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S-4/A
KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
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         Debt  restructuring  costs - Debt  restructuring  costs represent costs
associated with the  restructuring  of the Renewal Notes in conjunction with the
June 1991 Recapitalization. The debt restructuring costs were being amortized to
interest  expense over the life of the Renewal  Notes.  During each of the years
1993 and 1992,  WellTech amortized  approximately  $80,000 of debt restructuring
costs. In connection with the January 1994 Recapitalization  discussed in Note 4
below, the remaining  unamortized debt restructuring  costs were included in the
debt converted to equity.

(3)      Financing -

         In January  1994,  WellTech  completed  a financial  restructuring  and
recapitalization  (the "1994  Recapitalization")  with its principal lenders and
shareholders.  As a  result,  WellTech's  $34  million  Renewal  Notes,  with  a
discounted  book  value of  approximately  $30.8  million,  plus the  associated
deferred interest payable, net of unamortized debt issue expense, were converted
into 277,436 shares of WellTech common stock.  Simultaneous with this conversion
of debt to equity,  Welltech sold 39,209 shares of common stock for $4.7 million
and issued a new term note for $3 million.

         A summary of outstanding long-term debt and capital lease obligation is
presented below (in thousands):

                                                       December 31,
                                                 1993             1994

         Renewal Notes                         $    -           $34,231
         Less unamortized discount                  -           ( 3,481)
                                                 ----           --------
                                                    -            30,750
         New Term Debt                          4,900             1,900
          Obligation under capital
            lease through 1995                     65               244
         Notes Payable                          2,453               399
                                               ------         ---------
          Total long-term debt and
            capital lease obligation            7,418            33,293
          Less current maturities                 798               511
                                              -------         ---------
          Long-term debt and capital
            lease obligation, less
             current maturities               $ 6,620           $32,782
                                              =======           =======

         In November 1992, certain lenders, who are also stockholders,  provided
a $2 million  loan to WellTech.  These funds were placed into a cash  collateral
account with WellTech's insurance provider to be used to pay future claims under
WellTech's self insurance  program.  In January 1994, the $1.9 million principal
balance  remaining  on this  note was  rolled  into new notes  with a  principal
balance of $4.9 million.  The accrued interest on the $1.9 million note was paid
through January 19, 1994, the date of the issuance of the new notes. Interest is
payable  semi-annually  on July 6 and  January 6  commencing  July 6, 1995.  All
principal and accrued and unpaid interest is payable in full by January 7, 1998.
The  interest  rate is 12% per  annum.  In  connection  with the bank  financing
concluded in January 1995,  discussed  below,  the accrued  interest on the $4.9
million notes was paid through January 6, 1995 and the terms of these notes were
modified.

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