the Common Stock
or a non-negotiated tender or exchange offer for such stock and, accordingly,
may limit a stockholder's ability to realize a premium over the market price of
the Common Stock in connection with any such transaction.
In the event a Repurchase Event occurs and the Holders exercise their
rights to require the Company to repurchase Debentures, the Company intends to
comply with applicable tender offer rules under the Exchange Act, including
Rules 13e-4 and 14e-1, as then in effect, with respect to any such repurchase.
RULE 144A INFORMATION REQUIREMENT
The Company has agreed to furnish to the Holders or beneficial holders
of the Debentures and prospective purchasers of the Debentures designated by
the Holders of the Debentures, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND ACCELERATION
The following are Events of Default under the Indenture with respect
to the Debentures: (a) default in the payment of principal of or any premium,
if any, on any Debenture when due; (b) default in the payment of any interest
on any Debenture when due, which default continues for more than 30 days; (c)
default in the performance, or breach, of any other covenant or warranty of the
Company or any Subsidiary in the Indenture continuing for 60 days after written
notice by the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Debentures; (d) default on any other Indebtedness of
the Company or any Subsidiary if such Default results from the failure to pay
principal of, premium, if any, or interest on any such Indebtedness when due in
excess of $1,000,000 or as a result of
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<PAGE> 17
such Default, the maturity of such Indebtedness has been accelerated, without
such Default and acceleration having been rescinded or annulled within 10
days, and the principal amount of any other such Indebtedness in Default, or
the maturity of which has been so accelerated, aggregate $1,000,000 or more;
(e) except as otherwise permitted by the Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or ceases, for
any reason, to be in full force and effect, or any Subsidiary Guarantor, or any
person acting on behalf of any Subsidiary Guarantor, denies or disaffirms its
obligations under its Subsidiary Guarantee; (f) the entry by a court of a
judgment or order against the Company or any Subsidiary in an aggregate amount
in excess of $1,000,000 that is not covered by insurance written by third
parties that has not been vacated, discharged, satisfied or stayed pending
approval within 60 days after the entry thereof; and (g) certain events in
bankruptcy, insolvency or reorganization of the Company or any Subsidiary of
the Company.
If an Event of Default with respect to the Debentures shall occur and
be continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the then outstanding Debentures may declare the unpaid
principal of and any accrued interest on all such Debentures to be due and
payable immediately by notice to the Company. However, the Holders of a
majority in principal of the then outstanding Debentures may, by written notice
to the Trustee, rescind an acceleration and its consequences if such rescission
would not conflict with any judgment or decree and if all existing Events of
Default (except nonpayment of principal or interest that has become due solely
because of the acceleration) have been cured or waived. If an Event of Default
shall occur as a result of an event of bankruptcy, insolvency or reorganization
of the Company or any Subsidiary of the Company, such an amount shall become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder. The Company is required to furnish to the
Trustee annually a statement as to the performance by the Company of certain of
its obligations under Indenture and as to any default in such performance.
MODIFICATION, AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture and the Debentures may
be made by the Company and the Trustee without the consent of the Holders to:
(a) cure any ambiguity, defect or inconsistency; (b) provide for any
uncertificated Debentures in addition to certificated Debentures; (c) make any
change that does not adversely affect the legal rights of any Holder under the
Indenture; and (d) provide for assumption of obligations of the Company or a
Subsidiary Guarantor to Holders.
Modifications and amendments of the Indenture and the Debentures may
be made by the Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the outstanding
Debentures. The Holders of a majority in principal amount of the Debentures
then outstanding may waive compliance in a particular instance by the Company
with any provision of the Indenture or the Debentures. However, without the
consent of each Holder affected, an amendment or waiver may not (with respect
to any Debentures held by a nonconsenting Holder): (a) reduce the principal
amount of Debentures whose Holders must consent to an amendment or waiver; (b)
reduce the rate of interest or change the time for payment of interest,
including default interest, on any Debenture; (c) reduce the principal of or
change the maturity of any Debenture or alter the redemption provisions or the
price at which the Company shall offer to purchase such Debentures; (d) make
any Debenture payable in money other than that stated in the Debenture; (e)
make any changes as regards provisions for the waiver of past Defaults and the
rights of Holders to receive payment, as contained in the Indenture; (f) waive
a default in the payment of, premium or interest on, or redemption payment with
respect to, any Debenture; or (g) release any Subsidiary Guarantor from its
obligations under the Subsidiary Guarantee or make any change in its Subsidiary
Guarantee that would adversely affect the Holders, subject to certain
exceptions.
