-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SulRT4JeeInNotEaGluXsq6xWYsd7ODG4TqGffX0rxMfEscZ8QCwvl2k2AwV/rqD 0cncMZnxnH2F321TJsmfWA== 0000318996-96-000009.txt : 19960506 0000318996-96-000009.hdr.sgml : 19960506 ACCESSION NUMBER: 0000318996-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960503 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEY ENERGY GROUP INC CENTRAL INDEX KEY: 0000318996 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 042648081 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08038 FILM NUMBER: 96555741 BUSINESS ADDRESS: STREET 1: 255 LIVINGSTON AVE CITY: NEW BRUNSWICK STATE: NJ ZIP: 08901 BUSINESS PHONE: 9155705721 MAIL ADDRESS: STREET 1: P O BOX 10627 CITY: MIDLAND STATE: TX ZIP: 79702 FORMER COMPANY: FORMER CONFORMED NAME: YANKEE COMPANIES INC DATE OF NAME CHANGE: 19891012 FORMER COMPANY: FORMER CONFORMED NAME: YANKEE OIL & GAS INC DATE OF NAME CHANGE: 19841122 10-Q 1 __________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8038 KEY ENERGY GROUP, INC. (Exact name of registrant as specified in its charter) Maryland 04-2648081 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 255 Livingston Ave., New Brunswick, NJ 08901 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (908)247-4822 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant has filed documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No Common Shares outstanding at April 19, 1996: 10,413,513 ______________________________________________________________ KEY ENERGY GROUP, INC. AND SUBSIDIARIES INDEX Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings. 19 Item 2. Changes in Securities. 19 Item 3. Defaults Upon Senior Securities. 19 Item 4. Submission of Matters to a Vote of Security Holders. 19 Item 6. Exhibits and Reports on Form 8-K. 19 Signatures. 21 Key Energy Group,Inc. and Subsidiaries Consolidated Balance Sheets (unaudited) March 31, June 30, (Thousands, except share and per share data) 1996 1995 ASSETS Current Assets: Cash $1,598 $865 Restricted cash 1,705 410 Restricted marketable securities 267 267 Accounts receivable, net 19,183 8,133 Prepaid expenses 1,793 358 Inventories 1,764 1,257 Total Current Assets 26,310 11,290 Property and Equipment: Oilfield service equipment 64,091 23,726 Oil and gas well drilling equipment 4,682 2,014 Motor vehicles 1,041 526 Oil and gas properties and other related equipment,successful efforts 10,270 7,652 Furniture and equipment 1,367 332 Buildings and land 5,026 2,086 86,477 36,336 Accumulated depreciation & depletion (7,334) (4,394) Net Property and Equipment 79,143 31,942 Other Assets 5,190 2,011 Total Assets $110,643 $45,243 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $9,562 $3,930 Accrued interest 305 145 Other accrued liabilities 9,539 2,612 Accrued income taxes 49 174 Deferred tax liability 118 118 Current portion of long-term debt 4,245 2,249 Total Current Liabilities 23,818 9,228 Long-term debt, less current portion 37,073 13,700 Accrued casualty insurance 4,909 - Deferred income taxes 3,333 2,204 Minority interest 1,151 - Commitments and contingencies Stockholders' equity: Common stock, $.10 par value; 25,000,000 shares authorized, 10,413,513 and 6,913,513 shares issued and outstanding at March 31, 1996 and June 30, 1995, respectively 1,041 691 Additional paid-in capital 32,763 15,186 Retained earnings 6,555 4,234 Total Stockholders' Equity 40,359 20,111 Total Liabilities and Stockholders' Equity $110,643 $45,243 See the accompanying notes which are an integral part of these consolidated financial statements. Key Energy Group, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Ended Nine Months Ended March 31, March 31, (Thousands, except per share data) 1996 1995 1996 1995 REVENUES: Oilfield services $11,916 $10,145 $31,064 $31,068 Oil and gas revenues 1,016 695 2,743 1,772 Oil and gas well drilling 1,370 - 5,029 - Other revenues, net - 209 258 171 14,302 11,049 39,094 33,011 COSTS AND EXPENSES Oilfield services direct costs 8,655 7,784 22,808 24,134 Oil and gas direct costs 316 182 935 613 Oil and gas well drilling 1,151 - 3,886 - Depreciation and depletion expense 1,146 642 2,940 1,887 General and administrative expense 1,219 1,174 3,609 2,996 Interest expense 571 370 1,448 997 13,058 10,152 35,626 30,627 Income before minority interest and and income taxes 1,244 897 3,468 2,384 Minority interest 18 - 18 - Income tax expense 399 266 1,129 742 NET INCOME $827 $631 $2,321 $1,642 EARNINGS PER SHARE : Primary: Income before minority interest and income taxes $0.18 $0.14 $0.50 $0.36 Net income $0.12 $0.10 $0.33 $0.25 Assuming full dilution: Income before minority interest and income taxes $0.18 $0.14 $0.50 $0.36 Net income $0.12 $0.10 $0.33 $0.25 WEIGHTED AVERAGE SHARES OUTSTANDING: Primary 6,981 6,637 6,981 6,637 Assuming full dilution 6,986 6,637 6,986 6,637 See the accompanying notes which are an integral part of these consolidated financial statements. Key Energy Group, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Ended Nine Months Ended March 31, March 31, (Thousands) 1996 1995 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $827 $631 $2,321 $1,642 Adjustments to reconcile income from operations to net cash provided by operations: Depreciation, depletion and amortization 1,146 642 2,940 1,887 Deferred income taxes 399 266 1,129 742 Minority interest net income 18 - 18 - Change in assets and liabilities, net of effects from acquisitions: (Increase) decrease in accounts receivable 26 (148) (193) (1,108) (Increase) decrease in other current assets (184) (654) (94) (725) Decrease in accounts payable and accrued expenses 191 107 (616) (1,457) (Decrease) increase in accrued interest (1) 27 22 11 (Decrease) increase in accrued taxes (75) - (125) - (Increase) decrease in other assets (75) (1) (84) (1) Net cash provided by operating activities 2,272 870 5,318 991 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures - Oilwell service operations (878) (385) (2,605) (2,284) Capital expenditures - Oil and gas operations - (16) (7) (23) Capital expenditures - Oil and gas well drilling operations (90) - (450) - Expenditures for oil and gas properties (382) (78) (2,532) (1,289) Net cash used in investing activities (1,350) (479) (5,594) (3,596) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (259) (471) (1,677) (1,518) Cash received from purchase of WellTech 1,168 - 1,168 - Borrowings under line-of-credit 41 (1,377) 13 (406) Proceeds from long-term debt 476 1,310 2,800 4,176 Net cash provided by (used in) financing activities 1,426 (538) 2,304 2,252 Net increase (decrease) in cash and restricted cash 2,348 (147) 2,028 (353) Cash and restricted cash at beginning of period 955 967 1,275 1,173 Cash and restricted cash at end of period $3,303 $820 $3,303 $820 Supplemental cash flow disclosures: Interest paid $434 $343 $1,288 $986 Supplemental schedule of non-cash investing and financing transactions: Fair value of Common Stock and Warrants issued WellTech West Texas $- $- $- $8,647 Fair value of Common Stock issued for Clint Hurt Drilling $- $23 $- $23 Issuance of note payable in Clint Hurt Drilling acquisition $- $725 $725 $- See the accompanying notes which are an integral part of these consolidated financial statements. Key Energy Group, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial information in this report includes the accounts of Key Energy Group, Inc. ("Key") and its wholly-owned subsidiaries and was prepared in conformity with accounting policies used in the Annual Report on Form 10-K furnished for the preceding fiscal year. The consolidated financial information in this report includes the four operating subsidiaries of the Company; Yale E. Key, Inc. ("Yale E. Key") and WellTech Eastern, Inc. ("WellTech") (which was acquired in March 1996 after the merger of WellTech, Inc. "Old WellTech" into Key, see Note 2) which are both involved in oilwell service operations, Odessa Exploration Inc. ("OEI") which is involved in the production and exploration of oil and natural gas and Key Energy Drilling, Inc. d/b/a Clint Hurt Drilling ("Clint Hurt Drilling") which is involved in the drilling for oil and natural gas. In addition, as a result of the WellTech merger, (see Note 2) the Company acquired a 63% ownership in Servicios WellTech, S.A. ("Servicios"), an Argentinean corporation, which is accounted for using the consolidation with a minority interest method. OEI utilizes the successful efforts method of accounting for its oil and gas properties. Under this method, all costs associated with productive wells and nonproductive development wells are capitalized, while nonproductive exploration costs and geological and geophysical costs (if any) are expensed. Capitalized costs relating to proved properties are depleted using the unit-of-production method based on proved reserves expressed as net equivalent Bbls as reviewed by independent petroleum engineers. The carrying amounts of properties sold or otherwise disposed of and the related allowance for depletion are eliminated from the accounts and any gain/loss is included in results of operations. OEI's aggregate oil and gas properties are stated at cost, not in excess of total estimated future net revenues net of related income tax effects. In the opinion of Key, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position as of March 31, 1996, the statement of cash flows for the three and nine months ended March 31, 1996 and 1995, and the results of operations for the three and nine month periods then ended. The consolidated financial statements of Key have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principals for complete financial statements. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. 2. ACQUISITIONS WellTech, Inc. In March 1996, Key acquired, through a merger, Old WellTech. Key was the surviving entity in the merger. Net consideration for the merger was 3,500,000 shares of Key Common Stock and warrants to purchase 500,000 additional shares. In the merger, Old WellTech stockholders received an aggregate of 4,929,962 shares of Key Common Stock and warrants to purchase 750,000 shares of Key Common Stock at $6.75 per share. As part of the merger, 1,429,962 of the 1,635,000 shares of Key Common Stock owned by Old WellTech and previously issued warrants to purchase 250,000 shares of Key Common Stock at $5.00 per share were cancelled. WellTech's principal line of business is oil and gas well servicing and it operates in the Mid-Continent and Northeast areas of the United States and in Argentina. Until November 1995, Old WellTech also conducted certain operations in Russia. On March 26, 1996, Key shareholders approved the merger. The acquisition was accounted for using the purchase method. Odessa Exploration Properties In April of 1996, the Company announced that OEI had agreed to purchase approximately $7.1 million of oil and gas producing properties from two unrelated companies. The properties to be acquired include production in 264 gross (79 net) wells with daily average net production of 240 barrels of oil and 1.5 mmcf of natural gas. The reserves are approximately equally divided between oil and natural gas. Financing for the acquisition is expected to come from bank financing. The acquisition will be accounted for using the purchase method. Clint Hurt Drilling On March 30, 1995, Key and Clint Hurt Associates, Inc. ("CHA") entered into an Asset Purchase Agreement pursuant to which CHA sold to Key all of its assets in West Texas. Such assets mainly consisted of four oil and gas drilling rigs and related equipment. As consideration for the acquisition, Key paid CHA $1,725,000, of which $1,000,000 was paid in cash and the balance in the form of a $725,000 note payable to CHA (the note was paid in full in July 1995). Mr. Clint Hurt entered into consulting and noncompetition agreements with Key in consideration for which Key issued 5,000 shares of Key Common Stock. The acquisition was accounted for using the purchase method and the results of operations of Clint Hurt Drilling have been included in those of Key since April 1, 1995. 3. LONG-TERM DEBT In January 1996, prior to the completed merger described in Note 2, Key, Yale E. Key, Clint Hurt and Old WellTech entered into new separate credit facilities with The C.I.T. Group/Credit Finance, Inc. ("C.I.T.) totaling approximately $35 million (the combined maximum credit limit). As a result of the new separate credit facilities, the interest rate for Yale E. Key was lowered from two and one-half to one and one-quarter percent over the stated prime rate (8.25% at March 31, 1996). In addition, the interest rate for the Old WellTech debt was lowered from an aggregate of three and one-half percent to one and one-quarter percent over the stated prime rate (8.25% at March 31, 1996). Each of the C.I.T. term notes require principal and interest payments, due the first day of each month beginning February 1, 1996, plus a final payment of the unpaid balance of the note due December 31, 1998. The expiration of each of the lines of credit are December 31,1998. The proceeds of the initial borrowings were used to repay substantially all of the debt of Key (other than that of OEI) and Old WellTech. Key believes that such a facility will provide sufficient funds to finance its operating and capital expenditure needs for the foreseeable future. The indebtedness, which is currently being modified to reflect the Welltech merger, will be the obligation of Key and Key's subsidiaries, Yale E. Key, Clint Hurt and WellTech. At March 31, 1996, the Company (on a combined basis) had approximately $2 million in term and credit-line availability. The Yale E. Key C.I.T. term note, ($9,885,000 approximate principal balance at March 31, 1996), as amended, requires monthly principal payments of approximately $119,000, plus interest, while the Yale E. Key C.I.T. line of credit, ($2,792,000 approximate principal balance at March 31, 1996),as amended, requires monthly payments of interest. The note is collateralized by all of the assets (including equipment and inventory) of Yale E. Key, while the line of credit is collateralized by the accounts receivable of Yale E. Key. Both the term note and the line of credit will be guaranteed by Key. At March 31, 1996, there was approximately $500,000 of credit line availability. The Clint Hurt Drilling C.I.T. term note, ($1,208,000 approximate principal balance at March 31, 1996), requires monthly principal payments of approximately $14,643, plus interest, while the Clint Hurt Drilling C.I.T. line of credit, ($588,000 approximate principal balance at March 31, 1996),as amended, requires monthly payments of interest The note is collateralized by all of the assets (including equipment and inventory) of Clint Hurt Drilling while the line of credit is collateralized by the accounts receivable of Clint Hurt Drilling. Both the term note and the line of credit will be guaranteed Key. At March 31, 1996, there was no credit line availability. The WellTech C.I.T. term note, ($12,125,000 approximate principal balance at March 31, 1996), as amended, requires monthly principal payments of approximately $141,000, plus interest, while the WellTech C.I.T. line of credit, ($5,121,000 approximate principal balance at March 31, 1996),as amended, requires monthly payments of interest. The note is collateralized by all of the assets (including equipment and inventory) of WellTech while the line of credit is collateralized by the accounts receivable of WellTech. Both the term note and the line of credit will be guaranteed by Key. At March 31, 1996, there was no credit line availability. The agreement with C.I.T. includes certain restrictive and financial covenants, which include, though not limited to; certain financial ratios, annual capital expenditure maximums, and restrictions on cash distributions and declarations of dividends on common stock. The OEI loan agreement, as amended, with Norwest Bank Texas, N.A. ("Norwest") provides for a $7.5 million revolving line of credit note subject to a borrowing base limitation (approximately $7.0 million at March 31, 1996). The borrowing base is redetermined on at least a semi-annual basis. The borrowing base is reduced by approximately $60,000 per month through October 1997; the maturity of the note. The note's interest rate is Norwest's prime rate (8.5% at March 31, 1996) plus one-half percent. The note is secured by substantially all of the oil and gas properties of OEI. The note is also guaranteed by Key. The loan agreement contains various restrictive covenants and compliance requirements, including covenants which (a) prohibit OEI from declaring or paying dividends on OEI's common stock, (b) limit the incurrence of additional indebtedness by OEI and, (c) limit the disposition of assets and various other financial covenants. 