FIRST AMENDMENT
TO THIRD AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
AND MODIFICATION OF NOTES
THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT AND MODIFICATION OF NOTES (the "Amendment") is dated as of November
22, 1996, and entered into by and between THE CIT GROUP/CREDIT FINANCE, INC.
("Lender") with its office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and YALE E. KEY, INC. ("Yale"), KEY ENERGY DRILLING, INC. (d/b/a ▇▇▇▇▇ ▇▇▇▇
Drilling) ("Hurt") and WELLTECH EASTERN, INC. ("WellTech") (individually each a
"Borrower" and collectively the "Borrowers").
WHEREAS, Lender and Borrowers have entered into that certain Third
Amended and Restated Loan and Security Agreement dated as of May 21, 1996
("Agreement");
WHEREAS, in connection with the execution of the Agreement, Borrowers
executed and delivered to Lender the following promissory notes (collectively
the "Notes"):
(i) Amended and Restated Promissory Note dated May 21, 1996
executed by WellTech payable to Lender in the original
principal amount of $11,822,186.00 (the "WellTech Note");
(ii) Amended and Restated Promissory Note dated May 21, 1996
executed by Yale payable to Lender in the original principal
amount of $10,004,082.00 (the "Yale Note"); and
(iii) Amended and Restated Promissory Note dated May 21, 1996
executed by Hurt payable to Lender in the original principal
amount of $1,230,000.00 (the "Hurt Note"); and
WHEREAS, on or about July 3, 1996 Key Energy Group, Inc. ("Key") issued
and sold $52,000,000 in the aggregate principal amount of its convertible
subordinated debentures due 2003 (the "Debentures") pursuant to a Private
Offering Memorandum dated June 28, 1996; and on August 29, 1996, Key, the
Borrowers, and American Stock Transfer and Trust Company, as Trustee, entered
into that certain Indenture (the "Indenture"); and
WHEREAS, part of the proceeds of the Debentures were used to repay the
Notes; and
WHEREAS, Borrowers have requested certain amendments to the Agreement,
including the ability to reborrow part of the amounts repaid under the Notes,
all as more fully set forth herein; and
WHEREAS, Lender has agreed to the amendments set forth herein subject
to the terms and conditions provided for in this Amendment; and
FINS2DAL:40474.4 18739-00020
-1-
WHEREAS, Lender and Borrowers desire to amend the Agreement and to
modify the Notes as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment,
to the extent not otherwise defined herein, shall have the same meanings as in
the Agreement, as amended hereby.
Section 1.02. New Definitions. The following new definitions are
hereby added to the
Agreement:
"Hurt Note" means the Amended and Restated Promissory Note
dated May 21, 1996 executed by Hurt payable to Lender in the original
principal amount of $1,230,000 as amended and modified from time to
time.
"Indenture" means the Indenture entered into by Key Energy
Group, Inc., the
Borrowers, and American Stock Transfer and Trust Company, as Trustee,
dated August 29,
1996.
"Parent" means Key Energy Group, Inc., a Delaware corporation,
and owner and holder of 100% of the common stock of each Borrower.
"Parent Guaranty" means the Guaranty dated as of May 21, 1996
made by Parent in favor of Lender.
"WellTech Note" means the Amended and Restated Promissory Note
dated May 21, 1996 executed by WellTech payable to Lender in the
original principal amount of $11,822,186 as amended and modified from
time to time.
"Yale Note" means the Amended and Restated Promissory Note
dated May 21, 1996 executed by Yale payable to Lender in the original
principal amount of $10,004,082 as amended and modified from time to
time.
FINS2DAL:40474.4 18739-00020
-2-
ARTICLE II
Amendments
Section 2.01. Amendment to Section 6.4 of the Agreement.
