Potential Obstacles to Integration of WellTech. The success of Key
following the Merger will be dependent partially upon Key's ability to integrate
the current management and operations of WellTech into its ongoing management
and operations. Obstacles to such integration may arise, and some of those
obstacles could adversely affect Key's ongoing operations and performance. There
can be no assurance that Key will be able effectively to integrate its
management and operations with those of WellTech or that administrative and
operational efficiencies resulting from the Merger can be attained.
Customer Response to the Transactions. Management of Key believes that
following the Merger Key will be able to provide its customers with a broader
array of products and an increased ability to service customer needs. However,
there can be no assurance that the current Key and WellTech customers will
respond favorably to the Merger. An unfavorable customer response to the Merger
could have an adverse effect upon the ongoing operations of Key.
WellTech Shareholder Ownership of Key Common Stock. Upon the
consummation of the Merger, there will be 10,413,513 shares of Key Common Stock
outstanding. Of such shares, the 4,929,962 shares of Key Common Stock and New
Key Warrants to purchase an additional 750,000 shares of Key Common Stock issued
to WellTech stockholders pursuant to the Merger will be freely tradeable without
restriction or registration under the Securities Act, including the shares and
New Key Warrants to be issued to certain stockholders of WellTech, who will have
the benefit of an effective registration statement under the Securities Act.
Stockholders should be aware that one group of five affiliated entities will
hold approximately 38.3% of the Key Common Stock outstanding after the Merger.
All but 155,000 of the remaining shares of Key Common Stock currently
outstanding are freely tradeable, although sales of shares held by "affiliates"
of Key are subject to volume and other limitations imposed by Rule 144 under the
No predictions can be made as to the effect, if any, that market sales
of shares or the availability of shares for sale will have on the market price
for the Key Common Stock prevailing from time to time. Sales of substantial
amounts of Key Common Stock in the public market could adversely affect the
market price of the Key Common Stock.
Possible Volatility of Stock Price. The Key Common Stock is traded on
the American Stock Exchange. The closing price of the Key Common Stock on August
30, 1995, immediately prior to the announcement of the Merger was $4-15/16, and
on February 26, 1996 was $6. (See "Price Range of Key Common Stock" for
additional information with respect to the prices of the Key Common Stock in
earlier years.) The New Key Warrants are a new issue and there exists no trading
market for them. The volume of transactions in the Key Common Stock has varied
from time to time, although it has, for the most part, been limited. In
addition, the stock market in recent years has experienced price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of a specific company. These fluctuations could adversely affect the
market price of the Key Common Stock and the New Key Warrants. (See "Proposals
to be Voted upon at the Key Special Meeting--Item 1: The Merger--Certain