KEY ENERGY GROUP, INC.
March 13, 1996
You are cordially invited to attend a Special Meeting in Lieu of the
Annual Meeting of Stockholders (the "Key Special Meeting") of Key Energy Group,
Inc. ("Key") to be held on March 26, 1996 at 11:00 a.m., local time, at the
Hyatt Regency, Two Albany Street, New Brunswick, New Jersey.
At the Key Special Meeting, stockholders will be asked to approve and
adopt an Agreement and Plan of Merger (the "Merger Agreement") entered into on
November 18, 1995 providing for the merger of WellTech, Inc. ("WellTech") with
and into Key (the "Merger").
As a result of the Merger, all outstanding shares of common stock of
WellTech will be converted into shares of Key Common Stock and five-year
warrants to purchase shares of Key Common Stock (the "New Key Warrants").
WellTech currently owns 1,635,000 shares (23.6%) of Key Common Stock and holds
warrants (the "Existing Key Warrants") to purchase an additional 250,000 shares
of Key Common Stock at $5.00 per share. As part of the Merger, 1,429,962 of the
1,635,000 shares of Key Common Stock and the Existing Key Warrants currently
owned by WellTech will be canceled. Assuming that no appraisal rights are
asserted by the WellTech stockholders in the Merger, Key will issue to WellTech
stockholders an aggregate of 4,929,962 shares of Key Common Stock and New Key
Warrants to purchase 750,000 shares of Key Common Stock at $6.75 per share.
Taking into account the cancellation of the 1,429,962 shares of Key Common Stock
and the Existing Key Warrants currently held by WellTech, net Merger
consideration will consist of 3,500,000 shares of Key Common Stock and warrants
to purchase 500,000 additional shares of Key Common Stock.
The Merger is subject to various conditions, described in this Proxy
Statement--Prospectus. It is expected that the Merger will be completed during
the first quarter of 1996.
Your Board of Directors has carefully considered the terms of the
proposed Merger and believes that the Merger and related transactions are
advisable and in the best interests of Key and its stockholders. The Board has
unanimously approved the Merger and the related transactions and recommends that
stockholders vote FOR that proposal.
In order to permit Key to issue shares of Key Common Stock to the
WellTech stockholders as provided in the Merger Agreement, to provide for future
equity financings or acquisitions and to simplify the Company's organizational
documents which, as a result of various corporate transactions and
restructurings, have become overly complex, Key stockholders will also be asked
to approve and adopt an amendment to the Articles of Incorporation of Key
amending and restating those Articles in their entirety (the "Key Charter
Amendment"), which, among other things, will increase the total number of
authorized shares of Key Common Stock from 10,000,000 to 25,000,000 and permit
the Board to classify and reclassify unissued shares of Common Stock into
preferred or preference stock, subject to certain limitations. The Board has
unanimously approved the Key Charter Amendment and recommends that stockholders
vote FOR that proposal.
The stockholders will also be asked to elect the Board of Directors
which, assuming the Merger is consummated, will include two nominees of WellTech
and to approve the adoption of the Key 1995 Stock Option Plan for officers,
directors and other employees covering an aggregate of 1,150,000 shares of Key
Common Stock and the adoption of the Key Outside Directors Stock Option Plan
covering an aggregate of 300,000 shares of Key Common Stock.
We hope you will be able to attend the meeting. However, even if you
anticipate attending in person, we urge you to complete, sign, date and return
the enclosed proxy card promptly to ensure that your shares will be represented
at the Key Special Meeting. If you do attend, you will, of course, be entitled
to vote in person.
Thank you and I look forward to seeing you at the meeting.
Francis D. John
President and Chief Executive Officer