Section 6.4 of the Agreement
is hereby amended in its entirety to read as follows:
"6.4 (a) Each Borrower's books and records concerning accounts
and its chief executive officer are and shall be maintained only at the
address set forth in Section 10.6(d). Each Borrower's only other places
of business and the only other locations of Collateral, if any, are and
shall be the addresses set forth in Section 10.6(e) hereof, except any
Borrower may change such locations in the ordinary course of business
or open a new place of business after thirty (30) days prior written
notice to Lender; provided, however, if such new place of business is
the result of an acquisition of the business or assets of another
entity and is located in a state other than a state where Lender has a
currently filed financing statement reflecting the acquiring Borrower
as "Debtor", then such notice period will be reduced to fifteen (15)
days. Prior to any change in location or opening of any new place of
business, each Borrower shall execute and deliver or cause to be
executed and delivered to Lender such financing statements, financing
documents, mortgages, and security and other agreements as Lender may
reasonably require, including, without limitation, those described in
Section 6.14. Without otherwise limiting the effect of the foregoing,
Borrower may change the location of its well servicing rigs and
drilling rigs without prior approval of Lender; provided, however, such
well servicing rigs and drilling rigs may not be removed from the state
where they are located as of the date hereof without notice to Lender
if such removal would cause Lender's security interest therein to
lapse, and Borrowers shall within five (5) days of Lender's request,
provide Lender with a listing of the current locations of all well
servicing rigs and drilling rigs.
(b) Notwithstanding the foregoing provisions of Section 6.4(a)
hereof, any Borrower may open a new place of business in connection
with the acquisition of the business and assets of another entity
without such prior notice and document execution and delivery if such
new place of business is located in a state where Lender has a
currently filed financing statement reflecting the acquiring Borrower
as "Debtor". Borrower shall, within five (5) days following the
consummation of such acquisition, give Lender notice thereof and shall
promptly thereafter execute and deliver such additional financing
statements, financing documents, mortgages, and security and other
agreements as Lender may reasonably require, including, without
limitation, those described in Section 6.14."
Sectioon 2.02. Amendment to Section 6.6 of the Agreement. Section 6.6
of the Agreement is hereby amended in its entirety to read as follows:
"6.6 No Borrower shall directly or indirectly: (a) sell,
lease, transfer, assign, abandon or otherwise dispose of any part of the
Collateral or any material
FINS2DAL:40474.4 18739-00020
-3-
portion of its other assets (other than sales of inventory to buyers in
the ordinary course of business) or (b) consolidate with or merge into
any other entity."
Section 2.03. Amendment to Section 6.12 of the Agreement. The last
sentence of Section 6.12 of the Agreement is hereby amended to read as follows:
"In addition, WellTech may make intercompany loans to WellTech's 63%
owned subsidiary, Servicios WellTech, S.A. ("Servicios") as long as (a)
all such intercompany loans are properly documented on WellTech's books
and records, (b) all such intercompany loans are memorialized by one or
more Intercompany Note and Security Agreements (the "Servicios Chattel
Paper"), (c) no such additional intercompany loans to Servicios after
January 19, 1996 would exceed the amount of $2,000,000 which is part of
the principal amount as set forth in the related Amended and Restated
Intercompany Note and Security Agreement executed by Servicios dated
November 22, 1996, and (d) Lender retains a properly perfected security
interest in the Servicios Chattel Paper at the time of such
intercompany loan."
The remaining provisions of Section 6.12 are unchanged.
Section 2.04. Amendment to Section 6.20 of the Agreement. Section
6.20 of the Agreement is hereby amended in its entirety to read as follows:
"6.20 RESERVED."
Section 2.05. Amendment to Section 7.1 of the Agreement. Section 7.1 of
the Agreement is hereby amended by the addition of a new "Event of Default"
subsection (m) which reads as follows:
"(m) The occurrence and continuance of an event of default under
the Indenture."
All remaining provisions of Section 7.1 are unchanged.
Section 2.06. Amendment to Section 9.1 of the Agreement. Section
9.1 of the Agreement
is hereby amended in its entirety to read as follows:
"9.1 Term. This Agreement shall only become effective upon the
execution and delivery of this Agreement by each Borrower and Lender
and shall continue in full force and effect until either December 31,
2001, or January 5, 2002, at Lender's option, and shall be deemed
automatically renewed for successive terms of two (2) years thereafter
unless terminated as of the end of the initial or any renewal term
(each a "Term") by the Lender or any Borrower giving the other parties
hereto written notice at least sixty (60) days prior to the end of the
then-current Term."