4. CASH FLOW DISCLOSURES OF WELLTECH ACQUISITION During March 1994, Key completed an acquisition of WellTech (see Note 2). The acquisition of WellTech,accounted for using the purchase method, resulted in the following noncash investing activities(in thousands): Recorded amounts of assets acquired, including cash acuired of $1,168 ............ $ 58,829 Liabilities assumed .......................... (40,902) ---------- Fair value of Key Common Stock issued........... $ 17,927 ===== The liabilities assumed include amounts recorded for litigation and certain other preacquisition contingencies of WellTech. 5. COMMITMENTS AND CONTINGENCIES Various suits and claims arising in the ordinary course of business are pending against Key and its subsidiaries. Management does not believe that the disposition of any of these suits or claims will result in a material adverse impact on the consolidated financial position of Key. During August 1995, Key entered into employment agreements with certain of its officers. These employment agreements generally run to June 30, 1998, but will automatically be extended on a yearly basis unless terminated by Key or the applicable officer. In addition to providing a base salary for each officer, the employment agreements provide for severance payments for each officer varying from 12 to 36 months of the officer's base salary. The current annual base salaries for the officers covered under such employment agreements total approximately $800,000. KEY ENERGY GROUP, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. QUARTER ENDED MARCH 31, 1996 VERSUS QUARTER ENDED MARCH 31, 1995 Overview The following discussion provides information to assist in the understanding of Key Energy Group, Inc.'s ("Key") financial condition and results of operations. It should be read in conjunction with the financial statements and related notes appearing elsewhere in this report. Operating results for the three and nine months ended March 31, 1996 include Key's oilfield well service operations conducted by its wholly-owned subsidiaries, Yale E. Key, Inc. ("Yale E. Key"), its oil and natural gas exploration and production operations conducted by its wholly-owned subsidiary, Odessa Exploration Inc. ("OEI") and Key Energy Drilling, Inc. d/b/a Clint Hurt Drilling ("Clint Hurt Drilling") which is engaged in oil and natural gas well contract drilling and was acquired in March 1995. Also included are the operating results of WellTech, Inc. ("WellTech") for the period of March 26, 1996 (the date of the merger, see Note 2) to March 31, 1996. Historically, fluctuations in oilfield well service operations and oil and gas well contract drilling activity have been closely linked to fluctuations in crude oil and natural gas prices. However, Key, through acquisitions, customer alliances and agreements, and diversification of services, seeks to minimize the effects of such fluctuations on Key's results of operations and financial condition. Results of Operations The Company or Key Revenues of Key for the three months ended March 31, 1996 increased $3,253,000 or 29% to $14,302,000 from $11,049,000 for the comparable fiscal 1995 quarter, while net income of $827,000 increased $196,000 or 31% from the comparable fiscal 1995 quarter total of $631,000. The increase in revenues was primarily due to the addition of Clint Hurt Drilling on April 1, 1995, whose operations were not included in the comparable 1995 quarter results, increased oil and gas revenues from OEI, increased oilwell service equipment utilization and the acquisition of WellTech (see Note 2). The improvement in quarterly net income is partially attributable to the inclusion of Clint Hurt Drilling, but is also a result of an increase in oilwell service equipment utilization and a decrease in total consolidated Key costs and expenses as a percent of total revenues. Oilfield Services Oilfield services are performed by Yale E. Key and WellTech. Yale E. Key conducts oilfield services primarily in West Texas, while WellTech conducts oilfield services in the Mid-Continent region of the United States (primarily in Oklahoma) through its operating division; WellTech Mid-Con, and in the Northeastern United States (primarily in Michigan, Pennsylvania and West Virginia) through its operating division; WellTech Eastern. In addition, WellTech conducts oilfield services in Argentina through its 63% ownership in Servicios WellTech, S.A. ("Servicios"), an Argentinean corporation. Oilfield service revenues for the quarter ended March 31, 1996 increased $1,771,000 or 17% from $10,145,000 for the quarter ended March 31, 1995 to $11,916,000 for the current quarter ending March 31, 1996. The increase in revenues is primarily attributable to higher equipment utilization as the result of an increase in demand for oilfield services and the acquisition of WellTech whose operating results are included for the period of March 26, 1996 (the date of the merger, see Note 2) to March 31, 1996. Yale E. Key averaged a 90% equipment utilization for the current quarter compared to 81% for the comparable quarter of last year. In addition, Yale E. Key continues the diversification of oilfield services into higher margin business segments such as oilfield frac tanks, oilfield fishing tools and trucking operations. Oil and Natural Gas Exploration and Production Oil and natural gas exploration and production operations are performed by Odessa Exploration Inc. Revenues from oil and gas activities increased $321,000 or 46% from $695,000 during the quarter ended March 31, 1995 to $1,016,000 for the current quarter. The increase in revenues was primarily the result of increased production of oil and natural gas as several oil and natural gas wells which were drilled began production during the 1996 quarter as well as higher oil and natural gas prices for the quarter. Of the total $1,016,000 of revenues for the quarter ended March 31, 1996, approximately $820,000 was from the sale of oil and gas - 21,826 barrels of oil at an average price of $20.28 per barrel and 232,049 MCF of natural gas at an average price of $1.63 per MCF. The remaining $196,000 of revenues represented primarily administrative fee income and other miscellaneous income. Oil and Natural Gas Well Drilling Oil and natural gas well drilling operations are performed by Clint Hurt Drilling which was acquired in March 1995. Comparable numbers for the prior years quarter are, therefore, not available. Revenues for the quarter ended March 31, 1996 were $1,370,000. Depreciation, Depletion and Amortization Depreciation, depletion and amortization expense for Key increased $504,000 or 79% from $642,000 to $1,146,000 during the three months ended March 31, 1996 as compared with the prior period. The increase is primarily due to oilfield service depreciation expense, which is the result of increased capital expenditures for the current quarter versus the prior quarter ended March 31, 1995, and the addition of Clint Hurt Drilling and WellTech (see Note 2). In addition, depletion expense generated by OEI increased for the current quarter due to the increase in the production of oil and natural gas. Interest Expense Interest expense for Key increased $201,000 or 54% from $370,000 during the three months ended March 31, 1995 to $571,000 for the current quarter. The increase is primarily the result of the Clint Hurt and WellTech acquisitions (see Note 2) and the addition of certain oil and gas properties purchased by OEI. General and Administrative Expenses General and administrative expenses include those of Key as well as Yale E. Key, WellTech, OEI and Clint Hurt Drilling. These expenses increased $45,000 or 32% from $1,174,000 for the quarter ending March 31, 1995 to $1,219,000 for the current quarter. The increase can be primarily attributed to the acquisition and subsequent inclusion of Clint Hurt Drilling's and WellTech's general and administrative expenses. Income Tax Expense Income tax expense for Key for the three months ended March 31, 1996 and 1995 was $399,000 and $266,000 respectively. Minority Interest The minority interest of $18,000 is that portion of net income from Servicios WellTech attributable to the minority shareholders (37%) for the period of acquisition until March 31, 1996 (see Note 2). Net Income Net income before minority interest and income taxes was $1,244,000 for the three months ended March 31, 1996, which was an increase of $347,000 or 39% over the comparable quarter ending March 31, 1995 amount of $897,000. The increase in net income before minority interest and income taxes was primarily due to the addition of Clint Hurt Drilling and WellTech (see Note 2), increased oil and gas revenues and higher oilfield service equipment utilization. Net income for the three months ended March 31, 1996 was $827,000, which was a $196,000 or 31% increase from $631,000 for the three months ended March 31, 1995. Cash Flow Net cash provided by operations increased $1,402,000 from $870,000 during the three months ended March 31, 1995 to $2,272,000 in net cash provided by operations for the current quarter. The increase is attributable primarily to lower increase in other assets and accrued expenses and higher net income and depreciation expense over the same period last year. Net cash used in investing activities increased $871,000 from $479,000 for the three months ended March 31, 1995 to $1,350,000 for the current quarter. The increase is primarily the result of increased expenditures for oil and gas properties and oilwell service operations. In addition, net cash used in investing activities for the current quarter included $90,000 used in the oil and gas well drilling operations. Net cash provided by financing activities was $1,426,000 for the three months ended March 31, 1996 as compared to $538,000 in net cash used by financing activities for the comparable quarter. The increase is primarily the result of net cash received from the WellTech purchase (see Note 2) during the current quarter and a decrease in proceeds from long-term debt during the current quarter. Such proceeds were primarily used for the oil and natural gas drilling program conducted by OEI. Cash increased $2,348,000 for the three months ended March 31, 1996, as compared to a net decrease in cash of $147,000 for the three months ended March 31, 1995. NINE MONTHS ENDED MARCH 31, 1996 VERSUS NINE MONTHS ENDED MARCH 31, 1995 Results of Operations The Company or Key Revenues of Key for the nine months ended March 31, 1996 increased $6,083,000 or 18% to $39,094,000 from $33,011,000 for the comparable fiscal 1995 period, while net income increased $679,000 or 41% to $2,321,000 from $1,642,000 for the comparable fiscal 1995 nine month total of $1,642,000. The increase in revenues was primarily due to the addition of Clint Hurt Drilling on April 1, 1995, whose operations were not included in the prior year results, the increase in oil and gas revenues and the acquisition of WellTech (see Note 2). The improvement in net income is partially attributable to the inclusion of Clint Hurt Drilling, but is also a result of an increase in oil and gas revenues, the addition of WellTech (see Note 2) and a decrease in total consolidated Key costs and expenses as a percent of total revenues. Oilfield Services Oilfield services are performed by Yale E. Key and WellTech. Oilfield service revenue declined $4,000 from $31,068,000 for the prior nine month period ending March 31, 1995 to $31,064,000 for the current nine month period ending March 31, 1996. The decline is primarily attributable to curtailed equipment utilization as the result of adverse weather conditions and a slight decline in demand during the first and second quarters of the Company's fiscal year. This decline in oilfield service revenues is largely offset by an increase in oilfield service revenues during the current quarter ended March 31, 1996. Yale E. Key averaged an 86% equipment utilization for the nine months; and due to lower expenses, the continued diversification of services into higher margin business segments such as oilfield frac tanks, oilfield fishing tools and trucking operations, the gross margin increased from 21% to 24% of revenues for the nine months ended March 31, 1996. Oil and Natural Gas Exploration and Production Oil and natural gas exploration and production are performed by Odessa Exploration, Inc. Revenues from oil and gas activities increased $971,000 or 55% from $1,772,000 in the 1995 period to $2,743,000 for the current nine month period despite relatively constant crude oil and lower natural gas prices during the first and second quarters of the fiscal year. The increase in revenues was primarily the result of increased production of oil and natural gas as several oil and natural gas wells which were drilled began production during the 1996 period. Of the total $2,743,000 of revenues for the nine months ended March 31, 1996, approximately $2,313,000 was from the sale of oil and gas - 66,177 barrels of oil at an average price of $17.54 per barrel and 711,198 MCF of natural gas at an average price of $1.62 per MCF. The remaining $430,000 of revenues represented primarily administrative fee income and other miscellaneous income. Oil and Natural Gas Well Drilling Oil and natural gas well drilling operations are performed by Clint Hurt Drilling which was acquired in March 1995. Comparable numbers for the prior nine month period ending March 31, 1995 are, therefore, not available. Revenues for the nine months ended March 31, 1996 were $5,029,000. Depreciation, Depletion and Amortization Depreciation, depletion and amortization expense for Key increased $1,053,000 or 56% from $1,887,000 to $2,940,000 during the nine months ended March 31, 1996 as compared with the prior fiscal 1995 nine month period. The increase is primarily due to oilfield service depreciation expense, which is the result of increased oilfield service capital expenditures for the current period versus the prior period and the addition of WellTech and Clint Hurt Drilling (see Note 2). In addition, depletion expense generated by OEI increased for the period due to the increase in the production of oil and natural gas. Interest Expense Interest expense for Key increased $451,000 or 45% from $997,000 during the nine months ended March 31, 1995 to $1,448,000 for the current period. The increase is primarily the result of acquisitions and the addition of certain oil and gas properties by OEI. General and Administrative Expenses General and administrative expenses include those of Key as well as Yale E. Key, WellTech, OEI and Clint Hurt Drilling. These expenses increased $613,000 or 20% to $3,609,000 during the nine months ended March 31, 1996 as compared to $2,996,000 for the nine months ended March 31, 1995. The increase can be primarily attributed to the acquisition and subsequent inclusion of Clint Hurt Drilling's general and administrative expenses as well as the acquisition of WellTech (see Note 2). Income Tax Expense Income tax expense for Key for the nine months ended March 31, 1996 and 1995 was $1,129,000 and $742,000 respectively. Minority Interest The minority interest of $18,000 is that portion of net income from Servicios WellTech attributable to the minority shareholders (37%) for the period of acquisition until March 31, 1996 (see Note 2). Net Income Net income before minority interest and income taxes was $3,468,000 for the nine months ended March 31, 1996, which was an increase of $1,084,000 or 45% over the comparable period of $2,384,000. The increase in net income before minority interest and income taxes was primarily due to the addition of Clint Hurt Drilling and other oilwell service acquisitions (see Note 2), increased oilfield service equipment utilization during the third quarter of fiscal 1996 and increased oil and gas revenues. Net income for the nine months ended March 31, 1996 was $2,321,000, which was a $679,000 or 41% increase from $1,642,000 for the nine months ended March 31, 1995. Cash Flow Net cash provided by operations increased $4,327,000 from $991,000 during the nine months ended March 31, 1995 to $5,318,000 for the current period. The increase is attributable primarily to lower decrease in accounts payable and accrued expenses and higher net income and depreciation expense over the same period last year. Net cash used in investing activities increased $1,998,000 from $3,596,000 for the nine months ended March 31, 1995 to $5,594,000 for the current period. The increase is primarily the result of increased expenditures for oil and gas properties. In addition, net cash used in investing activities for the current period included $450,000 used in the oil and gas well drilling operations. Net cash provided by financing activities was $2,304,000, a $52,000 increase, for the nine months ended March 31, 1996 as compared to $2,252,000 for the comparable period. The increase is primarily the result of cash received from the purchase of WellTech during the current period, which is partially offset by a decrease in proceeds from long-term debt during the current quarter. Such proceeds were primarily used for the oil and natural gas drilling program conducted by OEI. Cash increased $2,028,000 for the nine months ended March 31, 1996, as compared to a net decrease in cash of $353,000 for the nine months ended March 31, 1995. