Exhibit 10.1

August 21, 2015

Mr. Richard J. Alario

Key Energy Services, Inc.

1301 McKinney Street

Suite 1800

Houston, Texas 77010

 

RE: Letter Agreement Regarding Continued Employment Terms

Dear Mr. Alario:

Key Energy Services, Inc. (the “Parent”) and Key Energy Services, LLC (the
“Company”) wish to enter into this letter agreement (the “Letter Agreement”)
with you (“you” or “Executive”) in order to address the circumstances of your
continued employment and future retirement from employment with the Parent and
the Company and the benefits due upon such retirement. Please carefully review
this Letter Agreement, and, if you agree, return a signed copy of your
acceptance as indicated below to Dwight W. Rettig, Interim General Counsel.

The Parent, the Company and Executive are parties to that certain Amended and
Restated Employment Agreement, entered into as of December 31, 2007, as amended
(the “Employment Agreement”). The Parent, the Company and Executive agree that
the Employment Agreement shall be amended and superseded as necessary to give
full effect to the terms and provisions of this Letter Agreement. Capitalized
terms not defined in this Letter Agreement shall have the meaning assigned to
such term in the Employment Agreement.

In consideration of the mutual agreements set forth herein and in the Employment
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parent, the Company and
Executive hereby agree as follows, effective as of August 21, 2015:

 

  1. Employment Position; Resignation as Chairman. The Parent agrees to continue
to employ Executive as its Chief Executive Officer, and Executive hereby accepts
such employment. Effective as of the date hereof, Executive resigns as Chairman
of the Board of Directors of Parent (the “Board”), but agrees to remain a member
of the Board.

 

  2. Term of Employment. Executive’s employment hereunder shall continue from
the date hereof until December 31, 2016 or such earlier date as the Board
requests Executive’s resignation (the “Retirement Date”). Effective on the
Retirement Date, Executive hereby resigns from his position as Chief Executive
Officer of the Parent, as a member of the Board and from any other officer or
director positions of any direct or indirect subsidiary of the Parent. Executive
agrees to take any and all further acts necessary to accomplish these
resignations.

 

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  3. Compensation Prior to the Retirement Date. During Executive’s employment
under the Letter Agreement, Executive shall be entitled to compensation and
benefits that are no less favorable to Executive than those provided to
Executive immediately prior to the date of this Letter Agreement, including,
without limitation, Base Salary, Equity-Based Incentives and incentive
opportunities under Performance Cash Compensation Plans.

 

  4. Good Reason Waiver. Executive hereby consents to, and shall not have Good
Reason as a result of, Executive’s replacement as the Chairman of the Board,
Executive’s retirement as Chief Executive Officer of the Parent and any other
resignations made pursuant to Section 2 of this Letter Agreement.

 

  5. Change in Control. Notwithstanding any of the provisions of this Letter
Agreement to the contrary, if a Change in Control occurs prior to the Retirement
Date, the following provisions shall apply: (i) upon a Change in Control
Executive shall be entitled to the benefits provided in Section 5(e) of the
Employment Agreement, as applicable, and (ii) if Executive’s employment is
terminated by Executive for Good Reason, by the Company not for Cause or by the
Company for Disability, any of which occur within one year after a Change in
Control, or if the Retirement Date occurs within one year after a Change in
Control, then upon termination of employment Executive shall be entitled to
(A) the same amount and form of the benefits provided under Section 6 of this
Letter Agreement and (B) an additional amount (the “Enhanced Severance Payment”)
equal to one (1) times the Base Salary paid in a lump sum on the date that is
sixty (60) days after the date of Executive’s termination. If Executive’s
termination is due to Disability, the amount of the Enhanced Severance Payment
shall be reduced by disability insurance proceeds as provided in
Section 5(d)(iii) of the Employment Agreement.

 

  6. Compensation and Benefits Due Upon the Retirement Date. Upon the Retirement
Date and subject to Executive’s execution of a release in a manner consistent
with Section 5(d)(iv) of the Employment Agreement, Executive shall be entitled
to the following:

 

  (a) Severance compensation in an aggregate amount equal to three (3) times the
Base Salary (at the rate in effect as of the date of termination, but not less
than $865,000 per year), payable in thirty-six (36) substantially equal monthly
installments commencing at the end of the calendar month in which the date of
termination occurs. Each subsequent monthly installment payment shall be paid on
or about the first day of the month to which it relates.

 

  (b) Continuation of benefits as provided in Section 5(f) of the Employment
Agreement;

 

  (c) Equity-Based Incentives held by Executive as of the Retirement Date shall
be treated as provided in Section 5(e)(i) of the Employment Agreement, with any
outstanding award of Performance Units becoming vested and paid as provided in
Section 5(b) of the applicable Performance Unit Award Agreement; and

 

  (d) Executive shall be eligible for payments under Performance Cash
Compensation Plans as if Executive satisfied all service requirements applicable
thereunder with respect to the calendar year in which the Retirement Date
occurs.

