SECOND AMENDMENT
TO THIRD AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
AND MODIFICATION OF NOTES
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
AND MODIFICATION OF NOTES (this "Amendment") is dated as of March 27, 1997, and
entered into by and between THE CIT GROUP/CREDIT FINANCE, INC. ("Lender") with
its office at 00 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, and YALE E. KEY,
INC. ("Yale"), KEY ENERGY DRILLING, INC. (d/b/a Xxxxx Xxxx Drilling) ("Hurt")
and WELLTECH EASTERN, INC. ("WellTech") (individually each a "Borrower" and
collectively the "Borrowers").
WHEREAS, Lender and Borrowers have entered into that certain Third Amended and
Restated Loan and Security Agreement dated as of May 21, 1996 as amended by the
First Amendment to Third Amended and Restated Loan and Security Agreement dated
November 22, 1996 (the "First Amendment") (as so amended, the "Agreement");
WHEREAS, in connection with the execution of the Agreement, Borrowers executed
and delivered to Lender the following promissory notes (collectively the
"Notes"):
(i) Amended and Restated Promissory Note dated May 21, 1996 executed by WellTech
payable to Lender in the original principal amount of $11,822,186.00 as amended
by the First Amendment (the "WellTech Note");
(ii) Amended and Restated Promissory Note dated May 21, 1996 executed by Yale
payable to Lender in the original principal amount of $10,004,082.00 as amended
by the First Amendment (the "Yale Note"); and
(iii) Amended and Restated Promissory Note dated May 21, 1996 executed by Hurt
payable to Lender in the original principal amount of $1,230,000.00 as amended
by the First Amendment (the "Hurt Note"); and
WHEREAS, on or about July 3, 1996 Key Energy Group, Inc. ("Key") issued and sold
$52,000,000 in the aggregate principal amount of its convertible subordinated
debentures due 2003 (the "Debentures") pursuant to a Private Offering Memorandum
dated June 28, 1996; and on July 3, 1996, Key, the Borrowers, and American Stock
Transfer and Trust Company, as Trustee, entered into that certain Indenture (the
"Indenture"); and
WHEREAS, part of the proceeds of the Debentures were used to repay the Notes;
and
WHEREAS, Borrowers requested the ability to reborrow part of the amounts repaid
under the Notes, all as more fully set forth in the First Amendment; and
WHEREAS, Borrowers have recently concluded several acquisitions with respect to
the stock or assets of other corporations and, accordingly, have requested an
increase in both the amount of the Maximum Credit and the Term Loan; and
WHEREAS, Lender has agreed to such increases and to the amendments set forth
herein subject to the terms and conditions provided for in this Amendment; and
WHEREAS, Lender and Borrowers desire to amend the Agreement and to modify the
Notes as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
Amendments
Section 2.01. Amendment to Section 10.1 of the Agreement. Section 10.1 of the
Agreement is hereby amended in its entirety to read as follows:
"10.1 (a) Maximum Credit: $55,000,000
(b) Eligible Accounts Percentage: Eighty-Five Percent (85%) so long as the
dilution percentage of such accounts does not exceed Four Percent (4%) whereupon
the Eligible Accounts Percentage shall be reduced to an amount deemed reasonable
by Lender.
(c) Maximum days after Invoice Date for Eligible Accounts: 90 days; provided,
however, that Lender may make advances up to $250,000.00 in the aggregate at any
given time against Eligible Accounts which are between 91 days and 120 days past
invoice date.
(d) Minimum Borrowing: $45,000,000.
(e) Sublimits:
(i) For Yale, $55,000,000 less all Obligations of Hurt and WellTech; (ii) For
Hurt, the lesser of (i) $2,000,000, and
(ii) $55,000,000 less all Obligations of Yale and WellTech; and
(iii) For WellTech, $55,000,000 less all Obligations of Hurt and Yale."
Section 2.02. Amendment to Section 10.2(a) of the Agreement. Section 10.2(a) of
the Agreement is hereby amended in its entirety to read as follows:
"(a) Term Loan:
(i) For Yale, up to but not to exceed $16,187,000 (the "Maximum Amount");
(ii) For Hurt, up to but not to exceed $1,540,000 (the "Maximum Amount"); and
(iii) For WellTech, up to but not to exceed $20,867,000 (the "Maximum Amount")."
