7% CONVERTIBLE SUBORDINATED DEBENTURE
DUE JULY 1, 2003
No. ____
$______________
KEY ENERGY GROUP, INC.
promises to pay to
_________________________________________________________________
______________
or its registered assigns, the principal sum of
_________________________________________________________________
______________
Dollars on July 1, 2003.
Interest Payment Dates: July 1 and January 1, commencing January
1, 1997.
Record Dates: June 15 and December 15 (whether or not a Business
Day).
KEY ENERGY GROUP, INC.
By:
Officer of the Company
(SEAL)
Attest: By:
Officer of the Company
This is one of the Convertible Subordinated Debentures referred
to in the within-mentioned Indenture:
_________________________, as Trustee
By Authorized Signature
Dated: ,
7% CONVERTIBLE SUBORDINATED DEBENTURE
DUE JULY 1, 2003
Unless and until it is exchanged in whole or in part
for Securities in definitive form, this Security may not be
transferred except as a whole by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. Unless this
certificate is presented by an authorized representative of The
Depositary Trust Company, 55 Water Street, New York, New York
("DTC"), to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as
requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or such other entity as is
requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
THE DEBENTURE EVIDENCED HEREBY HAS NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE, SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE
DEBENTURE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2)
AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THE DEBENTURE EVIDENCED HEREBY RESELL OR OTHERWISE
TRANSFER THE DEBENTURE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH DEBENTURE EXCEPT (A) TO KEY
ENERGY GROUP, INC. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE DEBENTURE EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT OR (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
DEBENTURE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT
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OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
DEBENTURE EVIDENCED HEREBY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF SUCH DEBENTURE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
AMERICAN STOCK TRANSFER & TRUST COMPANY, AS TRUSTEE. IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO AMERICAN STOCK
TRANSFER & TRUST COMPANY, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THREE YEARS
FROM THE ORIGINAL ISSUANCE OF THE DEBENTURE EVIDENCED HEREBY.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
Section 1. Interest. Key Energy Group, Inc., a
Maryland corporation (the "Company"), promises to pay
interest on the principal amount of this 7% Convertible
Subordinated Debenture due 2003 (the "Debenture") at the rate
and in the manner specified below.
The Company shall pay interest on the principal
amount of this Debenture in cash at the rate per annum shown
above, which rate shall be (i) subject to an increase of
fifty (50) basis points (__%) in the event of a Servicios
Guaranty Default and (ii) subject to increase as specified
in the Registration Rights Agreement dated as of July 3, 1993,
to which the Company is a party. The Company will pay interest
(including the additional interest as a Servicios Default
Payment or any additional interest referred to in such
Registration Rights Agreement) semi-annually on July 1 and
January 1 of each year commencing January 1, 1997, or if any
such day is not a Business Day, on the next Business Day (each
an "Interest Payment Date") to record holders of Debentures
("Holders") at the close of business on June 15 or December
15 immediately preceding the applicable Interest Payment
Date. A copy of the Indenture (defined Below), the
Registration Rights Agreement and all other agreements
affecting this Debenture or the Holders may be obtained from
the Company upon request.
Interest shall be computed on the basis of a 360-day
year consisting of twelve 30-day months. Interest shall accrue
from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of the original
issuance of this Debenture. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of 1% per
annum in excess of the then applicable interest rate on this
Debenture; it shall pay interest on overdue installments of
interest (without regard to any applicable grace periods) at the
same rate to the extent lawful.
Section 2. Method of Payment. The Company shall pay
interest on the Debentures (except defaulted interest) to
Holders at the close of business on the record date next
preceding the Interest Payment Date, even if such
Debentures are canceled after such record date and on or before
such Interest
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Payment Date. The Holder hereof must surrender this Debenture
to a Paying Agent (as defined in the Indenture) to collect
principal payments. The Company shall pay principal and
interest in money of the United States that at the time of
payment is legal tender for payment of public and private
debts. The Company, however, may pay principal and interest by
check payable in such money. It may mail an interest check to a
Holder's registered address.
Section 3. Paying Agent and Registrar. Initially, the
Trustee shall act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-Registrar
without notice to any Holder. The Company and any of its
Subsidiaries may act in any such capacity.
Section 4. Indenture. The Company issued the
Debentures under an Indenture, dated as of July 3, 1996 (the
"Indenture"), among the Company, the Subsidiary Guarantors
(as defined in the Indenture) and American Stock Transfer &
Trust Company, as Trustee. The terms of the Debentures include
those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code ss.ss. 77aaa-77bbbb), as amended by the Trust
Indenture Reform Act of 1990, and as in effect on the
date of the Indenture. The Debentures are subject to all
such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the
Indenture and the Debentures. Capitalized used herein that are
not defined herein shall have the meanings set forth in the
Indenture. The Debentures are unsecured general obligations
of the Company limited to $52,000,000 in aggregate principal
amount.