Section 2.07. Amendment to Section 9.2 of the Agreement.
Section 9.2 of the Agreement
is hereby amended in its entirety to read as follows:
FINS2DAL:40474.4 18739-00020
-4-
"9.2 In consideration of the issuance of a warrant to purchase 125,000
shares of the common stock of Parent, Lender agrees that any of the
Borrowers may also terminate this Agreement by giving Lender at least
thirty (30) days prior written notice at any time upon payment in full
of all of the Obligations as provided herein, including the applicable
early termination fee provided below. Lender shall also have the right
to terminate this Agreement at any time upon or after the occurrence of
an Event of Default. If Lender terminates this Agreement upon or after
the occurrence of an Event of Default, or if any of the Borrowers shall
terminate this Agreement as permitted herein effective prior to the end
of the then-current Term, in addition to all other Obligations, the
Borrowers collectively shall pay to Lender, upon the effective date of
termination, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as
to a reasonable calculation of Lender's lost profits, an early
termination fee equal to:
(a) $400,000 if the effective date of such termination
occurs on or before November 22, 1997;
(b) $300,000 if the effective date of such termination
occurs after November 22, 1997 but on or before November 22, 1998;
(c) $200,000 if the effective date of such termination occurs
after November 22, 1998 but on or before the end of the then current
Term.
If Borrowers terminate this Agreement and repay the
Obligations without having provided Lender with at least thirty (30)
days' prior written notice thereof, Borrowers will pay to Lender an
additional amount equal to thirty (30) days of interest at the
applicable Interest Rate, based on the average outstanding amount of
the Obligations for the six (6) month period preceding the date of
termination."
Section 2.08. Amendment to Section 9.3 of the Agreement. Section
9.3 of the Agreement is hereby amended in its entirety to read as
follows:
"9.3. Borrower may prepay, in whole or in part, the Term
Loans prior to the end of the then current Term without any premium or
penalty."
Section 2.09. Amendment to Section 10.1 of the Agreement. Section
10.1 of the Agreement is hereby amended in its entirety to read as
follows:
"10.1 (a) Maximum Credit: $40,000,000
(b) Eligible Accounts Percentage: Eighty-Five Percent
(85%) so long as the dilution percentage of such
accounts does not exceed Four Percent (4%) whereupon
the Eligible Accounts Percentage shall be reduced to
an amount deemed reasonable by Lender.
FINS2DAL:40474.4 18739-00020
-5-
(c) Maximum days after Invoice Date for Eligible
Accounts: 90 days; provided, however, that Lender may
make advances up to $250,000.00 in the aggregate at
any given time against Eligible Accounts which are
between 91 days and 120 days past invoice date.
(d) Minimum Borrowing: $12,000,000.
(e) Sublimits:
(i) For Yale, $40,000,000 less all Obligations
of Hurt and WellTech;
(ii) For Hurt, the lesser of (i) $2,000,000, and
(ii) $40,000,000 less all
Obligations of Yale and WellTech; and
(iii) For WellTech, $40,000,000 less all
Obligations of Hurt and Yale."
Section 2.10. Amendment to Section 10.2(a) of the Agreement.
Section 10.2(a) of the
Agreement is hereby amended in its entirety to read as follows:
"(a) Term Loan:
(i) For Yale, up to but not to exceed
$8,932,231.21 (the "Maximum
Amount");
(ii) For Hurt, up to but not to exceed
$1,091,239.41 (the "Maximum
Amount"); and
(iii) For WellTech, up to but not to exceed
$9,666,309.60 (the "Maximum
Amount")."
Section 2.11. Amendment to Section 10.4 of the Agreement.