Section 2.03. Amendment to Section 10.4 of the Agreement. Section 10.4 of the
Agreement is hereby amended in its entirety to read as follows:
"10.4 Fees:
(a) Interest Rate: Prime Rate plus .25% per annum
(b) Closing Fees: None
(c) Unused Line Fee Rate: .25% per annum payable on the first day of the
following month."
ARTICLE III
Modifications to Notes
Section 3.01. Amendments to Hurt Note. The first three (3) paragraphs of the
Hurt Note are hereby amended in their entirety to read as follows:
"FOR VALUE RECEIVED, KEY ENERGY DRILLING, INC., D/B/A XXXXX XXXX DRILLING, a
Delaware corporation, promises to pay to the order of THE CIT GROUP/CREDIT
FINANCE, INC. ("CIT"), at its offices at 00 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000 or such other place as the holder hereof may from time to time
designate in writing, in legal tender of the United States of America, the
principal sum of One Million Five Hundred Forty Thousand Dollars ($1,540,000) or
so much thereof as may be borrowed hereunder and reflected on Schedule "A"
attached hereto and made a part hereof, plus interest from the date hereof on
the unpaid principal balance as follows:
The principal amount available to be borrowed under this Note (the "Maximum
Amount") shall be repaid in monthly installments of $18,334.00 each on the first
day of each month beginning May 1, 1997, and at no time shall the outstanding
principal exceed the Maximum Amount. The principal sum hereof outstanding shall
be due and payable on the end of the "Term" as defined in the Loan Agreement
described herein.
Interest shall be earned at the rate (the "Annual Rate") of one-quarter of one
percent (.25%) per annum plus the "Prime Rate". The "Prime Rate" is the per
annum rate of interest publicly announced by Chase Manhattan Bank, New York, New
York, or the applicable rate of its successors or assigns, from time to time as
its prime rate (the prime rate is not intended to be the lowest rate of interest
charged by Chase Manhattan Bank, New York, New York, or its successors or
assigns, to its borrowers). Such interest shall be payable monthly in arrears on
the first day of each and every month, commencing on the first day of the month
after an advance is made hereunder. Interest shall be computed on the unpaid
principal balance and shall be calculated on a year of 360 days for actual days
elapsed. Interest and principal not paid when due shall bear interest at a rate
equal to two percent (2%) per annum in excess of the Annual Rate." The remaining
provisions of the Hurt Note are unchanged.
Section 3.02. Amendments to WellTech Note. The first three (3) paragraphs of the
WellTech Note are hereby amended in their entirety to read as follows:
"FOR VALUE RECEIVED, WELLTECH EASTERN, INC., a Delaware corporation, promises to
pay to the order of THE CIT GROUP/CREDIT FINANCE, INC. ("CIT"), at its offices
at 00 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 or such other place as the
holder hereof may from time to time designate in writing, in legal tender of the
United States of America, the principal sum of Twenty Million Eight Hundred
Sixty-Seven Thousand and no/100 Dollars ($20,867,000) or so much thereof as may
be borrowed hereunder and reflected on Schedule "A" attached hereto and made a
part hereof, plus interest from the date hereof on the unpaid principal balance
as follows:
The principal amount available to be borrowed under this Note (the "Maximum
Amount") shall be repaid in monthly installments of $248,417.00 each on the
first day of each month beginning May 1, 1997, and at no time shall the
outstanding principal exceed the Maximum Amount. The principal sum hereof
outstanding shall be due and payable on the end of the "Term" as defined in the
Loan Agreement described herein.
