The net proceeds from this transaction were used to retire $325,000 of Shawmut
Term Debt, to make additional investments in Servicios WellTech of approximately
$1,000,000 and for additional vendor payments.
Letter of Credit - In October, November and December 1995, Shawmut
issued, under WellTech's revolving credit facility, an additional $300,000 in
letters of credit making the total outstanding $1,380,000. These letters of
credit provide collateral for the payment of the self-insured retention under
certain of WellTech's liability insurance policies. The additional $300,000 is
the complete collateral requirement for WellTech's 95-96 policy year.
During 1995, WellTech was not in compliance with certain of the
restrictive covenants of its Loan Agreement with Shawmut and received waivers
for such events of non compliance. On January 19, 1996, WellTech entered into a
credit agreement with a new lender, the CIT Group/Credit Finance ("CIT") to
refinance certain existing indebtedness, which enabled WellTech to repay all
indebtedness to Shawmut (approximately $5 million). The new indebtedness is in
the form of a three year revolving credit arrangement and a three year term loan
and is cross guaranteed by Key and cross collateralized by their assets. Upon
consummation of the merger, the new indebtedness will be the obligation of Key,
as survivor of the merger. There are no restrictive financial covenants until
the merger is completed. However, failure to consummate the merger by April 30,
1996, may, at the option of CIT, constitute an event of default if WellTech
fails to refinance this credit facility by July 31, 1996, or if Key fails to
continue to operate WellTech pursuant to the Interim Operations Agreement until
such refinancing is completed.
(3) Equity Transactions
On March 31, 1995, WellTech issued 5,470 shares of common stock in
exchange for certain well servicing assets. This transaction was valued at
(4) Investments in Unconsolidated Well Servicing Operations
Servicios WellTech - In April 1995, Servicios WellTech, S.A. ("SWT")
was recapitalized and WellTech's ownership interest increased from 50% to 63%.
Consequently, effective April 1, 1995, WellTech changed its method of accounting
for SWT from the equity method to consolidation with a minority interest.