16
<PAGE> 18
BOOK ENTRY, DELIVERY AND FORM
Debentures sold to Qualified Institutional Buyers in reliance on Rule
144A under the Securities Act will be initially deposited with, or on behalf
of, DTC and registered in the name of Cede & Co., as DTC's nominee, in the form
of a global Debenture (the "Rule 144A Global Debenture"). Interests in the
Rule 144A Global Debenture will be shown in, and transfers thereof will be
effected only through, records maintained by DTC and its participants. The
Rule 144A Global Debenture will be reduced in principal amount to reflect the
subsequent transfer by owners of beneficial interest in the Rule 144A Global
Debenture to another person who is not a Qualified Institutional Buyer. If DTC
is at any time unwilling or unable to continue as depositary for Debentures
represented by the Rule 144A Global Debenture and a successor depositary is not
named within 90 days, the Company will issue certificated Debentures in
exchange for Debentures represented by the Rule 144A Global Debenture, which
will bear any legend required under the caption "Transfer Restrictions."
Transfer of the Debentures, whether as an interest in the Rule 144A Global
Debenture or as certificated Debentures, must be made in accordance with the
Indenture. For a description of the restrictions on transfer of the
Debentures, see "Transfer Restrictions."
DTC has advised the Company that DTC is a limited-purpose trust
company that was created to hold securities for its participating organizations
(collectively, the "Participants or DTC's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. DTC's Participants include securities brokers and dealers, banks
and trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect Participants"
or "DTC's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who
are not Participants may beneficially own securities held by or on behalf of
DTC only through DTC's Participants or DTC's Indirect Participants.
So long as DTC or its nominee is the registered owner of any
Debentures, DTC or such nominee will be considered the sole holder under the
Indenture of any Debentures evidenced by the Rule 144A Global Debenture.
Beneficial owners of Debentures evidenced by the Rule 144A Global Debenture
will not be considered the owners or holders thereof under the Indenture for
any purpose, including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. Neither the Company nor
the Trustee will have any responsibility or liability for any aspect of the
records of DTC or for maintaining, supervising or reviewing any records of DTC
relating to the Debentures.
Payments in respect of the principal of, premium, if any, and interest
on any Debentures registered in the name of DTC or its nominee on the
applicable record date will be payable by the Trustee to or at the direction of
DTC or its nominee in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names Debentures, including Debentures represented
by the Rule 144A Global Debenture, are registered as the owners thereof for the
purpose of receiving such payments. Consequently, neither the Company nor the
Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Debentures. The Company believes,
however, that it is currently the policy of DTC to immediately credit accounts
of the relevant Participants with such payments, in amounts proportionate to
their respective holdings of beneficial interests in relevant security as
shown on the records of DTC. Payments by DTC's Participants and DTC's
Indirect Participants to the beneficial owners of Debentures will be governed
by standing instructions and customary, practice and will be the responsibility
of DTC's Participants and DTC's Indirect Participants.
Neither the Company nor the Trustee will be liable for any delay by
DTC or its nominee in identifying the beneficial owners of Debentures DTC and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from DTC or its nominees for all purposes.
17
<PAGE> 19
GOVERNING LAW
The Indenture and Debentures are governed by and construed in
accordance with the laws of the State of New York, without giving effect to
such State's conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Company and its Subsidiaries may maintain deposit accounts and
conduct other banking transactions with the Trustee in the ordinary course of
business.
DESCRIPTION OF NOTES
In September 1997, the Company issued $216.0 million principal amount
of the Notes. The Notes are convertible into shares of Common Stock at a
conversion price of $38.50 per share (subject to adjustment in certain events)
at any time on and after the earlier of (i) the date that a shelf registration
statement to cover the Notes and the Common Stock issuable upon conversion of
the Notes is declared effective and (ii) 270 days following the date of
original issuance of the Notes. The Company currently does not have a
sufficient number of shares of Common Stock authorized for issuance upon
conversion of the Notes. However, the Board of Directors has approved an
increase, subject to stockholder approval, in the number of authorized shares
of Common Stock and such increase, if approved, would be sufficient to reserve
a sufficient number of shares for issuance upon conversion of the Notes. Until
such time as the Company's authorized Common Stock has been increased to a
number of shares sufficient to reserve for the conversion of all of the Notes,
the Company may pay cash in lieu, in whole or in part, of delivering Common
Stock. The Notes are redeemable, at the Company's option, on or after September
15, 2000 at a redemption price of 102.86% of principal amount in the first
twelve months, and 102.14%, 101.43%, 100.71% and 100% of principal amount in
the four years thereafter, respectively. Additionally, holders of the Notes
have the right to require the Company to repurchase such Notes at 100% of the
principal amount thereof, together with accrued and unpaid interest, in the
event of a Change in Control (as defined in the indenture relating to the
Notes).