Section 10.4 of the Agreement
is hereby amended in its entirety to read as follows:
"10.4 Fees:
(a) Interest Rate: Prime Rate plus .50% per annum
(b) Closing Fees: None
(c) Unused Line Fee Rate: .25% per annum payable on the
first day of the following month."
Section 2.12. Amendment to Section 10.5 of the Agreement.
Section 10.5 of the Agreement
is hereby amended in its entirety to read as follows:
FINS2DAL:40474.4 18739-00020
-6-
"10.5 Financial Covenants: Unless indicated otherwise, all amounts
below shall be determined in accordance with generally accepted
accounting principles, in effect on the date hereof, consistently
applied:
(a) "Consolidated Debt Service (Fixed Charge) Coverage
Ratio" means the ratio of (a) the sum of net income
plus (i) depreciation and amortization expenses plus
(ii) increases in deferred taxes less (iii) decreases
in deferred taxes resulting from tax payments
actually made; divided by (b) the sum of payments on
long term indebtedness plus (i) capital lease
payments plus (ii) any unfunded capital expenditures;
(c) determined on a consolidated basis.
Testing of the following ratio will begin on March
31, 1996.
Parent and its Subsidiaries will maintain a
Consolidated Debt Service (Fixed Charge) Coverage
Ratio of not less than 1.50 to 1.00, such ratio to be
tested at the end of each calendar quarter (i.e. as
of March 31, June 30, September 30 and December 31)
based on the prior 12- month period.
(b) "Consolidated Tangible Net Worth" means the amount by which the
------------------------------- sum of (a) Shareholders' Equity plus
Subordinated Debt (non-current balance) exceeds (b) Intangible Assets,
determined on a consolidated basis for Parent and its Subsidiaries. For this
purpose: "Shareholders Equity" means shareholders' equity determined according
to GAAP; and "Intangible Assets" means (i) assets which are treated as
intangible pursuant to GAAP; (ii) obligations owing by any persons that are
officers, directors, shareholders, employees, subsidiaries or affiliates, or any
entity in which any such person owns any interest; and (iii) any asset which is
intangible or lacks intrinsic and marketable value or collectibility, including
without limitation goodwill, noncompetition agreements, patents, copyrights,
trademarks, franchises or organization or research and development costs,
prepaid expenses or investments in subsidiaries/affiliates; and (iv) any other
assets determined to be intangible by Lender in its reasonable credit judgment.
Parent and its Subsidiaries will maintain a
Consolidated Tangible Net Worth of not less than
$35,000,000, such net worth to be tested as of the
end of each calendar quarter (i.e. as of March 31,
June 30, September 30 and December 31).
(c) Total Senior Secured Liabilities (as defined by GAAP)
to Consolidated
Tangible Net Worth:
FINS2DAL:40474.4 18739-00020
-7-
Parent and its Subsidiaries will not allow the ratio
of Total Senior Secured Liabilities to Consolidated
Tangible Net Worth to be greater than .90 to 1.00,
such ratio to be tested as of the end of any calendar
quarter (i.e. as of March 31, June 30, September 30
and December 31).
(d) Total Current Assets (as defined by GAAP) to Total
Current Liabilities (as
defined by GAAP).
Parent and its Subsidiaries will maintain a ratio of
Total Current Assets to Total Current Liabilities of
not less than 1.15 to 1.0, such ratio to be tested as
of the end of any calendar quarter (i.e. as of March
31, June 30, September 30 and December 31)."
Section 2.13. Amendment to Schedule 6.12. Schedule 6.12 is hereby
amended in its entirety and replaced with "Amended Schedule 6.12" attached to
the First Amendment and incorporated and made a part of the Agreement by this
reference.