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1996, Key had $3,303,000 in cash and restricted cash as compared to $1,275,000 in cash and restricted cash at June 30, 1995. Yale E. Key has projected $3.0 million for oilwell service capital expenditures over the 1996 fiscal year as compared to $2.8 million for the fiscal year ended June 30, 1995. Capital expenditures are expected to be primarily capitalized improvement costs (totaling over $5,000) to existing equipment and machinery. Financing of capital expenditures is expected to come from the operating cash flows of Yale E. Key. Capital expenditures were $2,605,000 for the nine months ended March 31, 1996. OEI has forecasted approximately $3 million in oil and gas property acquisitions for fiscal 1996 as compared to $2.8 million during fiscal 1995 (which does not include the acquisition described in Note 2). Financing of oil and gas acquisitions is expected to come from borrowings. Oil and gas acquisitions were $2,532,000 for the nine months ended March 31, 1996. Financing of oil and gas acquisitions is expected to be obtained from bank financing and/or private investors. Bank Financing In January 1996, prior to the completed merger described in Note 2, Key, Yale E. Key, Clint Hurt and Old WellTech entered into new separate credit facilities with The C.I.T. Group/Credit Finance, Inc. ("C.I.T.) totaling approximately $35 million (the combined maximum credit limit). As a result of the new separate credit facilities, the interest rate for Yale E. Key was lowered from two and one-half to one and one-quarter percent over the stated prime rate (8.25% at March 31, 1996). In addition, the interest rate for the Old WellTech debt was lowered from an aggregate of three and one-half percent to one and one-quarter percent over the stated prime rate (8.25% at March 31, 1996). Each of the C.I.T. term notes require principal and interest payments, due the first day of each month beginning February 1, 1996, plus a final payment of the unpaid balance of the note due December 31, 1998. The expiration of each of the lines of credit are December 31,1998. The proceeds of the initial borrowings were used to repay substantially all of the debt of Key (other than that of OEI) and Old WellTech. Key believes that such a facility will provide sufficient funds to finance its operating and capital expenditure needs for the foreseeable future. The indebtedness, which is currently being modified to reflect the Welltech merger, will be the obligation of Key and Key's subsidiaries, Yale E. Key, Clint Hurt and WellTech. At March 31, 1996, the Company (on a combined basis) had approximately $2 million in term and credit-line availability. Acquisitions WellTech, Inc. In March 1996, Key acquired, through a merger, Old WellTech. Key was the surviving entity in the merger. Net consideration for the merger was 3,500,000 shares of Key Common Stock and warrants to purchase 500,000 additional shares. In the merger, Old WellTech stockholders received an aggregate of 4,929,962 shares of Key Common Stock and warrants to purchase 750,000 shares of Key Common Stock at $6.75 per share. As part of the merger, 1,429,962 of the 1,635,000 shares of Key Common Stock owned by Old WellTech and previously issued warrants to purchase 250,000 shares of Key Common Stock at $5.00 per share were cancelled. WellTech's principal line of business is oil and gas well servicing and it operates in the Mid-Continent and Northeast areas of the United States and in Argentina. Until November 1995, Old WellTech also conducted certain operations in Russia. On March 26, 1996, Key shareholders approved the merger. The acquisition was accounted for using the purchase method. Odessa Exploration Properties In April of 1996, the Company announced that OEI had agreed to purchase approximately $7.1 million of oil and gas producing properties from two unrelated companies. The properties to be acquired include production in 264 gross (79 net) wells with daily average net production of 240 barrels of oil and 1.5 mmcf of natural gas. The reserves are approximately equally divided between oil and natural gas. Financing for the acquisition is expected to come from bank financing. The acquisition will be accounted for using the purchase method. Clint Hurt Drilling On March 30, 1995, Key and Clint Hurt Associates, Inc. ("CHA") entered into an Asset Purchase Agreement pursuant to which CHA sold to Key all of its assets in West Texas. Such assets mainly consisted of four oil and gas drilling rigs and related equipment. As consideration for the acquisition, Key paid CHA $1,725,000, of which $1,000,000 was paid in cash and the balance in the form of a $725,000 note payable to CHA (the note was paid in full in July 1995). Mr. Clint Hurt entered into consulting and noncompetition agreements with Key in consideration for which Key issued 5,000 shares of Key Common Stock. The acquisition was accounted for using the purchase method and the results of operations of Clint Hurt Drilling have been included in those of Key since April 1, 1995. Impact of SFAS 121 In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 - Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121") regarding the impairment of long-lived assets, identifiable intangibles and goodwill related to those assets. SFAS 121 is effective for financial statements for fiscal years beginning after December 15, 1995, although earlier adoption is encouraged. The application of SFAS 121 will require periodic determination of whether the book value of long-lived assets exceeds the future cash flows expected to result from the use of such assets and, if so, will require reduction of the carrying amount of the "impaired" assets to their estimated fair values. Key estimates that the implementation of SFAS 121 will not have a material effect on Key's financial position. Key will adopt SFAS 121 for the fiscal year beginning July 1, 1996. Impact of Inflation on Operations Although in a complex environment it is extremely difficult to make an accurate assessment of the impact of inflation on Key's operations, management is of the opinion that inflation has not had a significant impact on it business. Cautionary Statement for Purposes of The "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. Key desires to take advantage of the new "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Key's Report on Form 10-Q contains statements which may be considered "forward-looking statements" including statements concerning projections, plans, objectives, future events or performance and underlying assumptions and other statements which are other than statements of historical fact. Key wishes to caution readers that the following important factors, among others, may have affected and could in the future affect Key's actual results and could cause Key's actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of Key: Occurrences affecting the need for, timing and extent of Key's capital expenditures or affecting Key's ability to obtain funds from operations, borrowings or investments to finance needed capital expenditures; Key's ability successfully to identify and finance oil and gas property acquisitions and its ability successfully to operate existing and any subsequently acquired properties; The availability of adequate funds under Key's credit facility to fund operations for the foreseeable future, or if such funds are inadequate, the ability of Key to obtain new or additional financing or to generate adequate funds from operations; Key is highly leveraged due to the substantial indebtedness Key has incurred and Welltech, prior to its merger into Key, had incurred; Key's ability to enter into and retain profitable oilfield servicing and drilling contracts with customers which make timely payments for such services; The demand for oilfield services, drilling services and for oil and gas, and the supply of and demand for drilling and servicing rigs, all of which are subject to fluctuations which could adversely affect Key's operations; Key's ability to integrate the management of and operations of WellTech into the ongoing management and operations of Key; The existence on many competitors in all of Key's operations, many of which have financial and other resources greatly in excess of those available to Key; The amount and rate of growth in Key's general and administrative expense, including, but not limited to, the costs of integrating WellTech's operations into Key.; The effect of regulations and changes in regulations, including environmental regulations with which Key must comply, the cost of such compliance and the potentially material adverse effects if Key were not in substantial compliance either currently or in the future; Key's relationship with its employees and the potential adverse effect if labor disputes or grievances were to occur; Uncertainties related to operations and investments outside the United States; The costs and other effects of legal and administrative cases and proceedings and/or settlements, including but not limited to environmental and workers compensation cases; The effect of changes in accounting policies and practices or of changes in Key's organization, compensation and benefit plan, or of changes in Key's material agreements of understandings with third parties. Key undertakes no obligation to release publicly the result of any revisions to any forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. On March 26, 1996, a meeting of the holders of Common Stock, par value $.10 per share, was held to approve the purchase of WellTech, Inc. and other related matters. Only holders of record as of the close of business on March 16, 1996 were entitled to notice of and to vote at the meeting and at any adjournment thereof. On the Record Date, the outstanding number of shares entitled to vote consisted of 6,914,513 shares of Common Stock. The results of the voting were as follows: For Against Abstain Proposal 1 (WellTech Merger) 4,923,496 (71%) 4,752 * 5,399 * Proposal 2 (Charter Amendment) 4,746,427 (69%) 180,751 (3%) 6,469 * Proposal 3 (Board of Directors)** 4,759,353 (69%) 174,294 (3%) -- Proposal 4 (1995 Stock Option Plan) 4,752,583 (69%) 175,010 (3%) 6,054 * Proposal 5 (Outside Directors Stock Option Plan) 4,884,489 (71%) 36,257 (1%) 12,901 * * Less than 1% ** All Directors received the identical votes. Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are filed as a part of the Form 10-Q: Exhibit Number Item * 1.1 Amendment to Merger Agreement dated as of March 21, 1996 * 3.1 Amended and Restated Articles of Incorporation of Key 3.2 Amended and Restated By-Laws of Key. Incorporated by reference to Amendment No. 2 to Key's Form S-4 Registration Statement (No.333-369). * 4.1 Common Stock Purchase Warrant to purchase Shares of Key Common Stock issued in connection with the merger of WellTech, Inc. ("WellTech") into Key and supplemental information required by Item 601(a)(4) of Regulation S-K. 4.2 Common Stock Purchase Warrant to purchase 75,000 shares of Key Common Stock issued to CIT Group/Credit Finance, Inc. ("CIT") In corporated by reference to Amendment No. 2 to Key's Form S-4 Registration Statement (No. 333-369). * 4.3 Form of Registration Rights Agreement between Key and Certain Holders of Key Common Stock. 4.4 Registration Rights Agreement dated as of January 19, 1996 between Key and CIT. Incorporated by reference to Amendment No. 2 to Key's Form S-4 Registration Statement (No. 333-369). 10.1 Second Amended and Restated Loan Agreement and Security Agreement between Key, Yale E. Key, Inc., Key Energy Drilling, Inc. d/b/a Clint Hurt Drilling ("Clint Hurt") and CIT. Incorporated by reference to Amendment No.2 to Key's Form S-4 Registration Statement (No. 333-369). 10.2 Cross-Guaranty and Cross-Collateralization Agreement between Key, Yale E. Key, Inc., Clint Hurt, Welltech and CIT. Incorporated by reference to Amendment No. 2 to Key's Form S-4 Registration Statement (No. 333-369). 10.3 Key 1995 Stock Option Plan. Incorporated by reference to Amendment No. 2 to Key's Form S-4 Registration Statement (No.333-369). 10.4 Key Outside Directors Stock Option Plan. Incorporated by reference to Amendment No. 2 to Key's Form S-4 Registration Statement (No.333-369). * 11 Statement - Computation of per share earnings * 27(a) Statement - Financial Data Schedule * Filed herewith as part of the Condensed Consolidated Financial Statements. (b) Key filed a report on Form 8-K during the quarter ended March 31, 1996 which was dated March 26, 1996 relating to the consummation of the merger of WellTech with Key. The Form 8-K incorporated by reference the financial statements of WellTech included in Key's Form S-4 Registration Statement (No.333-369) as well as the pro-forma financial information included therein. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KEY ENERGY GROUP, INC. (Registrant) By /s/ Francis D. John_________ President, Chief Executive Officer Dated: May 3, 1996 and Chief Financial Officer By /s/ Danny R. Evatt_________ Dated: May 3, 1996 Vice President and Chief Accounting Officer EX-1.1 2 EXHIBIT 1.1 Exhibit 1.1 Key Energy Group, Inc. 255 Livingston Avenue New Brunswick, New Jersey 08901 As of March 21, 1996 WellTech, Inc. 3535 Briarpark, Suite 200 Houston, Texas 77042 Re: Modification of Agreement and Plan of Merger Ladies and Gentlemen: Reference is hereby made to the Agreement and Plan of Merger between Key Energy Group, Inc. ("Key") and WellTech, Inc. (the "Company"), dated as of November 18, 1995, as amended by Amendment No. 1, dated as of January 18, 1996, and as further amended by Amendment No. 2, dated as of February 29, 1996 (the "Agreement"). Unless otherwise stated herein, capitalized terms shall have the meaning given to them in the Agreement. The purpose of this letter agreement is to modify the Agreement as follows: 1. Section 2.1(d) is amended by substituting the phrase "closing Key share price on the day before the Closing" for the phrase "Key Share Price" in the fifth line thereof. 