LEGAL MATTERS
Certain legal matters relating to the validity of the Common Stock
have been passed upon by Porter & Hedges, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of the Company and
subsidiaries as of June 30, 1997 and 1996, and for each of the years in the
three-year period ended June 30, 1997, have been incorporated by reference in
this Prospectus in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, upon the authority of said firm as
experts in accounting and auditing.
The financial statements of Well-Co Oil Service, Inc. as of June 25,
1997 and for the period from July 1, 1996 to June 25, 1997, have been
incorporated by reference into this Prospectus in reliance upon the report of
Robinson Burdette Martin & Cowan, L.L.P., independent certified public
accountants, upon the authority of said firm as experts in accounting and
auditing.
18
<PAGE> 20
The financial statements of Ram Oil Well Service, Inc. and Rowland
Trucking Co., Inc. as of December 31, 1996 and 1995, have been incorporated by
reference into this Prospectus in reliance upon the report of Johnson, Miller &
Co., independent certified public accountants, upon the authority of said firm
as experts in accounting and auditing.
The consolidated financial statements of Coleman Oil & Gas, Inc. and
Subsidiaries as of October 31, 1996 and 1995, have been incorporated by
reference into this Prospectus in reliance upon the report of Chandler &
Company LLP, independent certified public accountants, upon the authority of
said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a registration statement on Form S-3
(together with all exhibits, schedules and amendments thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which is a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement.
Statements in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects
by such reference and the exhibits and schedules thereto. For further
information concerning the Company and the Common Stock, reference is made to
the Registration Statement. Copies of the Registration Statement may be
obtained from the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed fee.
The Company is subject to the information requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. The Registration Statement, as well as such
reports, proxy statements and other information can be inspected and copied at
the Public Reference Facilities maintained by the Commission at its principal
offices at 450 Fifth Street, N.W., Washington, D.C. 20549, and its regional
offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Such information also may be obtained on the Internet through the Commission's
EDGAR database at http://www.sec.gov. Copies of such materials also can be
inspected at the offices of the American Stock Exchange, 86 Trinity Place, New
York, New York 10006. With respect to each contract, agreement or other
document filed as an exhibit to the Registration Statement reference is made to
such exhibit for a more complete description of the matter involved and each
such statement shall be deemed qualified in all respects by such reference.
19
<PAGE> 21
================================================================================
NO DEALER, SALES PERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AND OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY, SINCE THE DATE HEREOF.
-------------------
CONTENTS
Page
Incorporation of Certain Documents
by Reference............................................ 2
Disclosure Regarding Forward Looking
Statements.............................................. 2
The Company................................................. 3
Risk Factors................................................ 4
Selling Securityholders..................................... 7
Plan of Distribution........................................ 8
Description of Common Stock................................. 9
Description of Debentures .................................. 10
Description of Notes........................................ 18
Legal Matters............................................... 18
Experts..................................................... 18
Available Information....................................... 19
================================================================================
KEY ENERGY
GROUP, INC.
$3,000,000
7% CONVERTIBLE SUBORDINATED
DEBENTURE DUE 2003
505,979 SHARES
COMMON STOCK
$.10 PAR VALUE PER SHARE
----------
PROSPECTUS
----------
JANUARY , 1998
================================================================================
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses
to be incurred in connection with the issuance and distribution of the
Securities registered hereby, other than underwriting discounts and
commissions.