Section 5. Optional Redemption. The Company may
redeem at any time on or after July 15, 1999, all or any portion
of the Securities outstanding at the following redemption
prices expressed as a percentage of the principal amount
thereof, if the Securities are redeemed during the 12 month
period beginning July 15, of the following years:
Year Percentage
1999..................... 104%
2000..................... 103%
2001..................... 102%
2002..................... 101%
Section 6. Redemption or Repurchase at Option of Holder. If
there is a Change of Control (as defined in the Indenture), the
Company will be required to offer to purchase on the Change of
Control Payment Date (as defined in the Indenture) all
outstanding Debentures at 100% of the principal amount
thereof, plus accrued and unpaid interest to the date of
purchase. Holders whose Debentures are subject to an offer to
purchase will receive an offer to purchase from the Company
prior to any related Change of Control Payment Date and may
elect to have their Debentures purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below.
4
Section 7. Notice of Redemption. Notice of redemption
will be mailed at least 30 days but not more than 60 days
before the redemption date to each Holder to be redeemed at
its registered address. Debentures may be redeemed in part but
only in whole multiples of $1,000, unless all of the Debentures
held by a Holder are to be redeemed. On and after the
redemption date, interest ceases to accrue on Debentures or
portions of them called for redemption.
Section 8. Conversion. Subject to the provisions of
the Indenture, the Holder hereof has the right, at his
option, at any time on or after July 15, 1999 and on or before
the maturity, or, as to all or any portion hereof called for
redemption during such period, the close of business on the
date fixed for redemption (unless the Company shall default
in payment due upon redemption thereof), to convert the
principal hereof or any portion of such principal that is $1,000
or a multiple thereof, into (A) that number of shares of the
Company's Common Stock, as such shares shall be constituted
at the date of conversion, obtained by dividing the principal
amount of this Debenture or portion thereof to be converted by
the conversion price of $9.75, or such conversion price as
adjusted from time to time as provided in the Indenture,
and (B) if such conversion occurs after November 1, 1996, and
before July 1, 1999, an amount equal to 50% of the interest
otherwise payable on the converted securities from the date of
conversion through and including July 1, 1999, (the
"Premium Protection Payment"), such amount payable, at the
option of the Company, in cash or Common Stock based on the
Closing Price of the Common Stock on the conversion date, by
surrender of this Debenture, together with a conversion
notice as provided in the Indenture, to the Company at the
office or agency of the Company maintained for that purpose
in New York, New York, and, unless the shares issuable on
conversion are to be issued in the same name as this Debenture,
duly endorsed by, or accompanied by instruments of transfer in
form satisfactory to the Company duly executed by, the holder
or by his duly authorized attorney ; provided, however, that
no Premium Protection Payments will be made after the
consummation of an all cash tender offer for 100% of the Common
Stock at a price per share representing a 40% or greater
premium above the conversion price. No adjustments in respect
of interest or dividends will be made upon any
conversion; provided, however, that if the Debenture shall be
surrendered for conversion during the period from the close of
business on any record date for the payment of interest to the
opening of business on the following interest payment date,
this Debenture (unless it or the portion being converted
shall have been called for redemption on a date in such period)
must be accompanied by an amount, in funds acceptable to the
Company, equal to the interest payable on such interest
payment date on the principal amount being converted. No
fractional shares will be issued upon any conversion, but an
adjustment in cash shall be made, as provided in the
Indenture, in respect of any fraction of a share which would
otherwise be issuable upon the surrender of any Debenture or
Debentures for conversion. A holder of Debentures is not
entitled to any rights of a holder of Common Stock until such
holder has converted his Debentures to Common Stock, and
only to the extent such Debentures are to have been converted to
Common Stock under the Indenture.
Section 9. Subordination. The Securities are
subordinated to Senior Indebtedness (as defined in the
Indenture). To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid.
5
The Company agrees, and each Holder by accepting a Security
agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give effect to such
provisions, and each Holder appoints the Trustee his
attorney-in-fact for any and all such purposes.
Section 10. Denominations, Transfer, Exchange. The
Debentures are initially issued in global form. The global
Debenture represents such of the outstanding Securities as
shall be specified therein or endorsed thereon in accordance
with the Indenture. The definitive Securities are in registered
form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Debentures may be
registered and Debentures may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Debenture or portion of an
Debenture selected for redemption. Also, it need not exchange
or register the transfer of any Debentures for a period of 15
days before a selection of Debentures to be redeemed.