Interest shall be earned at the rate (the "Annual Rate") of one-quarter of one
percent (.25%) per annum plus the "Prime Rate". The "Prime Rate" is the per
annum rate of interest publicly announced by Chase Manhattan Bank, New York, New
York, or the applicable rate of its successors or assigns, from time to time as
its prime rate (the prime rate is not intended to be the lowest rate of interest
charged by Chase Manhattan Bank, New York, New York, or its successors or
assigns, to its borrowers). Such interest shall be payable monthly in arrears on
the first day of each and every month, commencing on the first day of the month
after an advance is made hereunder. Interest shall be computed on the unpaid
principal balance and shall be calculated on a year of 360 days for actual days
elapsed. Interest and principal not paid when due shall bear interest at a rate
equal to two percent (2%) per annum in excess of the Annual Rate." The remaining
provisions of the WellTech Note are unchanged.
Section 3.03. Amendments to Yale Note. The first three (3) paragraphs of the
Yale Note are hereby amended in their entirety to read as follows:
"FOR VALUE RECEIVED, YALE E. KEY, INC., a Texas corporation, promises to pay to
the order of THE CIT GROUP/CREDIT FINANCE, INC. ("CIT"), at its offices at 00
Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 or such other place as the holder
hereof may from time to time designate in writing, in legal tender of the United
States of America, the principal sum of Sixteen Million One Hundred Eighty-Seven
Thousand Dollars ($16,187,000) or so much thereof as may be borrowed hereunder
and reflected on Schedule "A" attached hereto and made a part hereof, plus
interest from the date hereof on the unpaid principal balance as follows:
The principal amount available to be borrowed under this Note (the "Maximum
Amount") shall be repaid in monthly installments of $192,703.00 each on the
first day of each month beginning May 1, 1997, and at no time shall the
outstanding principal exceed the Maximum Amount. The principal sum hereof
outstanding shall be due and payable on the end of the "Term" as defined in the
Loan Agreement described herein.
Interest shall be earned at the rate (the "Annual Rate") of one-quarter of one
percent (.25%) per annum plus the "Prime Rate". The "Prime Rate" is the per
annum rate of interest publicly announced by Chase Manhattan Bank, New York, New
York, or the applicable rate of its successors or assigns, from time to time as
its prime rate (the prime rate is not intended to be the lowest rate of interest
charged by Chase Manhattan Bank, New York, New York, or its successors or
assigns, to its borrowers). Such interest shall be payable monthly in arrears on
the first day of each and every month, commencing on the first day of the month
after an advance is made hereunder. Interest shall be computed on the unpaid
principal balance and shall be calculated on a year of 360 days for actual days
elapsed. Interest and principal not paid when due shall bear interest at a rate
equal to two percent (2%) per annum in excess of the Annual Rate." The remaining
provisions of the Yale Note are unchanged.
ARTICLE IV
Ratifications, Representations and Warranties
Section 4.01. Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement, including, without
limitation, all financial covenants contained therein, are ratified and
confirmed and shall continue in full force and effect. Lender and each Borrower
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 4.02. Representations and Warranties. Each Borrower hereby represents
and warrants to Lender that the execution, delivery and performance of this
Amendment and all other loan, amendment or security documents to which such
Borrower is or is to be a party hereunder (hereinafter referred to collectively
as the "Loan Documents") executed and/or delivered in connection herewith, have
been authorized by all requisite corporate action on the part of such Borrower
and will not violate the Articles of Incorporation or Bylaws of such Borrower.
ARTICLE V
Conditions Precedent
Section 5.01. Conditions. The effectiveness of this Amendment is subject to the
satisfaction of the following conditions precedent (unless specifically waived
in writing by the Lender):
(a) Lender shall have received, in addition to this Amendment, all of the
following, each dated (unless otherwise indicated) as of the date of this
Amendment, in form and substance satisfactory to Lender in its sole discretion:
(i) Company Certificate. A certificate executed by the Secretary or Assistant
Secretary of each Borrower certifying (A) that Borrower's Board of Directors has
met and adopted, approved, consented to and ratified the resolutions attached
thereto which authorize the execution, delivery and performance by Borrower of
the Amendment and the Loan Documents, (B) the names of the officers of Borrower
authorized to sign this Amendment and each of the Loan Documents to which
Borrower is to be a party hereunder, (C) the specimen signatures of such
officers, and (D) that neither the Articles of Incorporation nor Bylaws of
Borrower have been amended since the date of the Agreement;
(ii) Evidence of Existence and Good Standing. Evidence of the existence and good
standing of each Borrower in such jurisdictions as Lender may require;
(iii) No Material Adverse Change. Since May 21, 1996, there shall have occurred
no material adverse change in the business, operations, financial condition,
profits or prospects of any Borrower, or in the Collateral, and the Lender shall
have received a certificate of each Borrower's chief executive officer to such
effect;
(iv) Other Documents. Each Borrower shall have executed and delivered such other
documents and instruments as well as required record searches as Lender may
require.
