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KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
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         1995 Stock Option Plan. On July 6, 1995, Key's  Compensation  Committee
adopted Key 1995 Stock Option Plan (the "1995 Plan") and granted certain options
under the 1995 Plan effective July 6, 1995 subject to the Board of Directors and
stockholder approval.  The Board approved the 1995 Plan and the option grants on
October 5, 1995.  Approval of the 1995 Plan is one of the items to be considered
at the Key Special Meeting.  (See "Proposals to be Voted upon at the Key Special
Meeting--Item 4: Adoption and Approval of the Key 1995 Stock Option Plan"). Upon
and subject to approval  of the 1995 Plan,  the Grant Plan will be canceled  and
will be replaced in its entirety by the 1995 Plan.

         The 1995 Plan provides for the grant of options  designed to qualify as
"incentive stock options" ("ISOs") within the meaning of Section 422 of the Code
and options not designed to qualify for such special tax treatment ("NSOs"),  to
purchase up to an  aggregate  of 1,150,000  shares of Key Common  Stock.  Unless
sooner  terminated,  the 1995 Plan will terminate on July 1, 2005 and no options
may be granted pursuant to the 1995 Plan after June 30, 2005. The 1995 Plan will
be administered  by the Committee  consisting of at least three (3) directors of
Key, each of whom is, to the extent so required,  both a "disinterested  person"
within the meaning of Rule 16b-3 of the Exchange  Act and an "outside  director"
within the  meaning  of  Section  162(b) of the Code.  The  Committee  currently
consists of Messrs. Greenfield, Manly and Wolkowitz.

         Subject  to  approval  by Key  stockholders,  options to  purchase  the
respective  number of shares of Key  Common  Stock  shown  below  were  granted,
effective  July 6, 1995,  to executive  officers and other key  employees of Key
under the 1995 Plan:

             Optionee                           Number of Shares

             Francis D. John                        500,000
             C. Ron Laidley                         125,000
             D. Kirk Edwards                        100,000
             Danny Evatt                             50,000
             Other key employees                    175,000
                         Total                      950,000

         All of such  options are  exercisable  at $5.00 per share,  the closing
price of Key Common Stock on July 6, 1995, the date of the grant,  and, with the
exception of 150,000  options  granted to Mr. John,  will generally vest in four
annual installments,  with the first installment to vest effective July 6, 1995,
subject to acceleration  of vesting upon the occurrence of certain events.  Upon
approval of the 1995 Plan by the stockholders,  compensation  expense associated
with these options will be recorded over the vesting period  beginning in fiscal
1996.  Compensation expense to be recognized over such period will be calculated
based on the  value of the  options  at the date 1995  Plan is  approved  by the
shareholders.  Options to purchase  150,000 shares granted to Mr. John will vest
on the first date (occurring on or after July 1, 1995 but prior to July 1, 1999)
on which the fair  market  value of Key Common  Stock  equals at least $9.50 per
share.  Compensation expense will be measured as the value of the options on the
first date on which vesting becomes  probable.  (See "Proposals to be Voted upon
at the Key Special  Meeting--Item 4: Adoption and Approval of the Key 1995 Stock
Option Plan.")