Section 11. Persons Deemed Owners. Before due
presentment to the Trustee for registration of the transfer
of this Debenture, the Trustee, any Agent and the Company may
deem and treat the person in whose name this Debenture is
registered as its absolute owner for the purpose of receiving
payment of principal of and interest on this Debenture
and for all other purposes whatsoever, whether or not this
Debenture is overdue, and neither the Trustee, any Agent nor
the Company shall be affected by notice to the contrary.
The registered holder of an Debenture shall be treated as
its owner for all purposes.
Section 12. Amendments and Waivers. Subject to certain
exceptions, the Indenture or the Securities may be amended with
the consent of the Holders of at least a majority in principal
amount of the then outstanding Securities, and any existing
default (except a payment default) may be waived with the
consent of the holders of a majority in principal amount
of the then outstanding Securities. Without the consent of
any Holder, the Indenture or the Securities may be amended to
cure any ambiguity, defect or inconsistency, to provide for
assumption of Company obligations to Holders or to make any
change that does not adversely affect the rights of any Holder.
Section 13. Defaults and Remedies. Events of default
include: default in payment of interest on the Securities
for 30 days; default in payment of principal of or premium on
the Securities when due; failure by the Company for 60 days
after notice to it to comply with its agreements in the
Indenture or the Securities; defaults under and acceleration
before express maturity of certain other Indebtedness that
aggregates $1,000,000 or more; certain final judgments which
remain undischarged if the aggregate of all such judgments
exceeds $1,000,000 or more; certain final judgments which
remain undischarged if the aggregate of all such judgments
exceeds $1,000,000; and certain events of bankruptcy or
insolvency. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Securities may declare all
the Securities to be due and payable immediately, except that
in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, all outstanding Securities become
due and
6
payable immediately without further action or notice and
all outstanding Securities, and all Obligations and Claims
with respect thereto, become immediately due and payable.
Holders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations,
Holders of a majority in principal amount of the then
outstanding Securities may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding
notice is in their interests. The Company must furnish an
annual compliance certificate to the Trustee.
Section 14. Trustee Dealings with Company. The
Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform
services for the Company, the Subsidiary Guarantors or their
Affiliates, and may otherwise deal with the Company, the
Subsidiary Guarantors or their Affiliates, as if it were not
Trustee; provided, however, that if the Trustee acquires any
conflicting interest as described in the Trust Indenture Act,
it must eliminate such conflict or resign.
Section 15. No Recourse Against Others. No director,
officer, employee, agent, manager, stockholder or other
Affiliates (other than the Subsidiary Guarantors), of the
Company or any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any of the
Subsidiary Guarantors under the Securities, the Indenture or
the Subsidiary Guarantees or for any claim based on, in
respect of or by reason of such obligations or their
creation. Each Holder by accepting a Debenture waives and
releases all such liability. The waiver and release are part of
the consideration for the issuance of the Debentures.
Section 16. Subsidiary Guarantees. Payment of
principal, premium (if any) and interest (including interest on
overdue principal and overdue interest, if lawful) is
unconditionally guaranteed by certain Subsidiaries of the
Company.
Section 17. Authentication. This Debenture shall
not be valid until authenticated by the manual signature of the
Trustee or an authenticating agent.
Section 18. Abbreviations. Customary abbreviations
may be used in the name of a Holder or an assignee, such as: TEN
COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST = Custodian),
and U/G/M/A (= Uniform Gifts to Minors Act).
Section 19. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security
Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Debentures and has directed
the Trustee to use CUSIP numbers in notices of redemption
as a convenience to Holders. No representation is made as to
the accuracy of such numbers either as printed on the
Debentures or as contained in any notice of redemption and
reliance may be placed only on the other identification number
placed thereon.
7
Section 20. Additional Rights of Holders of
Transfer Restricted Securities. In addition to the rights
provided to Holders of Securities under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights
set forth in the Registration Rights Agreement referred
to in the Indenture and certain other agreements executed
and delivered in connection therewith.
The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture. Request may
be made to:
Key Energy Group, Inc.
255 Livingston Avenue
New Brunswick, New Jersey 08901
Attn: Francis D. John
8
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we)
assign and transfer this Security to
_________________________________________________________________
_____________ (Insert assignee's soc. sec. or
tax I.D. no.)
_________________________________________________________________
_____________
_________________________________________________________________
_____________
_________________________________________________________________
_____________
_________________________________________________________________
_____________ (Print or type assignee's name,
address and zip code)
and irrevocably appoint
_____________________________________________________
___________________________________________________ agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
By: (THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (Banks, Stock Brokers, Savings and Loan
Associations, and Credit Unions) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15)
9
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this
Security purchased by the Company pursuant to Section 4.10 of
the Indenture (Change of Control), state the amount you
elect to have purchased (if all, write "ALL"):
$__________________________
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Security)
Signature Guaranteed:
By: (THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (Banks, Stock Brokers, Savings and Loan
Associations, and Credit Unions) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15)
10