<TABLE>
<S> <C>
Registration Fee Under Securities Act . . . . . . $ 1,059
Legal Fees . . . . . . . . . . . . . . . . . . . 7,500
Accounting Fees . . . . . . . . . . . . . . . . . 25,000
Printing and Engraving . . . . . . . . . . . . . 1,000
Miscellaneous Fees . . . . . . . . . . . . . . . 1,941
------------
Total . . . . . . . . . . . . . . . . . $ 14,000
============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 2-418 of the Maryland General Corporation Law (the "MGCL")
provides that a corporation may indemnify any director made a party to any
proceeding against judgments, penalties, fines, settlements and reasonable
expenses, unless it is established that (i) the act or omission of the
director was material to the matter giving rise to the proceeding and was
committed in bad faith or was a result of deliberate dishonesty, (ii) the
director actually received an improper personal benefit or (iii) in a criminal
proceeding, the director had reasonable cause to believe the act or omission
was unlawful. A director may not be indemnified in any proceeding charging
improper personal benefit if the director was adjudged to be liable and, in a
derivative action, there shall not be indemnification if a director has been
adjudged liable to the corporation. A director or officer of a corporation
who has been successful in the defense of any proceeding shall be indemnified
against reasonable costs incurred in such defense. Indemnification may not
be made unless authorized pursuant to a determination that the director
has met the requisite standard of conduct.
Article Seventh of the Company's Amended and Restated Articles of
Incorporation, as amended (the "Charter"), provides that the Company shall
indemnify (i) its directors and officers, whether serving the Company or
at its request any other entity, to the full extent required or permitted by
the MGCL, including the advance of expenses under the procedures and to the
full extent permitted by law and (ii) other employees and agents to such extent
as shall be authorized by the Board of Directors or the Company's By-Laws and
be permitted by law. The foregoing rights of indemnification are 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 the MGCL. Furthermore, no director or officer of the Company
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 the MGCL 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 with respect to
acts or omissions occurring prior to such amendment or repeal.
II-1
<PAGE> 23
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.1 Indenture dated as of July 3, 1996, among Key Energy Group, Inc., Yale E.
Key, Inc., WellTech Eastern, Inc., Odessa Exploration, Inc., Key Energy
Drilling, Inc., d/b/a Clint Hurt Drilling, Servicios WellTech, S.A., and
American Stock Transfer & Trust Company, as Trustee, relating to the
Company's $52,000,000 7% Convertible Subordinated Debentures due 2003
(incorporated by reference to Exhibit 4.2 of the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1997).
4.2 Indenture dated as of September 25, 1997, among Key Energy Group, Inc., and
American Stock Transfer & Trust Company, as Trustee, relating to the
Company's $216,000,000 5% Convertible Subordinated Notes due 2004
(incorporated by reference to Exhibit 4.2 of the Company's Registration
Statement on Form S-3 (Reg. No. 333-43115)).
5.1 Opinion of Porter & Hedges, L.L.P.
23.1 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Robinson Burdette Martin & Cowan, L.L.P.
23.4 Consent of Johnson, Miller & Co.
23.5 Consent of Chandler & Company LLP
24.1 Power of Attorney (included on signature page)
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply
if the information required to be included in a
post-effective amendment by those paragraphs is contained in
the periodic reports filed
II-2
<PAGE> 24
by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities and Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
Securities offered herein, and the offering of such Securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the Securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange of 1934 that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the Securities offered herein, and the
offering of such Securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers, directors and controlling
persons of the Registrant pursuant to the provisions described under
Item 15 of this registration statement, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
Securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is public policy as expressed in such Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, Key Energy Group, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New Brunswick, State of
New Jersey on January 5, 1998.
KEY ENERGY GROUP, INC.
By: /s/ Francis D. John
-----------------------------------
Francis D. John, President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-3 has been signed below by the
following persons in the capacities and on the dates indicated; and each of the
undersigned officers and directors of Key Energy Group, Inc. hereby severally
constitutes and appoints Francis D. John and Jack D. Loftis, and each of them,
to sign for him, and in his name in the capacity indicated below, such
Registration Statement on Form S-3 and for the purpose of registering such
securities under the Securities Act of 1933, as amended, and any and all
amendments thereto, including without limitation any registration statements or
post-effective amendment thereof filed under and meeting the requirements of
Rule 462(b) under the Securities Act, hereby ratifying and confirming our
signatures as they may be signed by our attorneys to such Registration
Statement and any and all amendments thereto.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Francis D. John President, Chief Executive Officer, and January 5, 1998
-------------------------------------------- Director
Francis D. John
/s/ William S. Manley Director January 5, 1998
--------------------------------------------
William S. Manley
/s/ Morton Wolkowitz Director January 5, 1998
--------------------------------------------
Morton Wolkowitz
/s/ David J. Breazzano Director January 5, 1998
--------------------------------------------
David J. Breazzano
/s/ Kevin P. Collins Director January 5, 1998
--------------------------------------------
Kevin P. Collins
/s/ Phillip W. Marcum Director January 5, 1998
--------------------------------------------
Phillip W. Marcum
</TABLE>
II-4
<PAGE> 26
<TABLE>
<S> <C> <C>
/s/ Stephen E. McGregor Executive Vice President and Chief January 5, 1998
-------------------------------------------- Financial Officer
Stephen E. McGregor
/s/ Danny R. Evatt Chief Accounting Officer and Treasurer January 5, 1998
--------------------------------------------
Danny R. Evatt
</TABLE>
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.1 Indenture dated as of July 3, 1996, among Key Energy Group, Inc., Yale E. Key, Inc.,
WellTech Eastern, Inc., Odessa Exploration, Inc., Key Energy Drilling, Inc., d/b/a
Clint Hurt Drilling, Servicios WellTech, S.A., and American Stock Transfer & Trust
Company, as Trustee, relating to the Company's $52,000,000 7% Convertible
Subordinated Debentures due 2003 (incorporated by reference to Exhibit 4.2 of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997).