 

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For the avoidance of doubt, as of the Retirement Date, the Parent, the Company
and Executive anticipate that the level of Executive’s services to the Company
and its affiliates will permanently decrease such that Executive shall be
considered to have incurred a “separation from service” with the Parent, the
Company and their affiliates within the meaning of Treas. Reg. §
1.409A-1(h)(1)(ii) as of the Retirement Date.

 

  7. Termination of Employment Prior to December 31, 2016. If the Board requests
Executive’s resignation prior to December 31, 2016, or if Executive terminates
his employment for Good Reason (taking into account the waiver in Section 4 of
this Letter Agreement) prior to December 31, 2016, then Executive shall be
entitled to the compensation and benefits provided in Section 6; provided,
however, that if the Board has requested Executive’s resignation, the severance
amount in Section 6(a) shall be increased by the Base Salary at the rate in
effect at the time of resignation that would have been paid to Executive from
the date of termination through December 31, 2016 had Executive remained
employed through December 31, 2016; provided further that in no event shall the
severance amount in Section 6(a) be increased by more than 6 months Base Salary.

 

  8. No Adverse Cooperation. Executive agrees not to act in any manner that
might damage the business of the Parent, the Company and their partners,
subsidiaries, affiliates, and related companies and any predecessors thereto,
and its and their present and former agents, employees, officers, directors,
owners, stockholders, attorneys, insurers, plan fiduciaries, successors and
assigns, whether in their individual or official capacities (collectively, the
“Key Parties”). Executive further agrees that Executive will not knowingly
encourage, counsel, or assist any attorneys or their clients in the presentation
or prosecution of any disputes, differences, grievances, claims, charges or
complaints by any third party against any of the Key Parties unless under a
subpoena or other court order to do so. Executive agrees both to immediately
notify the Company upon receipt of any such subpoena or court order, and to
furnish, within three (3) business days of its receipt, a copy of such subpoena
or other court order to the Company. If approached by anyone for counsel or
assistance in the presentation or prosecution of any disputes, differences,
grievances, claims, charges or complaints against any of the Key Parties,
Executive shall state no more than that he cannot provide counsel or assistance.
This provision does not apply to any assistance or cooperation that Executive
may be asked to provide to the U.S. Securities and Exchange Commission (“SEC”)
or the U.S. Department of Justice (“DOJ”) in connection with the investigations
that are discussed in the Parent’s Form 10-K for the year ended December 31,
2014.

 

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  9. Cooperation. Executive agrees to cooperate, at the reasonable request of
the Key Parties, in the defense and/or prosecution of any charges, claims,
investigations (internal or external), administrative proceedings, and/or
lawsuits relating to matters occurring during Executive’s period of employment,
including, but not limited to, the investigations that are discussed in the
Parent’s Form 10-K for the year ended December 31, 2014, and to make himself
reasonably available upon request for interviews by the Parent and/or its
outside counsel as necessary to accomplish this requirement. Executive further
agrees to consider, in good faith, in consultation with his counsel as
applicable, requests from the SEC and/or DOJ, as well as from outside counsel of
the Parent, to cooperate with the SEC and/or DOJ in connection with any
investigations, including, but not limited to, investigations that are discussed
in the Parent’s Form 10-K for the year ended December 31, 2014, in such form and
extent that are required for the purposes of such investigations, and during the
entire period of their duration. The Company agrees to reimburse Executive for
travel costs and reasonable incidental expenses incurred in connection with such
cooperation. Executive acknowledges that any payment, advancement, or
reimbursement of legal fees incurred in connection with such cooperation will be
governed by the advancement and indemnification provisions of the Parent’s
Directors’ and Officers’ insurance policy, the Company’s charter documents, and
Maryland law. In performing Executive’s obligations under this paragraph to
testify or otherwise provide information, Executive will honestly, truthfully,
forthrightly, and completely provide the information requested. The parties
agree that notwithstanding any provision of this Letter Agreement or the
Employment Agreement to the contrary, neither this Letter Agreement nor the
Employment Agreement shall prevent Executive from disclosing information to
governmental authorities.

 

  10. Effect on Employment Agreement. The terms and provisions of the Employment
Agreement, including but not limited to Sections 6 through 16 and Sections 18
through 22, shall continue in effect; provided, however, that to the extent that
this Letter Agreement conflicts with the Employment Agreement, this Letter
Agreement shall supersede the Employment Agreement. For the avoidance of doubt,
this Letter Agreement shall not result in any duplication of benefits under the
Employment Agreement.

 

  11. Amendment; Governing Law. This Letter Agreement may not be amended,
supplemented, cancelled or discharged except by a written instrument executed by
the parties hereto. This Letter Agreement shall, in all respects, be
interpreted, enforced, and governed under the laws of the State of Texas, in the
federal or state courts in Harris County.

Signature Pages Follow

 

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KEY ENERGY SERVICES, INC. By:  

/s/ Robert Drummond

Robert Drummond President & Chief Operating Officer KEY ENERGY SERVICES, LLC By:
 

/s/ Robert Drummond

Robert Drummond President & Chief Operating Officer

 

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Executive’s Acceptance

As evidenced by my signature below, I hereby agree to the terms and provisions
of the Letter Agreement.

Agreed this 21st day of August, 2015.

 

/s/ Richard J. Alario

Richard J. Alario

 

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