ARTICLE III
Modifications to Notes
Section 3.01. Amendments to Hurt Note. The first three (3)
paragraphs of the Hurt Note
are hereby amended in their entirety to read as follows:
"FOR VALUE RECEIVED, KEY ENERGY DRILLING, INC., D/B/A ▇▇▇▇▇
▇▇▇▇ DRILLING, a Delaware corporation, promises to pay to the order of
THE CIT GROUP/CREDIT FINANCE, INC. ("CIT"), at its offices at ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other place as the
holder hereof may from time to time designate in writing, in legal
tender of the United States of America, the principal sum of One
Million Ninety One Thousand Two Hundred Thirty Nine and 41/100 Dollars
($1,091,239.41) or so much thereof as may be borrowed hereunder and
reflected on Schedule "A" attached hereto and made a part hereof, plus
interest from the date hereof on the unpaid principal balance as
follows:
The principal amount available to be borrowed under this Note
(the "Maximum Amount") shall be automatically reduced by $14,642.86
each month, and at no time shall the outstanding principal exceed the
Maximum Amount. The principal sum hereof outstanding shall be due and
payable on the end of the "Term" as defined in the Loan Agreement
described herein.
Interest shall be earned at the rate (the "Annual Rate") of
one-half percent (.50%) per annum plus the "Prime Rate". The "Prime
Rate" is the per annum rate of interest publicly announced by Chase
Manhattan Bank, New York, New York, or the applicable rate of its
successors or assigns, from time to time as its prime rate (the prime
rate is not intended to be the lowest rate of interest charged by Chase
FINS2DAL:40474.4 18739-00020
-8-
Manhattan Bank, New York, New York, or its successors or assigns, to
its borrowers). Such interest shall be payable monthly in arrears on
the first day of each and every month, commencing on the first day of
the month after an advance is made hereunder. Interest shall be
computed on the unpaid principal balance and shall be calculated on a
year of 360 days for actual days elapsed. Interest and principal not
paid when due shall bear interest at a rate equal to two percent (2%)
per annum in excess of the Annual Rate."
The remaining provisions of the Hurt Note are unchanged.
Section 3.02. Amendments to WellTech Note. The first three (3)
paragraphs of the WellTech Note are hereby amended in their entirety to read as
follows:
"FOR VALUE RECEIVED, WELLTECH EASTERN, INC., a Delaware
corporation, promises to pay to the order of THE CIT GROUP/CREDIT
FINANCE, INC. ("CIT"), at its offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other place as the holder hereof may
from time to time designate in writing, in legal tender of the United
States of America, the principal sum of Nine Million Six Hundred
Sixty-Six Thousand Three Hundred Nine and 60/100 Dollars
($9,666,309.60) or so much thereof as may be borrowed hereunder and
reflected on Schedule "A" attached hereto and made a part hereof, plus
interest from the date hereof on the unpaid principal balance as
follows:
The principal amount available to be borrowed under this Note
(the "Maximum Amount") shall be automatically reduced by $140,740.31
each month, and at no time shall the outstanding principal exceed the
Maximum Amount. The principal sum hereof outstanding shall be due and
payable on the end of the "Term" as defined in the Loan Agreement
described herein.
Interest shall be earned at the rate (the "Annual Rate") of
one-half percent (.50%) per annum plus the "Prime Rate". The "Prime
Rate" is the per annum rate of interest publicly announced by Chase
Manhattan Bank, New York, New York, or the applicable rate of its
successors or assigns, from time to time as its prime rate (the prime
rate is not intended to be the lowest rate of interest charged by Chase
Manhattan Bank, New York, New York, or its successors or assigns, to
its borrowers). Such interest shall be payable monthly in arrears on
the first day of each and every month, commencing on the first day of
the month after an advance is made hereunder. Interest shall be
computed on the unpaid principal balance and shall be calculated on a
year of 360 days for actual days elapsed. Interest and principal not
paid when due shall bear interest at a rate equal to two percent (2%)
per annum in excess of the Annual Rate."
The remaining provisions of the WellTech Note are unchanged.
Section 3.03. Amendments to Yale Note. The first three (3)
paragraphs of the Yale Note
are hereby amended in their entirety to read as follows:
FINS2DAL:40474.4 18739-00020
-9-
"FOR VALUE RECEIVED, YALE E. KEY, INC., a Texas corporation,
promises to pay to the order of THE CIT GROUP/CREDIT FINANCE, INC.
