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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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         SECTION 7.  Adjustments, Notices and Other Events.

                  (a) Adjustment of Exercise Price. Subject to the provisions of
         this Section 7, the Exercise Price in effect from time to time shall be
         subject to adjustment, as follows:

                           (i) In case the Company  shall (x) declare a dividend
                  or make a distribution on the outstanding shares of its Common
                  Stock  in  shares  of  its  Common  Stock,  (y)  subdivide  or
                  reclassify the  outstanding  shares of its Common Stock into a
                  greater  number of shares,  or (z) combine or  reclassify  the
                  outstanding  shares of its Common Stock into a smaller  number
                  of shares,  the Exercise Price in effect immediately after the
                  record date for such dividend or distribution or the effective
                  date  of such  subdivision,  combination  or  reclassification
                  shall be adjusted so that it shall equal the price  determined
                  by multiplying the Exercise Price in effect  immediately prior
                  thereto by a fraction, of which (A) the numerator shall be the
                  number  of  shares of  Common  Stock  outstanding  immediately
                  before such dividend, distribution,  subdivision,  combination
                  or reclassification, and of which (B) the denominator shall be
                  the number of shares of Common Stock  outstanding  immediately
                  after such dividend, distribution, subdivision, combination or
                  reclassification.  Any shares of Common  Stock of the  Company
                  issuable in payment of a dividend shall be deemed to have been
                  issued  immediately prior to the record date for such dividend
                  for purposes of calculating  the number of outstanding  shares
                  of Common  Stock of the Company  under  Section  7(a)(ii)  and
                  7(a)(iii)  hereof.  Such adjustment shall be made successively
                  whether any event specified above shall occur.

                           (ii) In case the Company  shall fix a record date for
                  the issuance of rights,  options,  warrants or  convertible or
                  exchangeable  securities  to all  holders of its Common  Stock
                  entitling them (for a period expiring  within  forty-five (45)
                  days after such  record  date) to  subscribe  for or  purchase
                  shares of its Common  Stock at a price per share less than the
                  Current  Market  Price (as such  term is  defined  in  Section
                  7(a)(iv)  hereof) of a share of Common Stock of the Company on
                  such  record  date,  the  Exercise  Price  shall  be  adjusted
                  immediately  thereafter  so  that it  shall  equal  the  price
                  determined  by  multiplying   the  Exercise  Price  in  effect
                  immediately  prior  thereto  by a  fraction,  of which (A) the
                  numerator  shall be the  number  of  shares  of  Common  Stock
                  outstanding  on such  record date plus the number of shares of
                  Common Stock which the aggregate  offering  price of the total
                  number of shares of Common Stock so offered would  purchase at
                  the  Current  Market  Price  per  share,  and of which (B) the
                  denominator  shall be the  number of  shares  of Common  Stock
                  outstanding  on such record date plus the number of additional
                  shares of Common Stock offered for  subscription  or purchase.
                  Such  adjustment  shall be made  successively  whenever such a
                  record  date is fixed.  To the  extent  that any such  rights,
                  options,  warrants or convertible or  exchangeable  securities
                  are not so issued or expire  unexercised,  the Exercise  Price
                  then in effect shall be readjusted to the Exercise Price which
                  would  then be in  effect  if  such  unissued  or  unexercised
                  rights,  options,  warrants  or  convertible  or  exchangeable
                  securities had not been issuable.

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