(b) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other legal
matters incident thereto shall be satisfactory to Lender and its legal counsel,
Jenkens & Xxxxxxxxx, a Professional Corporation.
ARTICLE VI
Miscellaneous
Section 6.01. Survival of Representations and Warranties. All representations
and warranties made in the Agreement or any other document or documents relating
thereto, including, without limitation, any Loan Document furnished in
connection with this Amendment, shall survive the execution and delivery of this
Amendment and the other Loan Documents, and no investigation by Lender or any
closing shall affect the representations and warranties or the right of Lender
to rely thereon.
Section 6.02. Reference to Agreement. The Agreement, each of the Loan Documents,
and any and all other agreements, documents or instruments now or hereafter
executed and delivered pursuant to the terms hereof or pursuant to the terms of
the Agreement as amended hereby, are hereby amended so that any reference
therein to the Agreement shall mean a reference to the Agreement as amended
hereby.
Section 6.03. Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 6.04. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN THE STATE OF ILLINOIS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS.
Section 6.05. Successors and Assigns. This Amendment is binding upon and shall
inure to the benefit of Lender and each Borrower and their respective successors
and assigns; provided, however, that no Borrower may assign or transfer any of
its rights or obligations hereunder without the prior written consent of Lender.
Lender may assign any or all of its rights or obligations hereunder without the
prior consent of any Borrower.
Section 6.06. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
Section 6.07. Effect of Waiver. No consent or waiver, express or implied, by
Lender to or of any breach of or deviation from any covenant or condition of the
Agreement or duty shall be deemed a consent or waiver to or of any other breach
of or deviation from the same or any other covenant, condition or duty. No
failure on the part of Lender to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under this
Amendment, the Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power, or
privilege under this Amendment, the Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The rights and remedies provided for in the
Agreement and the other Loan Documents are cumulative and not exclusive of any
rights and remedies provided by law. Section
6.08. Headings. The headings, captions and arrangements used in this Amendment
are for convenience only and shall not affect the interpretation of this
Amendment.
Section 6.09. Releases. As a material inducement to Lender to enter into this
Amendment, each Borrower hereby represents and warrants that there are no claims
or offsets against, or defenses or counterclaims to, the terms and provisions of
and the other obligations created or evidenced by the Agreement or the other
Loan Documents. Each Borrower hereby releases, acquits, and forever discharges
Lender, and its successors, assigns, and predecessors in interest, their
parents, subsidiaries and affiliated organizations, and the officers, employees,
attorneys, and agents of each of the foregoing (all of whom are herein jointly
and severally referred to as the "Released Parties") from any and all liability,
damages, losses, obligations, costs, expenses, suits, claims, demands, causes of
action for damages or any other relief, whether or not now known or suspected,
of any kind, nature, or character, at law or in equity, which such Borrower now
has or may have ever had against any of the Released Parties, including, but not
limited to, those relating to (a) usury or penalties or damages therefor, (b)
allegations that a partnership existed between Borrower and the Released
Parties, (c) allegations of unconscionable acts, deceptive trade practices, lack
of good faith or fair dealing, lack of commercial reasonableness or special
relationships, such as fiduciary, trust or confidential relationships, (d)
allegations of dominion, control, alter ego, instrumentality, fraud,
misrepresentation, duress, coercion, undue influence, interference or
negligence, (e) allegations of tortious interference with present or prospective
business relationships or of antitrust, or (f) slander, libel or damage to
reputation, (hereinafter being collectively referred to as the "Claims"), all of
which Claims are hereby waived.