("CIT"), at its offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ or such other place as the holder hereof may from time to time
designate in writing, in legal tender of the United States of America,
the principal sum of Eight Million Nine Hundred Thirty-Two Thousand Two
Hundred Thirty-One and 21/100 Dollars ($8,932,231.21) or so much
thereof as may be borrowed hereunder and reflected on Schedule "A"
attached hereto and made a part hereof, plus interest from the date
hereof on the unpaid principal balance as follows:
The principal amount available to be borrowed under this Note
(the "Maximum Amount") shall be automatically reduced by $119,096.21
each month, and at no time shall the outstanding principal exceed the
Maximum Amount. The principal sum hereof outstanding shall be due and
payable on the end of the "Term" as defined in the Loan Agreement
described herein.
Interest shall be earned at the rate (the "Annual Rate") of
one-half percent (.50%) per annum plus the "Prime Rate". The "Prime
Rate" is the per annum rate of interest publicly announced by Chase
Manhattan Bank, New York, New York, or the applicable rate of its
successors or assigns, from time to time as its prime rate (the prime
rate is not intended to be the lowest rate of interest charged by Chase
Manhattan Bank, New York, New York, or its successors or assigns, to
its borrowers). Such interest shall be payable monthly in arrears on
the first day of each and every month, commencing on the first day of
the month after an advance is made hereunder. Interest shall be
computed on the unpaid principal balance and shall be calculated on a
year of 360 days for actual days elapsed. Interest and principal not
paid when due shall bear interest at a rate equal to two percent (2%)
per annum in excess of the Annual Rate."
The remaining provisions of the Yale Note are unchanged.
ARTICLE IV
Ratifications, Representations and Warranties
Section 4.01. Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement, including, without
limitation, all financial covenants contained therein, are ratified and
confirmed and shall continue in full force and effect. Lender and each Borrower
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 4.02. Representations and Warranties. Each Borrower hereby
represents and warrants to Lender that the execution, delivery and performance
of this Amendment and all other loan, amendment or security documents to which
such Borrower is or is to be a party hereunder (hereinafter referred to
collectively as the "Loan Documents") executed and/or delivered in
FINS2DAL:40474.4 18739-00020
-10-
connection herewith, have been authorized by all requisite corporate action on
the part of such Borrower and will not violate the Articles of Incorporation or
Bylaws of such Borrower.
ARTICLE V
Conditions Precedent
Section 5.01. Conditions. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent (unless
specifically waived in writing by the Lender):
(a) Lender shall have received, in addition to this Amendment,
all of the following, each dated (unless otherwise indicated) as of the
date of this Amendment, in form and substance satisfactory to Lender in
its sole discretion:
(i) Company Certificate. A certificate executed by the
Secretary or Assistant Secretary of each Borrower certifying
(A) that Borrower's Board of Directors has met and adopted,
approved, consented to and ratified the resolutions attached
thereto which authorize the execution, delivery and
performance by Borrower of the Amendment and the Loan
Documents, (B) the names of the officers of Borrower
authorized to sign this Amendment and each of the Loan
Documents to which Borrower is to be a party hereunder, (C)
the specimen signatures of such officers, and (D) that neither
the Articles of Incorporation nor Bylaws of Borrower have been
amended since the date of the Agreement;
(ii) Evidence of Existence and Good Standing.
Evidence of the existence
and good standing of each Borrower in such jurisdictions as
Lender may require;
(iii) No Material Adverse Change. Since May 21, 1996,
there shall have occurred no material adverse change in the
business, operations, financial condition, profits or
prospects of any Borrower, or in the Collateral, and the
Lender shall have received a certificate of each Borrower's
chief executive officer to such effect;
(iv) Amendment Documents.
a. The Amended and Restated Intercompany
Note and Security Agreement executed by Servicios
payable to WellTech in the original principal amount
of up to $5,400,000 dated November 22, 1996.
b. The Deed of Trust executed by WellTech
dated November 22, 1996 for the benefit of Lender
covering certain property located in ▇▇▇▇▇▇▇▇ County,
Oklahoma.
c. The Amendment to Common Stock
Purchase Warrant.
