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KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
Entire Document

The agreement  with C.I.T.  includes  certain  restrictive  covenants,  the most
restrictive  of which  prohibits  Key from making  distributions  and  declaring
dividends on Yale E. Key's 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 $6.5 million at December 31, 1995). 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 December
31, 1995) plus one-half percent. The note is secured by substantially all of the
oil and gas  properties  of OEI and the pledge of certain  collateral by current
and former  officers and  directors  of Key. As of December  31,  1995,  Norwest
waived  the  pledge of  collateral  and  released  the  collateral  to the seven
individuals who had pledged it. 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.

The Clint Hurt Drilling loan  agreement  with Norwest  provided for a $1 million
term loan and a $200,000  line of credit.  The $1  million  term loan  ($776,000
approximate principal balance at December 31, 1995), requires principal payments
of  approximately  $28,000 per month plus interest for 36 months with a maturity
date of April 1998. The $200,000 line of credit ($77,000  approximate  principal
balance at December 31, 1995) requires  principal  payments of $20,000 per month
beginning July 5, 1995,  plus interest,  through its maturity in April 1996. The
term loan and line of credit have an interest  rate of Norwest  prime rate (8.5%
at December 31, 1995), plus 3/4 of one percent.  The notes are secured by all of
the equipment of Clint Hurt Drilling and are guaranteed by Key. In addition, the
loan   agreement   contains   various   restrictive   covenants  and  compliance

Each of Key (and Yale E. Key and Clint Hurt) and WellTech  recently entered into
new credit facilities of approximately $17.5 million (subject to certain advance
formulas)  the  proceeds of the initial  borrowings  of which were used to repay
substantially  the debt of Key (other than that of OEI) and WellTech (other than
that of certain  affiliates),  respectively.  Key believes  that such a facility
will provide  sufficient funds to finance its operating and capital  expenditure
needs for the foreseeable future. The new indebtedness will be the obligation of
Key, as survivor of the merger,  and Key's  subsidiaries,  Yale E. Key and Clint
Hurt. The cross-guaranty and cross- collateralization  arrangement could, if the
merger is not  consummated,  create  contingent  liabilities for each of Key and
WellTech.  The  failure to  consummate  the merger on or prior to April 30, 1996
will, at the option of the lender,  constitute an event of default under the new
indebtedness  if WellTech  fails to refinance its credit  agreement on or before
July 31,  1996 or Key fails to  continue  to operate  WellTech  pursuant  to the
Interim Operations Agreement.  Key and WellTech have agreed not to terminate the
Interim Operations Agreement without the consent of the lender.