2. Key and the Company agree that there shall be no third party designated as an "Exchange Agent" under Section 2.2 of the Agreement. All references to an "Exchange Agent" and "Exchange Fund" and provisions relating thereto in the Agreement are hereby deleted. 3. Section 2.2(a) is hereby deleted in its entirety. 4. At the Closing, the Company shall surrender and deliver to Key Certificates evidencing the number of Company Shares held by the shareholders of the Company, and upon receipt of each Certificate, Key shall deliver the Exchange Merger Consideration in accordance with Section 2.1(a) to the holder of such Certificate, it being understood, however, that the failure of the Company to deliver a certificate shall not delay the Closing. In no event shall Key be required to deliver Exchange Merger Consideration to a holder of Company Shares until such holder surrenders his Certificate(s) to Key. WellTech, Inc. As of March 21, 1996 Page 2 5. Except as set forth in this letter agreement, the exchange of Certificates for the Exchange Merger Consideration shall be effectuated in accordance with the Agreement and the Agreement is ratified and confirmed and remains in full force and effect. By executing a copy of this letter and returning it to Key, you will confirm our mutual understanding and agreement set forth above. Very truly yours, KEY ENERGY GROUP, INC. By: ____________________ Francis D. John President Accepted and agreed to as of the date first written above. WELLTECH, INC. By: ________________________ EX-3.1 3 EXHIBIT 3.1 Exhibit 3.1 ARTICLES OF AMENDMENT AND RESTATEMENT OF KEY ENERGY GROUP, INC. Key Energy Group, Inc., a Maryland corporation (the "Corporation"), certifies to the Maryland Department of Assessments and Taxation as follows: (1) The Corporation desires to amend and restate its Articles of Incorporation as are currently in effect in accordance with Section 2-609 of the Maryland General Corporation Law. (2) These Articles of Amendment and Restatement restate, integrate and amend provisions of Articles of Incorporation of the Corporation, as heretofore amended. (3) The Board of Directors of the Corporation, at a meeting held on November __, 1995, unanimously adopted a resolution that these Articles of Amendment and Restatement shall be submitted for shareholder approval as being advisable and in the best interests of the Corporation. (4) The Articles of Amendment and Restatement were duly adopted by shareholders in accordance with Section 2-604 of the Maryland General Corporation Law. (5) The address of the principal office of the Corporation is 257 Livingston Avenue, New Brunswick, New Jersey 08901. (6) The name and the address of the resident agent of the Corporation within the State of Maryland is The Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The Articles of Incorporation are hereby amended and restated to read in their entirety as follows: FIRST: The original Articles of Incorporation of the Corporation were filed with the State Department of Assessments and Taxation of the State of Maryland on April 22, 1977, and the Corporation is duly incorporated under Maryland General Corporation Law. SECOND: The name of the corporation is: Key Energy Group, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Maryland General Corporation Law. FOURTH: The present address of the principal office of the Corporation within the State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. FIFTH: (a) The total number of shares of stock of all classes which the Corporation has authority to issue is Twenty Five Million (25,000,000) shares of capital stock amounting in aggregate par value to $2,500,000. All of such shares are initially classified as "Common Stock" (par value $.10 per share). The Board of Directors may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock, provided, however, that, notwithstanding anything to the contrary in these Articles, no such classification or reclassification shall create a class of stock which shall (i) have more than one vote per share, (ii) be issued in connection with any so-called "shareholder rights plan", "poison pill" or other anti-takeover measure, or (iii) be issued for consideration which is less than fair consideration as determined in good faith by the Corporation's Board of Directors. (b) The following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Common Stock of the Corporation: (1) Each share of Common Stock shall have one vote, and, except as otherwise provided in respect of any class of stock hereafter classified or reclassified, the exclusive voting power for all purposes shall be vested in the holders of the Common Stock. (2) Subject to the provisions of law and any preferences of any class of stock hereafter classified or reclassified, dividends,including dividends payable in shares of another class of the Corporation's stock, may be paid on the Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable. (3) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock shall be entitled to share ratably in the net assets of the Corporation remaining after payment or provision for payment of the debts and other liabilities of the Corporation and the amount to which the holders of any class of stock hereafter classified or reclassified having a preference on distributions in the liquidation, dissolution or winding up of the Corporation shall be entitled, together with the holders of any other class of stock hereafter classified or reclassified having a preference on distributions in the liquidation, dissolution or winding up of the Corporation. (c) Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of capital stock shall include, without limitation, subject to the provisions of these Articles of Amendment and Restatement, as from time to time amended (the "Charter"), authority to classify or reclassify any unissued shares of such stock into a class or classes of preferred stock, preference stock, special stock or other stock, and to divide and classify shares of any class into one or more series of such class, by determining, fixing, or altering one or more of the following: (1) The distinctive designation of such class or series and the number of shares to constitute such class or series; provided, however, that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other class or series shall become part of the authorized capital stock and be subject to classification and reclassification as provided in this sub-paragraph. (2) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating. (3) Whether or not shares of such class or series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights. (4) Whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine. (5) Whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof. (6) The rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock. (7) Whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this sub- paragraph, and, if so, the terms and conditions thereof. (8) Any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with the Maryland General Corporation Law or any other statutory or decisional law of the State of Maryland, now or hereafter in force ("Maryland Law") and the Charter. (d) For the purposes hereof and of any articles supplementary to the Charter providing for the classification or reclassification of any shares of capital stock or of any other charter document of the Corporation (unless otherwise provided in any such articles or document), any class or series of stock of the Corporation shall be deemed to rank: (1) prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series; (2) on a parity with another class or series either as dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such others, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and (3) junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be. (e) Anything in this Article FIFTH to the contrary notwithstanding, in no event shall any shares of capital stock entitle the holder thereof, and the Board of Directors shall have no power or authority to authorize the issue of any shares of capital stock entitling the holder thereof, to more than (1) vote per share. SIXTH: The number of directors of the Corporation shall be five, which number may be increased or decreased pursuant to the By-Laws of the Corporation, but shall never be less than the minimum number permitted by Maryland Law. The names of the directors who will serve until the next annual meeting and until their successors are elected and qualify are as follows: Francis D. John Van D. Greenfield William Manly Morton Wolkowitz D. Kirk Edwards SEVENTH: (a) The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation and of the directors and stockholders. (1) The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of the Corporation's stock of any class, whether now or hereafter authorized, or securities convertible into or exchangeable for, or evidencing the right to purchase or otherwise acquire, shares of the Corporation's stock of any class or classes, whether now or hereafter authorized, for such consideration as may be deemed advisable by the Board of Directors and without any action by the stockholders. (2) No holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe for or purchase any stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of stock or other securities at the time outstanding. (3) The Board of Directors of the Corporation shall, consistent with Maryland Law, have power in its sole discretion to determine from time to time in accordance with sound accounting practice or other reasonable valuation methods what constitutes annual or other net profits, earnings, surplus or net assets in excess of capital; to fix and vary from time to time the amount to be reserved as working capital, or determine that retained earnings or surplus shall remain in the hands of the Corporation; to set apart out of any funds of the Corporation such reserve or reserves in such amount or amounts and for such proper purpose or purposes as it shall determine and to abolish any such reserve or any part thereof; to distribute and pay distributions or dividends in stock, cash or other securities or property, out of surplus or any other funds or amounts legally available therefor, at such times and to the stockholders of record on such dates as it may, from time to time, determine; and to determine whether and to what extent and at what times and places and under and subject to what conditions and regulations the books, accounts and documents of the Corporation, or any of them, shall be open to the inspection of stockholders, except as otherwise provided by law or by the By-Laws, and, except as so provided, no stockholder shall have any right to inspect any book, account or document of the Corporation unless authorized so to do by resolution of the Board of Director. (4) Notwithstanding any provision of Maryland Law requiring the authorization of any action by a greater proportion than a majority of the total number of shares of all classes of capital stock or of the total number of shares of any class of capital stock, such action shall be valid and effective if authorized by the affirmative vote of the holders of a majority of the total number of shares of all classes outstanding and entitled to vote thereon, except as provided in the Charter. (5) The Corporation shall indemnify (A) its directors and officers, whether serving the Corporation or at its request any other entity, to the full extent required or permitted by the Maryland Law, including the advance of expenses under the procedures and to the full extent permitted by law and (B) other employees and agents to such extent as shall be authorized by the Board of Directors or the Corporation's By-Laws and be permitted by law. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such by-laws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by Maryland Law. (6) No director or officer of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or an officer, except to the extent that exculpation from liability is not permitted under Maryland Law as in effect when such breach occurred. No amendment of the Charter or repeal of any of its provisions shall limit or eliminate the limitations on liability provided to directors and officers hereunder with respect to acts or omissions occurring prior to such amendment or repeal. (7) The power to adopt, alter and repeal the By-Laws of the Corporation shall be vested in the Board of Directors of the Corporation, subject to the rights of stockholders to adopt, alter and repeal the By-Laws of the Corporation. (8) The Corporation reserves the right from time to time to make any amendments to the Charter which may now or hereafter be authorized by Maryland Law, including any amendments changing the terms or contract rights, as expressly set forth in any of the Corporation's outstanding stock by classification, reclassification or otherwise. (b) The enumeration and definition of particular powers of the Board of Directors included in the foregoing shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of the Charter, or construed as or by inference or otherwise in any manner to exclude or limit any powers conferred upon the Board of Directors under Maryland Law. EIGHTH: The duration of the Corporation shall be perpetual. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its President and witnessed by its Secretary on __________, 1995. - ------------------------------ _________________________________ Diane Mack, Secretary Francis D. John, President THE UNDERSIGNED, President of Key Energy Group, Inc., who executed on behalf of the Corporation Articles of Amendment and Restatement, hereby acknowledges in the name and on behalf of said Corporation that the foregoing Articles of Amendment and Restatement are to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to authorization and approval thereof are true in all material respects under the penalties of perjury. ------------------------------------- Francis D. John, President EX-4.1 4 EXHIBIT 4.1 Exhibit 4.1 THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION HEREOF OR OF THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE HEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS THEREUNDER. NEITHER THIS WARRANT NOR THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR UPON RECEIPT BY THE COMPANY OF AN OPINION SATISFACTORY AS TO FORM, SCOPE AND SUBSTANCE OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO AN EXEMPTION THEREFROM. Common Stock Purchase Warrant 67,910 As of March 28, 1996 [Number of Shares] KEY ENERGY GROUP, INC., a Maryland corporation (the "Company"), for value received, hereby certifies that HUDD & CO., or registered assigns, is entitled to purchase, except to the extent hereinafter referred to, from the Company 67,910 duly authorized, validly issued, fully paid and nonassessable shares (the "Warrant Shares") of Common Stock, par value $.10 per share (the "Common Stock"), of the Company at the purchase price per share of $6.75 (the "Exercise Price"), at any time or from time to time prior to 5:00 P.M., Boston, Massachusetts time, on March 28, 2001 (the "Expiration Date"), all subject to the terms and conditions set forth below in this Warrant. This Warrant (this "Warrant" and, together with any such warrants issued in substitution therefor or issued pursuant to the Asset Purchase Agreement, the "Warrants") referred to in the Agreement and Plan of Merger dated as of November 18, 1995 (as from time to time in effect, the "Asset Purchase Agreement") between the Company and WellTech, Inc. SECTION 1. Registration. The Company shall number and register this Warrant (and any other warrants issued in substitution herefor) in a register as they are issued. The Company may deem and treat the registered holders of the Warrants as the absolute owners thereof (notwithstanding any notation of ownership or other writing thereon made by anyone) for all purposes and shall not be affected by any notice to the contrary. Notwithstanding the foregoing, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued. SECTION 2. Registration of Transfer and Exchanges. The Company shall from time to time register the transfer of the Warrants in a Warrant register to be maintained by the Company upon surrender thereof accompanied by a written instrument or instruments of transfer in form reasonably satisfactory to the Company, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney and upon receipt of any applicable transfer taxes or evidence satisfactory to the Company that no such tax is due. Upon any such registration of transfer, a new Warrant shall be issued to the transferee(s) and the surrendered Warrant shall be canceled and disposed of by the Company. If such a transfer is not made pursuant to an effective Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), the Warrant holder will, if requested by the Company, deliver to the Company an opinion of counsel, which counsel and opinion shall be satisfactory in form, scope and substance to the Company, that the Warrants may be sold publicly without registration under the Securities Act, as well as: (a) an investment covenant satisfactory to the Company signed by the proposed transferee; (b) an agreement by such transferee to the impression of the restrictive investment legend set forth at the beginning of this Warrant; and (c) an agreement by such transferee to be bound by the provisions of this Warrant. This Warrant may be exchanged at the option of the holder(s) hereof, when surrendered to the Company at its office designated for such purpose (the address of which is set forth in Section 8) for another Warrant or other Warrants of like tenor and representing in the aggregate a like number of Warrants, including, without limitation, upon an adjustment in the number of Warrant Shares purchasable upon exercise of this Warrant. Warrants surrendered for exchange shall be canceled and disposed of by the Company. SECTION 3. Warrants: Exercise of Warrants. Subject to the terms of this Warrant, the holder of this Warrants shall have the right, which may be exercised at any time prior to the Expiration Date, to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on such exercise and payment of the Exercise Price then in effect for such Warrant Shares. No adjustments as to dividends will be made upon exercise of the Warrants. This Warrant may be exercised upon surrender hereof to the Company at its office designated for such purpose (the address of which is set forth in Section 8) with the form of election to purchase attached hereto duly filled in and signed, upon payment to the Company of the Exercise Price per Warrant Share, for the number of Warrant Shares in respect of which this Warrant is then exercised. Payment of the aggregate Exercise Price shall be made (a) in cash or by certified or bank cashier's check payable to the order of the Company, or (b) by delivery to the Company of that number of shares of Common Stock having a Fair Market Value (as hereinafter defined) equal to the then applicable Exercise Price multiplied by the number of Warrant Shares then being purchased. In the alternative, this Warrant may be exercised on a net basis, such that, without the exchange of any funds, the holder of this Warrant receives that number of Warrant Shares subscribed to less that number of shares of Common Stock having an aggregate Fair Market Value at the time of exercise equal to the aggregate Exercise Price that would otherwise have been paid by such holder for the number of Warrant Shares subscribed to. As used herein the term "Fair Market Value", on a per share basis, means the Closing Price of the Common Stock on the Date of Exercise. As used herein, the term "Date of Exercise" with respect to any Warrant means the date on which such Warrant is exercised as provided herein. For purposes of this Warrant, the "Closing Price" for any date shall mean the last sale price reported in the Wall Street Journal or other trade publication regular way or, in case no such reported sale takes place on such date, the average of the last reported bid and asked prices regular way, in either case on the principal national securities exchange on which the Common Stock is admitted to trading on any national securities exchange or if such national securities exchange is not the principal market for the Common Stock, the last sale price as reported by the National Association of Securities Dealers, Inc. Automated National Market System ("NASDAQ") or its successor, if any, or if the Common Stock is not so reported, the average of the reported bid and asked prices in the over-the-counter market, as furnished by the National Quotation Bureau, Inc., or if such firm is not then engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business and selected by the Company or, if there is no such firm, as furnished by any NASD member selected by the Company or, if the Common Stock is not quoted in the over-the-counter market, the fair value thereof determined in good faith by the Company's Board of Directors as of a date which is within fifteen (15) days of the date as of which the determination is to be made. Subject to the provisions of Section 4, upon such surrender of this Warrant and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch (and in any event within three (3) business days) to or upon the written order of the holder, and in the name of this Warrant holder or its nominee, a certificate or certificates for the number of full Warrant Shares issuable upon such exercise together with such other property (including cash) and securities as may be then deliverable upon such exercise. Such certificate or certificates shall be deemed to have been issued and the person so named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of this Warrant and payment of the Exercise Price. This Warrant shall be exercisable, at the election of the holder hereof, either in full or from time to time in part, and, in the event that this Warrant is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the Expiration Date, a new Warrant evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section and of Section 4. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Exercise Price on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. All Warrants surrendered upon exercise shall be canceled and disposed of by the Company. The Company shall keep copies of this Warrant and any notices received hereunder available for inspection by the normal business hours at its office. SECTION 4. Payment of Taxes. The Company will pay all stamp taxes in connection with the issuance, sale, delivery or transfer of the Warrants, as well as all such taxes attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant and payment of the Exercise Price. SECTION 5. Mutilated or Missing Warrants. In case any of the Warrants shall be mutilated, lost, stolen or destroyed, upon delivery of an indemnity agreement or security satisfactory to the Company in form, scope, substance and amount, the Company shall issue, in exchange and substitution for and upon cancellation of the mutilated Warrants or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent number of Warrants . SECTION 6. Reservation of Warrant Shares. The Company will at all times reserve and keep available, free from preemptive or similar rights, out of the aggregate of its authorized but unissued capital stock or its authorized and issued capital stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of each class of capital stock constituting a part of the Warrant Shares which may then be deliverable upon the exercise of all outstanding Warrants. The Company shall cause all Warrant Shares of each class of Common Stock or ther securities reserved for issuance upon exercise of the Warrants to be listed (or to be listed subject to notice of issuance) on each securities exchange on which such shares of Common Stock or any such other securities are listed. The Company or, if appointed, the transfer agent for shares of each class of Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Warrant on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each holder pursuant to Section 7. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon payment of the Exercise Price therefor and issue, be validly issued, fully paid, nonassessable, free of preemptive or similar rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 7. Adjustments, Notices and Other Events. (a) Adjustment of Exercise Price. Subject to the provisions of this Section 7, the Exercise Price in effect from time to time shall be subject to adjustment, as follows: (i) In case the Company shall (x) declare a dividend or make a distribution on the outstanding shares of its Common Stock in shares of its Common Stock, (y) subdivide or reclassify the outstanding shares of its Common Stock into a greater number of shares, or (z) combine or reclassify the outstanding shares of its Common Stock into a smaller number of shares, the Exercise Price in effect immediately after the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, of which (A) the numerator shall be the number of shares of Common Stock outstanding immediately before such dividend, distribution, subdivision, combination or reclassification, and of which (B) the denominator shall be the number of shares of Common Stock outstanding immediately after such dividend, distribution, subdivision, combination or reclassification. Any shares of Common Stock of the Company issuable in payment of a dividend shall be deemed to have been issued immediately prior to the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock of the Company under Section 7(a)(ii) and 7(a)(iii) hereof. Such adjustment shall be made successively whether any event specified above shall occur. (ii) In case the Company shall fix a record date for the issuance of rights, options, warrants or convertible or exchangeable securities to all holders of its Common Stock entitling them (for a period expiring within forty-five (45) days after such record date) to subscribe for or purchase shares of its Common Stock at a price per share less than the Current Market Price (as such term is defined in Section 7(a)(iv) hereof) of a share of Common Stock of the Company on such record date, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, of which (A) the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the Current Market Price per share, and of which (B) the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such rights, options, warrants or convertible or exchangeable securities are not so issued or expire unexercised, the Exercise Price then in effect shall be readjusted to the Exercise Price which would then be in effect if such unissued or unexercised rights, options, warrants or convertible or exchangeable securities had not been issuable. (iii) In case the Company shall fix a record date for the making of a distribution to all holders of shares of its Common Stock (A) of shares of any class other than its Common Stock or (B) of evidences of its indebtedness or (C) of assets (excluding cash dividends or distributions (other than extraordinary cash dividends or distributions), and dividends or distributions referred to in Subsection 7(a)(i) hereof) or (D) of rights, options, warrants or convertible or exchangeable securities (excluding those rights, options, warrants or convertible or exchangeable securities referred to in Section 7(a)(ii) hereof), then in each such case the Exercise Price in effect immediately thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, of which (x) the numerator shall be the total number of shares of Common Stock outstanding on such record date multiplied by the Current Market Price (as such term is defined in Section 7(a)(iv) hereof) per share on such record date, less the aggregate fair market value as determined in good faith by the Board of Directors of the Company of said shares or evidences of indebtedness or assets or rights, options, warrants or convertible or exchangeable securities so distributed, and of which (y) the denominator shall be the total number of shares of Common Stock outstanding on such record date multiplied by such Current Market Price per share. Such adjustment shall be made successively whenever such a record date is fixed. In the event that such distribution is not so made, the Exercise Price then in effect shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed. (iv) For the purpose of any computation under Section 7(a)(ii) or 7(a)(iii) hereof, the "Current Market Price" per share at any date (the "Computation Date") shall be deemed to be the average of the daily Closing Prices of the Common Stock for twenty (20) consecutive Trading Days ending the Trading Day immediately preceding the Computation Date; provided, however, that if there shall have occurred prior to the Computation Date any event described in Subsection 7(a)(i), 7(a)(ii) or 7(a)(iii) which shall have become effective with respect to market transactions at any time (the "Market-Effect Date") on or within such 20-day period, the Closing Price for each Trading Day preceding the Market-Effect Date shall be adjusted, for purposes of calculating such average, by multiplying such Closing Price by a fraction, of which (A) the numerator shall be the Exercise Price as in effect immediately prior to the Computation Date and of which (B) the denominator shall be the Exercise Price as in effect immediately prior to the Market-Effect Date, it being understood that the purpose of this proviso is to ensure that the effect of such event on the market price of the Common Stock shall, as nearly as possible, be eliminated in order that the distortion in the calculation of the Current Market Price may be minimized. (b) No Adjustments to Exercise Price. No adjustment in the Exercise Price in accordance with the provisions of Section 7(a)(i), 7(a)(ii) or 7(a)(iii) hereof need be made unless such adjustment would amount to a change of at least 1% in such Exercise Price; provided, however, that the amount by which any adjustment is not made by reason of the provisions of this Section 7(b) shall be carried forward and taken into account at the time of any subsequent adjustment in the Exercise Price. (c) Adjustment of Number of Shares. Upon each adjustment of the Exercise Price pursuant to Section 7(a)(i), 7(a)(ii) or 7(a)(iii) hereof, each Warrant shall thereupon evidence the right to purchase that number of Warrant Shares (calculated to the nearest hundredth of a share) obtained by multiplying the Exercise Price in effect immediately prior to the adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product so obtained by the Exercise Price in effect immediately after such adjustment. (d) Reorganizations. In case of any capital reorganization, other than in the cases referred to in Section 7(a) hereof, or the consolidation or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding shares of Common Stock or the conversion of such outstanding shares of Common Stock into shares of other stock or other securities or property), or the sale or conveyance of the property of the Company as an entirety or substantially as an entirety (collectively such actions being hereinafter referred to as "Reorganizations"), there shall thereafter be deliverable upon exercise of any Warrant (in lieu of the number of Warrant Shares theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of Warrant Shares which would otherwise have been deliverable upon the exercise of such Warrant would have been entitled upon such Reorganization if