The payment of interest on these notes is restricted by the terms of an
intercreditor agreement between these note holders and Shawmut (see below).
Interest on $2.0 million of these notes is not payable currently if WellTech
does not achieve certain levels of cash flows. These minimum levels of cash flow
were not achieved and the related interest was not paid on July 6, 1995.
Interest on the remaining $2.9 million of these notes is not payable currently
if WellTech is in default of certain covenants of the Loan Agreement with
Shawmut. WellTech was in default on July 6, 1995 and the payment of interest on
these notes has been deferred.
In November 1991, WellTech entered into a lease agreement to obtain the
necessary financing for a computer system. The lease agreement has been recorded
as a capital lease with the corresponding property and equipment being included
in the accompanying consolidated balance sheet.
During 1994, WellTech used seller financing to provide the capital to
fund several expansion opportunities. These notes payable which are secured by
the purchased assets bear interest at rates ranging from 5.3% to prime + 2%.
Negotiated repayment terms, which are fixed or based upon cash flow or asset
utilization, range from 3 to 5 years.
On January 6, 1995, WellTech entered into a Loan Agreement with
Barclays Business Credit, Inc. (subsequently acquired by Shawmut), whereby
Shawmut agreed to provide WellTech with a term loan of $2.5 million and a
revolving credit facility of up to $6.5 million. The Shawmut Term Loan, which
bears interest at Shawmut prime plus 1.75% is generally secured by WellTech's
rigs and equipment and is payable in 84 equal monthly installments of principal
plus interest. The availability under the revolving credit facility is a
function of available accounts receivable collateral, as defined in the Loan
Agreement. The interest rate on the revolver is Shawmut prime plus 1.75%. The
original term of the Loan Agreement is for a three (3) year period and includes
certain restrictive covenants relative to the maintenance of certain levels of
tangible net worth, working capital, aged accounts payable and cash flows and
contains restrictions on the purchase and sale of certain assets and capital
expenditures. See Note 12 for further discussion of WellTech's credit facility
and financing arrangements.
Aggregate loan maturities for the next five fiscal years are as
follows: 1995-$798,000; 1996- $353,000; 1997-$273,000; 1998-$5,073,000 and 1999
and thereafter $921,000.
Letters of Credit - WellTech had a letter of credit of $421,000
outstanding at December 31, 1994. In March 1995, Shawmut issued, under
WellTech's revolving credit facility, an additional letter of credit in the
amount of $1,080,000. These letters of credit provide collateral for the payment
of the self-insured retention under certain of WellTech's liability insurance
policies. The letter of credit in the amount of $421,000 is guaranteed by a
former stockholder of WellTech.
In addition to the above letters of credit, WellTech was contingently
obligated through January 6, 1995, to an officer and shareholder in the amount
of $292,000, for securities placed by him as collateral on behalf of WellTech to
further support the self-insured retention under WellTech's liability insurance
policies. In connection with the Shawmut financing, WellTech paid this amount
into its self-insurance cash collateral account and the officer's collateral was
returned to him.