FINS2DAL:40474.4 18739-00020
-11-
d. Warrant ▇▇. ▇ - ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ executed by Parent in
favor of Lender for 125,000 shares of Parent's stock dated November 22, 1996..
e. Amended and Restated Registration Rights Agreement.
f. Certificates of title for certain motor vehicles with documentation
acceptable to Lender for recording Lender's liens thereon.
g. UCC-1 Financing Statements for each of Borrower's
locations reflecting Lender's security interest.
(v) Other Documents. Each Borrower shall have executed and delivered
such other documents and instruments as well as required record
searches as Lender may require.
(b) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to Lender and its legal counsel, Jenkens & ▇▇▇▇▇▇▇▇▇, a
Professional Corporation.
(c) The Indenture shall have been amended to Lender's
satisfaction to reflect that Parent's obligations under the Parent
Guaranty constitute "Senior Indebtedness" under the Indenture.
ARTICLE VI
Miscellaneous
Section 6.01. Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other document or
documents relating thereto, including, without limitation, any Loan Document
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation by
Lender or any closing shall affect the representations and warranties or the
right of Lender to rely thereon.
Section 6.02. Reference to Agreement. The Agreement, each of the Loan
Documents, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Agreement as amended hereby, are hereby amended so that any
reference therein to the Agreement shall mean a reference to the Agreement as
amended hereby.
Section 6.03. Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this
FINS2DAL:40474.4 18739-00020
-12-
Amendment and the effect thereof shall be confined to the provision so held to
be invalid or unenforceable.
Section 6.04. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN
MADE AND TO BE PERFORMABLE IN THE STATE OF ILLINOIS AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
Section 6.05. Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of Lender and each Borrower and their respective
successors and assigns; provided, however, that no Borrower may assign or
transfer any of its rights or obligations hereunder without the prior written
consent of Lender. Lender may assign any or all of its rights or obligations
hereunder without the prior consent of any Borrower.
Section 6.06. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
Section 6.07. Effect of Waiver. No consent or waiver, express or
implied, by Lender to or of any breach of or deviation from any covenant or
condition of the Agreement or duty shall be deemed a consent or waiver to or of
any other breach of or deviation from the same or any other covenant, condition
or duty. No failure on the part of Lender to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power, or
privilege under this Amendment, the Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Amendment, the Agreement or any other Loan
Document preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege. The rights and remedies provided for in the
Agreement and the other Loan Documents are cumulative and not exclusive of any
rights and remedies provided by law.
Section 6.08. Headings. The headings, captions and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 6.09. Releases. As a material inducement to Lender to enter
into this Amendment, each Borrower hereby represents and warrants that there are
no claims or offsets against, or defenses or counterclaims to, the terms and
provisions of and the other obligations created or evidenced by the Agreement or
the other Loan Documents. Each Borrower hereby releases, acquits, and forever
discharges Lender, and its successors, assigns, and predecessors in interest,
their parents, subsidiaries and affiliated organizations, and the officers,
employees, attorneys, and agents of each of the foregoing (all of whom are
herein jointly and severally referred to as the "Released Parties") from any and
all liability, damages, losses, obligations, costs, expenses, suits, claims,
demands, causes of action for damages or any other relief, whether or not now
known or suspected, of any kind, nature, or character, at law or in equity,
which such Borrower now has or may have ever had against any of the Released
Parties, including, but not limited to, those relating to (a) usury or penalties
or damages therefor, (b) allegations that a partnership existed between Borrower
and the Released Parties, (c) allegations of unconscionable acts, deceptive
trade practices, lack of good faith or fair dealing, lack
FINS2DAL:40474.4 18739-00020
-13-
of commercial reasonableness or special relationships, such as fiduciary, trust
or confidential relationships, (d) allegations of dominion, control, alter ego,
instrumentality, fraud, misrepresentation, duress, coercion, undue influence,
interference or negligence, (e) allegations of tortious interference with
present or prospective business relationships or of antitrust, or (f) slander,
libel or damage to reputation, (hereinafter being collectively referred to as
the "Claims"), all of which Claims are hereby waived.
