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S-4/A
KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
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13.  TRANSACTIONS WITH RELATED PARTIES

In connection with the OEI acquisition  (see Note 2), Key has agreed to grant D.
Kirk  Edwards  (President  and CEO of  OEI) a  percentage  reversionary  working
interest  in five  deep gas  wells  located  in West  Texas  upon  repayment  of
$1,622,000 of the assumed bank debt from Key's earnings from the five wells. The
percentage  reversionary  working  interest  decreases  based  on  the  date  of
repayment of the assumed bank debt and ranges from 20% of the earnings  from the
five  wells  if  repayment  occurs  on or prior  to July 7,  1995,  to 5% of the
earnings from the five wells if repayment  occurs after July 7, 1996.  The value
of the reversionary interest assigned was insignificant at July 1, 1993.

Key leases  automotive  equipment from an independent third party (see Note 10),
which purchases the automotive equipment from an automobile  dealership in which
a former  officer  owns a majority  interest.  Net  proceeds  to the  automobile
dealership  totaled  $399,000 and  $1,058,000  for years ended June 30, 1995 and
1994,  respectively,  and  $449,000 and $132,000 for the seven months ended June
30, 1993 and the five months ended November 30, 1992,  respectively.  The leases
are  considered  operating  leases.  In the opinion of the Board of Directors of
Key,  the net  proceeds  from  automotive  equipment  were on  terms at least as
favorable to Key as could have been obtained from a third party. This opinion is
based on  information  provided by a third party  leasing  company,  that is not
affiliated  with the former officer or Key, to the Board of Directors  regarding
purchase prices and equipment lease rentals offered by third parties.

Key paid  $55,000,  $57,000 and $33,000  for the year ended June 30,  1994,  the
seven months  ended June 30, 1993 and the five months  ended  November 30, 1992,
respectively  (none during  fiscal  1995),  for oil field  related  services and
equipment to two oil field  related  companies in which two officers of Key have
an  interest.  In the  opinion of the Board of  Directors  of Key,  based on the
Board's review of competitive bids, these transactions were on terms at least as
favorable to Key as could have been obtained from a third party.

During  fiscal  1992,  two officers of Key loaned Key $90,000 to purchase a shop
and office  building from a related  party.  The note bears  interest at 8% with
interest payable monthly  beginning  January 19, 1992. The principal  balance is
due and payable on December 19, 1993. Key paid approximately $6,000 in principal
and interest  during fiscal 1992. The principal  balance of the note was $32,000
at November 30, 1992 and June 30, 1992.  At June 30, 1992,  the two officers who
held  the  note  agreed  to  reduce  the  note by  $57,000  in lieu of  accounts
receivable  due to Key from the same two officers.  During fiscal 1994, the same
two officers agreed to forgive $32,000, the balance of the note, due from Key.

On February 27, 1991, Key completed the private placement of $525,000  principal
amount of Senior  Convertible  Notes (the "Notes") due 1995 with  individual and
institutional investors, some of whom are current officers and directors of Key.
The  principal  amount  at June 30,  1994 and 1993  was  $19,000  and  $149,000,
respectively.  The Notes bear interest at 8%, and the principal balance is to be
paid over 20 equal  monthly  installments.  In  addition,  each  $1,000  Note is
accompanied by a warrant to purchase Key's Common Stock for $14.50 per share.

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