Section 6.10. Expenses of Lender. Borrowers agree to pay on demand (i) all costs
and expenses reasonably incurred by Lender in connection with the preparation,
negotiation and execution of this Amendment and the other Loan Documents
executed pursuant hereto and any and all subsequent amendments, modifications,
and supplements hereto or thereto, including, without limitation, the costs and
fees of Lender's legal counsel and the allocated cost of staff counsel and (ii)
all costs and expenses reasonably incurred by Lender in connection with the
enforcement or preservation of any rights under the Agreement, this Amendment
and/or other Loan Documents, including, without limitation, the costs and fees
of Lender's legal counsel and the allocated cost of staff counsel.
Section 6.11. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN LENDER AND
BORROWERS AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN LENDER AND BORROWERS.
IN WITNESS WHEREOF, the parties have executed this Second Amendment to Third
Amended and Restated Loan and Security Agreement on the date first above
written.
SIGNATORY PAGES TO
SECOND AMENDMENT
TO THIRD AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
AND MODIFICATION OF NOTES
"BORROWERS"
YALE E. KEY, INC.
By:
Name: Xxxxxxx X. Xxxx
Title: Executive Vice President
KEY ENERGY DRILLING, INC.
(d/b/a Xxxxx Xxxx Drilling)
By:
Name: Xxxxxxx X. Xxxx
Title: Executive Vice President
WELLTECH EASTERN, INC.
By:
Name: Xxxxxxx X. Xxxx
Title: President
"LENDER"
THE CIT GROUP/CREDIT FINANCE, INC.
By:
Name:
Title:
CONSENTS AND REAFFIRMATIONS
Key Energy Group, Inc. hereby acknowledges the execution of, and consents to,
the terms and conditions of that Second Amendment to Third Amended and Restated
Loan and Security Agreement dated as of March __, 1997, between Yale E. Key,
Inc., Key Energy Drilling, Inc. (d/b/a Xxxxx Xxxx Drilling), WellTech Eastern,
Inc. and The CIT Group/Credit Finance, Inc., ("Creditor") and reaffirms its
obligations under (i) that certain Guaranty (the "Guaranty") dated as of May 21,
1996 made by the undersigned in favor of the Creditor, and (ii) that certain
Amended and Restated Stock Pledge Agreement (the "Pledge") dated as of May 21,
1996 made by the undersigned in favor of the Creditor, and acknowledges and
agrees that the Guaranty and the Pledge and all other documents executed in
connection therewith remain in full force and effect and the Guaranty and the
Pledge and all such other documents are hereby ratified and confirmed.
Dated as of March __, 1997.
KEY ENERGY GROUP, INC.
By:
Name: Xxxxxxx X. Xxxx
Title:
AMENDED SCHEDULE 6.12
1. Key has guaranteed the obligations of Odessa to Norwest Bank Texas, Midland.
2. Key will pay the bonuses due to Xxxxxxx X. Xxxx under Mr. John's Employment
Agreement with Key.
3. Key will guarantee WellTech's obligations relating to the Nub's acquisition
and note balance: $200,000 - $250,000
4. WellTech leases from Hidco Development Corporation, which is owned by Xxxxxxx
X. Xxxx and his spouse, real property used for well servicing yards in Xx.
Xxxxxxxx, Xxxxxxxx xxx Xxxxxx, Xxxx Xxxxxxxx. Lease terms, including rental
rates, are deemed by management to be competitive.
5. WellTech leases from Talon Development Corporation real property used for its
servicing yard in Indiana, Pennsylvania. Xxxxxxx X. Xxxx owns a 33 1/3 interest
in Talon Development Corporation. Lease terms including rental rates are deemed
by management to be competitive.
6. WellTech initiated a management incentive compensation plan which requires
the payment of sums of money to various parties contingent upon the attainment
of a stipulated level of profitability. No payments have been made pursuant to
this plan since its adoption.
7. Provided no Event of Default has occurred or would result from the making of
such distributions, each Borrower may distribute funds to Key in an amount
sufficient in the aggregate to make regularly scheduled payments of interest
under the Indenture.
8. Each of the Borrowers may guarantee the obligations of Parent under the
Indenture and the Debentures and may guarantee obligations of subsidiaries of
Parent incurred in the ordinary course of business.