such Warrant had been exercised in full immediately prior to such Reorganization. In case of any Reorganization, appropriate adjustment, as determined in good faith by the Board of Directors of the Company, shall be made in the application of the provisions herein set forth with respect to the rights and interests of the holder of this Warrant so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares or other property thereafter deliverable upon exercise of the Warrants. Any such adjustments shall be made by and set forth in a supplemental agreement prepared by the Company or any successor thereto, between the Company, or any successor thereto, and shall for all purposes hereof conclusively be deemed to be an appropriate adjustment. The Company shall not effect any such Reorganization, unless upon or prior to the consummation thereof the successor corporation, or if the Company shall be the surviving corporation in any such Reorganization and is not the issuer of the shares of stock or other securities or property to be delivered to holders of shares of the Common Stock outstanding at the effective time thereof, then such issuer, shall assume by written instrument the obligation to deliver to the holder of any Warrants such shares of stock, securities, cash or other property as such holder shall be entitled to purchase in accordance with the foregoing provisions. (e) Verification of Computation. The Company shall select a firm of independent accountants, which selection (i) may be its regular firm of independent accountants and (ii) may be changed from time to time, to verify each computation and/or adjustment made in accordance with this Section 7. The certificate, report or other written statement of any such firm shall be conclusive evidence of the correctness of any computation made under this Section 7. Promptly upon its receipt of such certificate, report or statement from such firm of independent accountants, the Company shall deliver a copy thereof to the holder of this Warrant. (f) Notice of Certain Actions. In the event the Company shall: (i) declare any dividend payable in stock to the holders of its Common Stock or make any other distribution in property other than cash to the holders of its Common Stock; or (ii) offer to the holders of its Common Stock rights to subscribe for or purchase any shares of any class of stock or any other rights or options; or (iii) effect any reclassification of its Common Stock (other than a reclassification involving merely the subdivision or combination of outstanding shares of Common Stock) or any capital reorganization or any consolidation or merger (other than a merger in which no distribution of securities or other property is made to holders of Common Stock), or any sale, transfer or other disposition of its property, assets and business substantially as an entirety, or the liquidation, dissolution or winding up of the Company; then in each such case, the Company shall cause notice of such proposed action to be mailed to the holder of this Warrant as hereinafter set forth in this Section 7(f). Such notice shall specify the date on which the books of the Company shall close, or a record be taken, for determining the holders of Common Stock entitled to receive such stock dividend or other distribution or such rights or options, or the date on which such reclassification, reorganization, consolidation, merger, sale, transfer, other disposition, liquidation, dissolution, winding up or exchange shall take place or commence, as the case may be, and the date as of which it is expected that holders of record of Common Stock shall be entitled to receive securities or other property deliverable upon such action, if any such date has been fixed. Such notice shall be mailed in the case of any action covered by paragraph (i) or (ii) of this Section 7(f), at least ten (10) days prior to the record date for determining holders of the Common Stock for purposes of receiving such payment or offer, and, in the case of any action covered by paragraph (iii), at least ten (10) days prior to the earlier of the date upon which such action is to take place or any record date to determine holders of Common Stock entitled to receive such securities or other property. (g) Certificate of Adjustments. Whenever any adjustment is to be made pursuant to this Section 7, the Company shall prepare a Certificate executed by the Chief Financial Officer of the Company, setting forth such adjustment to be mailed to the holder of this Warrant at least fifteen (15) days prior thereto, such notice to include in reasonable detail (i) the events precipitating the adjustment, (ii) the computation of any adjustments, and (iii) the Exercise Price and the number of shares or the securities or othe property purchasable upon exercise of each Warrant after giving effect to such adjustment. Such Certificate shall be accompanied by the accountant's verification required by Section 7(e) hereof. SECTION 8. Notices. Any notice or demand authorized by the Warrants to be given or made by the registered holder of any Warrant to or on the Company shall be sufficiently given or made when received at the office of the Company expressly designated by the Company at its office for purposes of the Warrants (until Warrant holders are otherwise notified in accordance with this Section by the Company), as follows: Key Energy Group, Inc. 255 Livingston Avenue New Brunswick, NJ 08901 Attention: Francis D. John, President Any notice pursuant to the Warrants to be given by the Company to the registered holder(s) of any Warrant shall be sufficiently given when received by such holder at the address appearing on the Warrant register of the Company (until the Company is otherwise notified in accordance with this Section by such holder). SECTION 9. Cash Distributions and Dividends. If the Company pays a dividend or makes a distribution to the holders of its Common Stock of any securities (other than Common Stock) or property (including cash and securities of other companies) of the Company, or any rights, options or warrants to purchase securities (other than Common Stock) or property (including securities of other companies) of the Company, then, simultaneously with the payment of such dividend or the making of such distribution, and as a condition precedent to its right to do so, the Company will pay or distribute to the holders of the Warrants an amount of property (including without limitation cash) and/or securities (including without limitation securities of other companies) of the Company as would have been received by such holders had they exercised (whether or not the Warrants were then exercisable) all of the Warrants immediately prior to the record date (or other applicable date) used for determining stockholders of the Company entitled to receive such dividend or distribution. SECTION 10. No Rights or Liabilities as Stockholder; Information. Nothing contained in this Warrant shall be construed as conferring upon the holder hereof the right to vote or to consent as stockholders in respect of the meetings of stockholders or the election of members of the Board of Directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company or as imposing any obligation on such holder to purchase any securities or as imposing any liabilities on such holder as a stockholder sf the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. Notwithstanding the foregoing, the Company will furnish to each holder of any Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its stockholders or otherwise filed pursuant to the provisions of the Securities Act or the Securities Exchange Act of 1934, as amended. The Company shall give to each Warrant holder written notice of any determination to register any of its Common Stock at the same time that it gives notice to any holder of securities of the Company entitled to rights to register securities under the Securities Act. SECTION 11. Amendment and Modification; Waiver. This Warrant may not be amended or modified except by a written instrument signed by the Company and the registered holder of this Warrant at the time such amendment or modification is sought. Any waiver of any term or condition of this Warrant in any one instance shall not operate as or be deemed to be or construed as a further or continuing waiver of such term or condition, nor shall any failure at any time or times to enforce or require performance of any provision hereof operate as a waiver of or affect in any manner any party's right at a later time to enforce or require performance of such provision or any other provision hereof. SECTION 12. Severability. If any provision of this Warrant shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy, or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or if rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Warrant shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision were formed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case. SECTION 13. Successors. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Warrant holder shall bind and inure to the benefit of their respective successors and assigns. SECTION 14. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles or conflicts of laws. SECTION 15. Headings. The headings contained in this Warrant are inserted for convenience only and shall not constitute a part hereof. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by the signature of its duly authorized officer and the corporate seal hereunto affixed. KEY ENERGY GROUP, INC. By:_____________________ [Seal] Francis D. John, President FORM OF ELECTION TO PURCHASE (To Be Executed Upon Exercise of Warrant) The undersigned holder hereby represents that he, she or it is the registered holder of this Warrant, and hereby irrevocably elects to exercise the right, represented by this Warrant, to receive shares of Common Stock, $.10 par value, of KEY ENERGY GROUP, INC., and herewith tenders payment for such shares, to the order of KEY ENERGY GROUP, INC., the amount of $_____________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of the undersigned or nominee hereinafter set forth, and further that such certificate be delivered to the undersigned at the address hereinafter set forth or to such other person or entity as is hereinafter set forth. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such shares be registered in the name of the undersigned or nominee hereinafter set forth, and further that such certificate be delivered to the undersigned at the address hereinafter set forth or to such other person or entity as is hereinafter set forth. Certificate to be registered as follows: Certificate to be delivered as follows: Date:_________________________ ______________________________________ (Signature must conform in all respects to the name of the holder as specified on the face of the Warrant, unless Form of Assignment has been executed) FORM OF ASSIGNMENT [To be executed upon Transfer of Warrant] For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the right represented by such Warrant to purchase ________ shares of Common Stock of KEY ENERGY GROUP, INC. (the "Company") to which such Warrant relates, and appoints its Attorney to make such transfer on the books of the Company maintained for such purpose, with full power of substitution in the premises. ------------------------------------ (Signature must conform in all respects to name of holder as specified on the face of Warrant) ------------------------------------- (Street Address) ------------------------------------ (City), (State) (Zip Code) Exhibit 4.1 The following table shows the Warrants which were issued by Key simultaneously with the Warrant included as Exhibit 4.1. The only differences are the identities of the holders of the Warrants and the number of shares of Key Common Stock to which the Warrants relate. Number of Shares of Key Common Stock Identity of Warrant Holder to which Warrant Relates Goldman Sachs & Co. 50,205 Dol & Co. 351,436 Kristin Morsman 1,062 Ingrid Morsman 2,513 Emily Appleton 1,910 Natalie B. Thompson, Defined Benefit Pension Plan, 2,448 FBO Natalie B. Thompson American Oil and Gas Corporation 11,175 I.A. O'Shaughnessy Trust, FBO Gerald E 3,710 O'Shaughnessy, O'S Holding, Inc., Trustee Whitney Morsman 1,062 Gerald E. O'Shaughnessy 1976 Family Trust, FBO 11,130 The O'Shaughnessy Children, Stephen M O'Shaughnessy, Trustee L.G. O'Shaughnessy Trust, FBO Gerald E 3,710 O'Shaughnessy, O'S Holding, Inc., Trustee Sabine Ruhfus 7,420 Rolf E. Ruhfus 7,420 Patrick E. O'Shaughnessy 3,710 Stephen B. Aycock 2,441 William Herbert Hunt Trust Estate, d/b/a Horizontal 11,623 Rentals, J.W. Beavers, Jr., Trustee CCF/WellTech, L.P. 60,010 Jupiter Management Company, Inc. 8,461 Duane O. Nelson and Alice Lynn Nelson 922 Susan McAvoy 21 Arik Y. Prawer 357 Roughneck Partners II, L.P. 9,381 Cudd & Co. 20,743 Neptune Partners--1989A, L.P. 33,679 Neptune 1989 Investors Limited 22,053 Neptune 1989C Offshore Investors Limited 23,616 Roughneck Partners, L.P. 29,860 EX-4.3 5 EXHIBIT 4.3 Exhibit 4.3 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of January 19, 1996, by and between Key Energy Group, Inc., a Maryland corporation (the "Company"), and the Holder (as hereinafter defined) executing the signature page hereto. This Agreement is contemplated by that certain Secured Amended and Restated Loan and Security Agreement dated as of January 19, 1996 (the "Agreement") by and between the Company and The CIT Group/Credit Finance, Inc. ("CIT"). The parties hereby agree as follows: Section 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Advice" has the meaning set forth in Section 5. "Affiliate" means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such specified Person. "Business Day" means any day other than a day on which banks are authorized or required to be closed in the State of New York. "Closing Date" means the closing date as defined in that certain Agreement and Plan of Merger, dated as of November 18, 1995, by and between the Company and WellTech, Inc. (the "Merger Agreement"). "Commission" means the Securities and Exchange Commission. "Common Stock" means the common stock, par value $.10 per share, of the Company. "Company" has the meaning set forth in the preamble and shall include the Company's successors by merger, acquisition, reorganization or otherwise. "Controlling Persons" has the meaning set forth in Section 8(a). "Demand Registration" has the meaning set forth in Section 2(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. "Holder" means the holder of record of Registrable Securities. "Inspectors" has the meaning set forth in Section 4(m). "Lock-up Request" has the meaning set forth in Section 10. "NASD" has the meaning set forth in Section 4(q). "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "Piggy-Back Registration" has the meaning set forth in Section 3(a). "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to the prospectus, including post-effective amendments, and in each case including all material incorporated by reference or deemed to be incorporated by reference in such prospectus. "Records" has the meaning set forth in Section 4(m). "Registrable Securities" means, collectively, the Common Stock to be issued upon exercise of the Warrant (as hereafter defined) until such time as (i) a Registration Statement covering such Registrable Securities has been declared effective and such Registrable Securities have been disposed of pursuant to such effective Registration Statement, (ii) such Registrable Securities are transferred to any Person other than a Holder pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the Securities Act, including a sale pursuant to the provisions of Rule 144(k), or (iii) such Registrable Securities shall cease to be outstanding. "Registration Expenses" has the meaning set forth in Section 7. "Registration Statement" means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement (including any Shelf Registration Statement), and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144A" has the meaning set forth in Section 9(b). "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. "Shelf Registration" has the meaning set forth in Section 2(a). "Shelf Registration Statement" has the meaning set forth in Section 2(a). "Suspension Notice" has the meaning set forth in Section 5. "Target Effective Period" has the meaning set forth in Section 2(a). "Warrant" mean the warrant to purchase up to 75,000 shares of Common Stock held by CIT. Section 2. Shelf Registration. (a) Filing: Effectiveness. (i) If, as of the Closing Date, a shelf registration statement (the "Shelf Registration Statement") on the appropriate form for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (or such successor rule or similar provision then in effect) covering all of the Registrable Securities (a "Shelf Registration") is not effective or the effectiveness thereof has been suspended, or (ii) if the Closing Date has not occurred by June 30, 1995 and the Holder requests the Company to do so then the Company shall use its reasonable business efforts to cause such Shelf Registration Statement to be effective as soon as practicable. Once the Shelf Registration Statement is effective, the Company shall use its reasonable business efforts to keep such Shelf Registration Statement continuously effective for a period (the "Target Effective Period") ending with the earlier of (x) the sale of all Registrable Securities and (y) 24 months following the Closing Date or, if later, the date on which such Shelf Registration Statement is declared effective. The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by the registration form used by the Company for such Shelf Registration Statement or by the instructions applicable to such registration form or by the Securities Act or as reasonably requested (which request shall result in the filing of a supplement or amendment) by a Holder of Registrable Securities to which such Shelf Registration Statement relates (but only to the extent that such request by such Holder relates to information with respect to such Holder), and the Company agrees to furnish the Holder, Holders' counsel and any managing underwriter copies of any such supplement or amendment prior to its being used and/or filed with the Commission. The Holder shall be permitted to withdraw all or any part of the Registrable Securities from a Shelf Registration Statement (i) at any time prior to the effective date of such Shelf Registration Statement and (ii) in the event that on or after the effective date of such Shelf Registration Statement the Holder receives a Lock-up Request and such withdrawing Holder elects to exercise its rights to a Piggy-Back Registration pursuant to Section 3 hereof. The Company further agrees that if during the Target Effective Period, the Holder has not sold all Registrable Securities, then upon demand made by the Holder at any time within three years after the expiration of the Target Effective Period, the Company shall promptly file a registration statement on the appropriate form for an offering to be made by the Holder of all of the Registrable Securities then held by Holder (the "Demand Registration") and shall use reasonable business efforts to have such registration statement declared effective provided, however, that: (i) the Demand Registration need not be a Shelf Registration; (ii) the Holder shall be entitled to only one Demand Registration during said three year period; and (iii) the Holder's right to such Demand Registration shall terminate upon the first to occur of (y) expiration of such three year period of (z) sale of such Registrable Securities by the Holder. (b) Effective Registration. A registration will not be deemed to have been effected as a Shelf Registration or a Demand Registration unless the Shelf Registration Statement or Registration Statement filed upon demand, as the case may be, with respect thereto has been declared effective by the Commission and the Company has complied in all material respects with its obligations under this Agreement with respect thereto. If a Shelf Registration or Demand Registration is deemed not to have been effected, then the Company shall continue to be obligated to effect a Shelf Registration or a Demand Registration, as the case may be, pursuant to this Section 2. Section 3. Piggy-Back Registration. (a) Request for Registration. Each time the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any of its security holders of any class of equity security (other than (i) a registration statement on Form S-4 or S-8 (or any substitute form that is adopted by the Commission) or (ii) a registration statement filed in connection with an exchange offer or offering of securities solely to the Company's existing security holders), and the form of registration statement to be used permits the registration of Registrable Securities, then the Company shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event less than 20 days before the anticipated effective date), and such notice shall offer such Holders the opportunity to register such Registrable Securities as each such Holder may request (which request shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof) within 10 days after the date such notice is received by such Holder from the Company (a "Piggy-Back Registration"). The Company shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company or any other security holder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 3 by giving written notice to the Company of such withdrawal no later than five days prior to the anticipated effective date. The Company may withdraw a Piggy-Back Registration at any time prior to the time it becomes effective, provided that the Company shall give prompt notice of such withdrawal to the Holders of Registrable Securities requested to be included in such Piggy-Back Registration. (b) Reduction of Offering. If the managing underwriter or underwriters of an underwritten offering with respect to which Piggy-Back Registration has been requested as provided in Section 3(a) shall have informed the Company, in writing, that in the opinion of such underwriter or underwriters the total number of shares which the Company, Holders of Registrable Securities and any other Persons participating in such registration intend to include in such offering is such as to materially and adversely affect the success of such offering (including without limitation any material decrease in the proposed public offering price), then the number of shares to be offered for the account of all Persons (other than the Company) participating in such registration shall be reduced or limited (to zero if necessary) pro rata in proportion to the respective number of shares requested to be registered by such Persons to the extent necessary to reduce the total number of shares requested to be included in such offering to the number of shares, if any, recommended by such managing underwriter or underwriters. No registration effected under this Section 3, and no failure to effect a registration under this Section 3 shall relieve the Company of its obligation to effect a Shelf Registration or a Demand Registration pursuant to Section 2. No failure to effect a registration under this Section 3 and to complete the sale of Registrable Securities in connection therewith shall relieve the Company of any other obligation under this Agreement, including without limitation, the Company' s obligations under Sections 7 and 8. Section 4. Registration Procedures. In connection with the obligations of the Company to effect or cause the registration of any Registrable Securities pursuant to the terms and conditions of this Agreement, the Company shall use its reasonable business efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of distribution thereof as quickly as practicable, and in connection therewith: (a) The Company shall prepare and file with the Commission a Registration Statement on the appropriate form under the Securities Act, which form shall comply as to form in all materials respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith, and use its reasonable business efforts to cause such Registration Statement to become effective and remain effective in accordance with the provisions of this Agreement. (b) The Company shall promptly prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for as long as such registration is required to remain effective pursuant to the terms hereof; shall cause the Prospectus to be supplemented by any required Prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and shall comply with the provisions of the Securities Act applicable to it with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders set forth in such Registration Statement or supplement to the Prospectus; (c) The Company shall promptly furnish to any Holder and the underwriters, if any, without charge, such number of conformed copies of each Registration Statement and any post-effective amendment thereto and such number of copies of the Prospectus (including each preliminary Prospectus) and any amendments or supplements thereto, any documents incorporated by reference therein and such other documents as such Holder or underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities being sold by such Holder. (d) The Company shall, on or prior to the date on which a Registration Statement is declared effective, (i) use its reasonable business efforts to register or qualify the Registrable Securities covered by such Registration Statement under such other securities or "blue sky" laws of such states of the United States as any Holder or underwriter requests; (ii) do any and all other acts and things which may be necessary or advisable to enable such Holder to consummate the disposition of such Registrable Securities owned by such Holder; (iii) use its reasonable business efforts to keep each such registration or qualification (or exemption therefrom) effective during the period which the Registration Statement is required to be kept effective in accordance with the provisions of this Agreement; and (iv) do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities; provided, however, that the Company shall not be required (x) to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(d), (y) to file any general consent to service of process, or (z) to subject itself to taxation in any jurisdiction where it would not otherwise be subject to taxation. (e) The Company shall cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Holders to consummate the disposition of such Registrable Securities. (f) The Company shall promptly notify each Holder, Holders' counsel and any underwriter in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the issuance by any state securities commission or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Registrable Securities under state securities or "blue sky" laws or the initiation of any proceedings for that purpose, (v) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, and (vi) of the happening of any event which makes any statement made in a Registration Statement or related Prospectus untrue or which requires the making of any changes in such Registration Statement or Prospectus so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Immediately following expiration of any Suspension Period, the Company shall prepare and file with the Commission and furnish a supplement or amendment to such Prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (g) The Company shall make generally available to the Holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 45 days (90 days in the event it relates to a fiscal year) after the end of the 12-month period beginning with the first day of the Company's first fiscal quarter commencing after the effective date of a Registration Statement, which earnings statement shall cover said 12-month period, and which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act. (h) The Company shall promptly use its reasonable business efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement, and if one is issued use its reasonable business efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment. (i) The Company shall, if requested by the managing underwriter or underwriters, if any, Holders' counsel, or any Holder promptly incorporate in a Prospectus supplement or post-effective amendment such information as such managing underwriter or underwriters reasonably requests, or Holders' counsel reasonably requests, to be included therein, including, without limitation, with respect to the Registrable Securities being sold by such Holder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an underwritten offering of the Registrable Securities to be sold in such offering, and promptly make all required filings of such Prospectus supplement or post-effective amendment. (j) The Company shall, as promptly as practicable after filing with the Commission any document which is incorporated by reference into a Registration Statement (in the form in which it was incorporated), deliver a copy of each such document to each of the Holders and to Holders' counsel. (k) The Company shall cooperate with the Holders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends unless required under applicable law) representing securities sold under a Registration Statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or such Holders may reasonably request and keep available and make available to the Company's transfer agent prior to the effectiveness of such Registration Statement a supply of such certificates. (l) The Company shall enter into such customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as the Holders or the underwriters retained by the Holders participating in an underwritten public offering, if any, may reasonably request in order to expedite or facilitate the disposition of Registrable Securities. (m) The Company shall promptly make available to each Holder, any underwriter participating in any disposition pursuant to a Registration Statement, and any attorney, accountant or other agent or representative retained by any such Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided that, unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, the Company shall not be required to provide any information under this paragraph (1) if the Company believes, after consultation with counsel for the Company and counsel for the Holders, that to do so would cause the Company to forfeit an attorney-client privilege that was applicable to such information or (2) if either (i) the Company has requested and been granted from the Commission confidential treatment of such information contained in any filing with the Commission or documents provided supplementally or otherwise or (ii) the Company reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing unless prior to furnishing any such information with respect to (i) or (ii) such Holder of Registrable Securities requesting such information agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; and provided, further that each Holder of Registrable Securities agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential. (n) In the case of any underwritten public offering, the Company shall furnish to each Holder and to each underwriter a signed counterpart, addressed to such Holder or underwriter, of (i) an opinion or opinions of counsel to the Company, and (ii) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the managing underwriter therefor reasonably requests. (o) The Company shall cause the shares of Common Stock included in a Registration Statement to be listed on the American Stock Exchange or such other securities exchange on which similar securities issued by the Company are then listed. (p) The Company shall provide a CUSIP number for all Registrable Securities