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SEC Filings

KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
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shares received in the disqualifying  disposition,  over the ISO exercise price.
Any  excess of the sale price  over the fair  market  value of the shares on the
exercise date will be taxed as long-term  capital gain if the Option Shares were
held more than one year from the date of  exercise,  and as  short-term  capital
gain if held  for one  year or  less.  Section  424(c)  of the  Code  defines  a
"disposition"  of stock for this purpose as any sale,  gift or transfer of legal
title (except a transfer by will or  inheritance),  and most types of exchanges.
Optionees  will be  advised  that they  should  consult  their own tax  advisors
concerning the implications of the alternative minimum tax.

         Key  receives no tax  deduction on the grant or exercise of an ISO, but
is entitled to a tax  deduction if the  Optionee  recognizes  taxable  income on
account of a  disqualifying  disposition of ISO stock, in the same amount and at
the same time as the Optionee's recognition of ordinary compensation income.

         Alternative  Minimum Tax Treatment of ISOs. The alternative minimum tax
is payable by a taxpayer for a given year only to the extent that it exceeds his
tax liability determined by the regular method. A taxpayer's alternative minimum
taxable income  includes the difference  between the exercise price and the fair
market value of the Key Common Stock as of the time the taxpayer's rights in the
stock are  freely  transferable  or are not  subject  to a  substantial  risk of
forfeiture.  Thus,  if stock  acquired  through  the  exercise  of an ISO is not
subject to any  restrictions,  the  taxpayer  recognizes  this  difference,  for
alternative  minimum tax purposes,  in the year of exercise.  Basis of the stock
for  alternative  minimum  tax  purposes  is adjusted to reflect any income thus
realized.  The portion of a taxpayer's  alternative  minimum tax attributable to
the exercise of ISOs and other items of tax  preference is credited  against the
taxpayer's  regular tax  liability  in later years to the extent that  liability
exceeds the alternative minimum tax in those years.

         Exercise by Delivery of Stock.  In Revenue Ruling  80-244,  the Service
took the position that if an optionee pays part or all of the exercise  price of
an option by delivering  shares of stock already owned, the optionee  recognizes
no taxable gain on the shares delivered. The shares so received upon exercise of
the option are divided into two groups as to their  subsequent tax treatment.  A
number  of  shares  equal to the  number  of  shares  delivered  in  payment  is
considered  to be  received by the  optionee  in an exchange  subject to Section
1036(a) of the Code, so that the optionee's  basis and holding period in the new
shares are identical to his basis and holding  period in the old shares.  If the
optionee receives more shares than he delivers,  the additional shares are taxed
in accordance  with Section 83 (if the option is a NSO) or 422 (if the option is
an ISO). His basis in those shares is equal to the sum of the cash, if any, paid
on  exercise of the  option,  and the amount of  ordinary  income on which he is
taxed with respect to the shares under Section 83 or 422.

         This favorable tax treatment is unavailable with regard to the exercise
of an ISO by delivery  of stock  acquired  pursuant to another  ISO, a qualified
stock option,  an employee stock purchase plan option or a statutory  restricted
stock option,  if the statutory  holding period for the delivered  stock has not
been fulfilled.

         Restrictions  on  Resale  Imposed  by  Securities  Law.   Officers  and
directors  of Key,  and persons who own  beneficially  10% or more of Key Common
Stock are subject to Section  16(b) of the Exchange  Act,  which  requires  that
profits  made by them on any  purchase  and sale or sale and  purchase of equity
securities  of Key within any  six-month  period  inure to Key.  The grant of an