4.2 Indenture dated as of September 25, 1997, among Key Energy Group, Inc., and American
Stock Transfer & Trust Company, as Trustee, relating to the Company's $216,000,000
5% Convertible Subordinated Notes due 2004 (incorporated by reference to Exhibit 4.2
of the Company's Registration Statement on Form S-3 (Reg. No. 333-43115)).
5.1 Opinion of Porter & Hedges, L.L.P.
23.1 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Robinson Burdette Martin & Cowan, L.L.P.
23.4 Consent of Johnson, Miller & Co.
23.5 Consent of Chandler & Company LLP
24.1 Power of Attorney (included on signature page)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5.1
January 5, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Key Energy Group, Inc. - Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Key Energy Group, Inc., a Maryland
corporation (the "Company"), in connection with the registration on Form S-3
under the Securities Act of 1933, as amended, of (i) 505,979 shares (the
"Shares") of the Company's common stock, par value $.10 per share (the "Common
Stock"), of which 319,693 (the "Conversion Shares") are being offered upon
conversion of the Company's 7% Convertible Subordinated Debentures due 2003
(the"Debentures") and (ii) $3,000,000 principal amount of the Debentures.
In rendering the opinions set forth below, we have examined the
certificate of incorporation, bylaws and corporate proceedings of the Company,
and based upon such examination and having regard for applicable legal
principles, it is our opinion that (i) the Shares are validly issued, fully
paid and nonassessable outstanding shares of the Company's Common Stock, (ii)
the Conversion Shares, when issued in accordance with the terms of the
Debentures, will be validly issued, fully paid and nonassessable outstanding
shares of the Company's Common Stock, and (iii) the Debentures are validly
issued, fully paid and nonassessable outstanding debentures of the Company.
We consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the Prospectus included as part of the Registration
Statement.
Very truly yours,
/s/ Porter & Hedges, L.L.P.
PORTER & HEDGES, L.L.P.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Key Energy Group, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Midland, Texas
January 6, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Key Energy Group, Inc. on Form S-3 of our report dated August 8, 1997, on our
audit of the financial statements of Well-Co Oil Service, Inc. as of June 25,
1997 and for the period from July 1, 1996 to June 25, 1997, which report is
included in Key Energy Group, Inc.'s current report on Form 8-K/A (Amendment
No. 2) dated June 25, 1997.
/s/ Robinson Burdette Martin & Cowan, L.L.P.
Robinson Burdette Martin & Cowan, L.L.P.
Lubbock, Texas
January 5, 1998
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in the registration
statement of Key Energy Group, Inc. on Form S-3 of our reports dated January
23, 1997 and February 7, 1997, on our audits of the financial statements of Ram
Oil Well Service, Inc. and Rowland Trucking Co., Inc., respectively, as of
December 31, 1996 and 1995, which reports are included in Key Energy Group,
Inc.'s current report on Form 8-K/A (Amendment No. 1) dated September 1, 1997.
/s/ Johnson, Miller & Co.
Johnson, Miller & Co.
Hobbs, New Mexico
January 6, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF CHANDLER & COMPANY LLP
The Board of Directors
Key Energy Group, Inc.
We consent to the incorporation by reference in this registration statement of
Key Energy Group, Inc. on Form S-3 of our report dated July 25, 1997, on our
audits of the consolidated balance sheets of Coleman Oil & Gas, Inc. and
Subsidiaries as of October 31, 1996 and 1995, and the related statements of
earnings, stockholders' equity, and cash flows for the years then ended, and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ Chandler & Company LLP
Farmington, New Mexico
January 6, 1998