covered by a Registration Statement not later than the effective date of such Registration Statement. (q) The Company shall cooperate with each Holder and each underwriter participating in the disposition of Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. ("NASD"). (r) The Company shall, during the period when the Prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. (s) The Company shall appoint a transfer agent and registrar for all the shares of Common Stock covered by a Registration Statement not later than the effective date of such Registration Statement. (t) In connection with an underwritten offering, the Company will participate, to the extent reasonably requested by the managing underwriter for the offering or the Holders, in customary efforts to sell the securities under the offering, including without limitation, participating in "road shows." Section 5. Suspension Period. In the case of a Shelf Registration Statement, each Holder, upon receipt of any notice (a "Suspension Notice") from the Company of the happening of any event of the kind described in Section 4(f)(vi) or of any event which, in the Company's reasonable business judgment, could become such an event, shall forthwith discontinue disposition of the Registrable Securities pursuant to the Shelf Registration Statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(f) or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, such Holder will, or will request the managing underwriter or underwriters, if any, to, deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event that the Company shall give any Suspension Notice, (i) the Company shall use its reasonable business efforts and take such actions as are reasonably necessary to render the Advice and end the suspension period as promptly as practicable and (ii) the time periods for which a Shelf Registration Statement is required to be kept effective pursuant to Section 2 hereof shall be extended by the number of days during the suspension period. Section 6. Holder Information. If any Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right, to the extent permitted by law, to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal or state "blue sky" statute and the rules and regulations thereunder then in force, the deletion of the reference to such Holder. Section 7. Registration Expenses. Any and all expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all Commission and securities exchange, NASDAQ or NASD registration and filing fees, all fees and expenses incurred in connection with compliance with state securities or "blue sky" laws (including reasonable fees and disbursements of counsel for any underwriters in connection with "blue sky" qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of the Company's officers and employees performing legal or accounting duties), all expenses for word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, the fees and expenses incurred in connection with the listing of the Registrable Securities, the fees and disbursements of counsel for the Company and of the independent certified public accountants of the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letter requested pursuant to Section 4(n)) Securities Act liability insurance (if the Company elects to obtain such insurance), and the reasonable fees and expenses of any special experts or other Persons retained by the Company in connection with any registration, (all such expenses being herein called "Registration Expenses"), will be borne by the Company whether or not the Registration Statement to which such expenses relate becomes effective provided, however, that Registration Expenses shall not include (i) underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities or (ii) any fees or expenses of any counsel, accountants or other persons retained or employed by the Holders. Section 8. Indemnification and Contribution. (a) Indemnification bv the Company. The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Holder, its partners, officers, directors, trustees, stockholders, employees, agents and investment advisers, and each Person who controls such Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under common control with, or is controlled by, such Holder, together with the partners, officers, directors, trustees, stockholders, employees and agents of such controlling Person (collectively, the "Controlling Persons"), from and against all losses, claims, damages, liabilities and expenses (including without limitation any legal or other fees and expenses reasonably incurred by any Holder or any such Controlling Person in connection with defending or investigating any action or claim in respect thereof) (collectively, the "Damages") to which such Holder, its partners, officers, directors, trustees, stockholders, employees, agents and investment advisers, and any such Controlling Person may become subject under the Securities Act or otherwise, insofar as such Damages (or proceedings in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such Damages arise out of or are based upon any such untrue statement or omission based upon information relating to such Holder furnished in writing to the Company by such Holder expressly for use therein. In connection with an underwritten offering, the Company will indemnify the underwriters thereof, their officers and directors and each Person who controls such underwriters (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders of Registrable Securities except with respect to information provided by the underwriter specifically for inclusion therein. (b) Indemnification bv the Holders. Each Holder agrees to indemnify and hold harmless the Company, its directors, officers and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Holder, but only with reference to information relating to such Holder furnished to the Company in writing by such selling Holder expressly for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto); provided, however, that such selling Holder shall not be obligated to provide such indemnity to the extent that such Damages result from the failure of the Company to promptly amend or take action to correct or supplement any such Registration Statement or Prospectus on the basis of corrected or supplemental information provided in writing by such selling Holder to the Company expressly for such purpose. In no event shall the liability of any Holder of Registrable Securities hereunder be greater in amount than the amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Indemnification Procedures. In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such Person (the "indemnified party") shall promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceedings and shall pay the fees and disbursements of such counsel relating to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, or (ii) the indemnifying party fails promptly to assume the defense of such proceeding or fails to employ counsel reasonably satisfactory to such indemnified party or parties, or (iii) (A) the named parties to any such proceeding (including any impleaded parties) include both such indemnified party or parties and any indemnifying party or an Affiliate of such indemnified party or parties or of any indemnifying party, (B) there may be one or more defenses available to such indemnified party or parties or such Affiliate of such indemnified party or parties that are different from or additional to those available to any indemnifying party or such Affiliate of any indemnifying party and (C) such indemnified party or parties shall have been advised by such counsel that there may exist a conflict of interest between or among such indemnified party or parties or such Affiliate of such indemnified party or parties and any indemnifying party or such Affiliate of any indemnifying party, in which case, if such indemnified party or parties notifies the indemnifying party or parties in writing that it elects to employ separate counsel of its choice at the expense of the indemnifying parties, the indemnifying parties shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying parties, it being understood, however, that unless there exists a conflict among indemnified parties, the indemnifying parties shall not, in connection with any one such proceeding or separate but substantially similar or related proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such indemnified party or parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party or parties from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is a party, and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) Contribution. To the extent that the indemnification provided for in paragraph (a) or (b) of this Section 8 is unavailable to an indemnified party or insufficient in respect of any Damages, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such Damages in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders on the other hand in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holders on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the provisions of this Section 8(d), no Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Holder were offered to the public (less any underwriting discounts and commissions) exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue statement or omission. Each Holder's obligation to contribute pursuant to this Section 8(d) is several in the proportion that the proceeds of the offering received by such Holder bears to the total proceeds of the offering received by all the Holders and not joint. If indemnification is available under paragraph (a) or (b) of this Section 8, the indemnifying parties shall indemnify each indemnified party to the full extent provided in such paragraphs without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 8(d). The Company and each Holder agrees that it would not be just or equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the Damages referred to in this Section 8 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred (and not otherwise reimbursed) by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section ll(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. Section 9. Rule 144 and Rule 144A. (a) Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act (or, if the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales under Rule 144 under the Securities Act), and it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. (b) Rule 144A. Upon the request of any Holder, the Company shall deliver to such holder within 10 days following receipt by the Company of such request, the information required by Section (d)(4) of Rule 144A under the Securities Act, as such rule may be amended from time to time or any similar rule or regulation hereafter adopted by the Commission ("Rule 144A"), and will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations or the exemptions provided by Rule 144A. All information shall be "reasonably current" as defined in Rule 144A. Section 10. Restrictions on Sale by the Company and Others. In the event of an underwritten public offering for the account of the Company with respect to which the Holders have the right to exercise their rights to Piggy-Back Registration pursuant to Section 3 hereof, upon the written request (the "Lock-up Request") of the managing underwriter (or underwriters) of such offering, which request shall be made at least 20 days prior to the anticipated effective date of the Registration Statement for such offering, each Holder agrees not to effect any public sale or distribution of any securities similar to those being registered in such offering (other than pursuant to such offering), including without limitation, through sales of Registrable Securities pursuant to the Shelf Registration Statement, during the 10 days prior to, and during the 90-day period beginning on, the effective date of the Registration Statement relating to such offering. Section 11. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of the Holder (or if there is more than one Holder, of the Holders of a majority in interest) of the Registrable Securities then outstanding. (b) Notices. All notices and other communications provided for or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or sent by telecopier, registered or certified mail (return receipt requested), postage prepaid or courier to the parties at their respective addresses set forth on the signature pages hereof (or at such other address for any party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof). All such notices and communications shall be deemed to have been received: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to a courier guaranteeing overnight delivery. (c) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such person shall be entitled to receive the benefits hereof. (d) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law. (g) Severabilitv. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the Holders shall be enforceable to the fullest extent permitted by law. (h) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and is intended to be the complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (i) Attornevs' Fees. In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall, to the extent permitted by applicable law, be entitled to recover reasonable attorneys' fees and expenses in addition to any other available remedy. (j) Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. (k) Remedies. In the event of a breach or a threatened breach by any party to this Agreement of its obligations under this Agreement, any party injured or to be injured by such breach will be entitled to specific performance of its rights under this Agreement or to injunctive relief, in addition to being entitled to exercise all rights provided in this Agreement and granted by law. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, is inadequate and that any objection in any action for specific performance or injunctive relief that a remedy at law would be adequate is waived. IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written. KEY ENERGY GROUP, INC. By: /s/ Francis D. John Name: Francis D. John Title: Chief Executive Officer Address: 257 Livingston Avenue New Brunswick, New Jersey 08901 Telecopier: (908) 247-5148 EX-11.(A) 6 EARNINGS PER SHARE EXHIBIT 11(a) KEY ENERGY GROUP, INC. COMPUTATION OF PER SHARE EARNINGS NINE AND THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995 Nine Months Ended Nine Months Ended March 31, 1996 March 31, 1995 Fully Fully (thousands, except per share data) Primary Diluted Primary Diluted Net income $ 2,321 $ 2,321 $ 1,642 $ 1,642 Shares outstanding at beginning of period 6,914 6,914 5,274 5,274 Other dilutive securities: Common shares issued for acquisition of WellTech, Inc. * 67 67 - - Warrants to purchase Common Stock * - 5 - - Common shares issued for acquisition of WellTech West Texas operations - - 1,363 1,363 Average common shares outstanding 6,981 6,981 6,637 6,637 Earnings per share: $0.33 $0.33 $0.25 $0.25 Three Months Ended Three Months Ended March 31, 1996 March 31, 1995 Fully Fully (thousands, except per share data) Primary Diluted Primary Diluted Net income $ 827 $ 827 $ 631 $ 631 Shares outstanding at beginning of period 6,914 6,914 5,274 5,274 Other dilutive securities: Common shares issued for acquisition of WellTech, Inc. * 67 67 - - Warrants to purchase Common Stock * - 5 - - Common shares issued for acquisition of WellTech West Texas operations - - 1,363 1,363 Average common shares outstanding 6,981 6,986 6,637 6,637 Earnings per share: $0.12 $0.12 $0.10 $0.10 * - Weighted average. EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-30-1996 MAR-31-1996 3,303 267 19,183 0 1,764 26,310 86,477 (7,334) 110,643 23,818 0 0 0 1,041 32,763 110,643 0 39,094 0 35,626 0 0 1,448 3,468 1,129 2,321 0 0 0 2,321 0.33 0.33
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