Section 6.10. Expenses of Lender. Borrowers agree to pay on demand (i)
all costs and expenses reasonably incurred by Lender in connection with the
preparation, negotiation and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all subsequent amendments,
modifications, and supplements hereto or thereto, including, without limitation,
the costs and fees of Lender's legal counsel and the allocated cost of staff
counsel and (ii) all costs and expenses reasonably incurred by Lender in
connection with the enforcement or preservation of any rights under the
Agreement, this Amendment and/or other Loan Documents, including, without
limitation, the costs and fees of Lender's legal counsel and the allocated cost
of staff counsel.
Section 6.11. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER WITH
THE OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN
LENDER AND BORROWERS AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN LENDER AND BORROWERS.
FINS2DAL:40474.4 18739-00020
-14-
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Third Amended and Restated Loan and Security Agreement on the date first above
written.
"BORROWERS"
YALE E. KEY, INC.
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
KEY ENERGY DRILLING, INC.
(d/b/a ▇▇▇▇▇ ▇▇▇▇ Drilling)
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
WELLTECH EASTERN, INC.
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
"LENDER"
THE CIT GROUP/CREDIT FINANCE, INC.
By:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
FINS2DAL:40474.4 18739-00020
S - 1
CONSENTS AND REAFFIRMATIONS
Key Energy Group, Inc. hereby acknowledges the execution of, and
consents to, the terms and conditions of that First Amendment to Third Amended
and Restated Loan and Security Agreement dated as of November 22, 1996, between
Yale E. Key, Inc., Key Energy Drilling, Inc. (d/b/a ▇▇▇▇▇ ▇▇▇▇ Drilling),
WellTech Eastern, Inc. and The CIT Group/Credit Finance, Inc., ("Creditor") and
reaffirms its obligations under (i) that certain Guaranty (the "Guaranty") dated
as of May 21, 1996 made by the undersigned in favor of the Creditor, and (ii)
that certain Amended and Restated Stock Pledge Agreement (the "Pledge") dated as
of May 21, 1996 made by the undersigned in favor of the Creditor, and
acknowledges and agrees that the Guaranty and the Pledge and all other documents
executed in connection therewith remain in full force and effect and the
Guaranty and the Pledge and all such other documents are hereby ratified and
confirmed.
Dated as of November 22, 1996.
KEY ENERGY GROUP, INC.
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title:
FINS2DAL:40474.4 18739-00020
AMENDED SCHEDULE 6.12
1.Key has guaranteed the obligations of Odessa to Norwest Bank Texas,
Midland.
2.Key will pay the bonuses due to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ under Mr. John's
Employment Agreement with Key.
3. Key will guarantee WellTech's obligations relating to the Nub's
acquisition and note balance: $200,000 - $250,000
4. WellTech leases from Hidco Development Corporation, which is owned by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and his spouse, real property used for well servicing yards in
▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇. Lease terms, including rental
rates, are deemed by management to be competitive.
5. WellTech leases from Talon Development Corporation real property used
for its servicing yard in Indiana, Pennsylvania. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ owns a
33 1/3 interest in Talon Development Corporation. Lease terms including
rental rates are deemed by management to be competitive.
6. WellTech initiated a management incentive compensation plan which
requires the payment of sums of money to various parties contingent
upon the attainment of a stipulated level of profitability. No payments
have been made pursuant to this plan since its adoption.
7. Provided no Event of Default has occurred or would result from the
making of such distributions, each Borrower may distribute funds to Key
in an amount sufficient in the aggregate to make regularly scheduled
payments of interest under the Indenture.
8. Each of the Borrowers may guarantee the obligations of Parent under the
Indenture and the Debentures and may guarantee obligations of
subsidiaries of Parent incurred in the ordinary course of business.
FINS2DAL:40474.4 18739-00020