Exhibit 10.3

WARRANT AGREEMENT

dated as of December 15, 2016 between

KEY ENERGY SERVICES, INC.

and

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,

as Warrant Agent

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TABLE OF CONTENTS

 

         Page  

Article 1 Definitions

     1   

Section 1.01

 

Certain Definitions

     1   

Article 2 Issuance, Execution and Transfer of Warrants

     7   

Section 2.01

 

Issuance and Delivery of Warrants

     7   

Section 2.02

 

Execution and Authentication of Warrants

     8   

Section 2.03

 

Registration, Transfer, Exchange and Substitution

     8   

Section 2.04

 

Form of Warrant Certificates; Private Placement Legend

     9   

Section 2.05

 

Cancellation of the Warrant Certificates

     10   

Section 2.06

 

Limitations on Transfer of Plan Warrants

     10   

Section 2.07

 

Limitations on Transfer of Cash-Out Warrants

     10   

Article 3 Exercise and Settlement of Warrants

     11   

Section 3.01

 

Exercise of Warrants

     11   

Section 3.02

 

Procedure for Exercise

     11   

Section 3.03

 

Settlement of Warrants

     12   

Section 3.04

 

Delivery of Common Shares

     13   

Section 3.05

 

No Fractional Common Shares to Be Issued

     14   

Section 3.06

 

Acquisition of Warrants by Company

     14   

Section 3.07

 

Validity of Exercise

     14   

Section 3.08

 

Certain Calculations

     14   

Section 3.09

 

Reservation and Listing of Shares

     15   

Section 3.10

 

Charges, Taxes and Expenses

     15   

Article 4 Adjustments

     15   

Section 4.01

 

Adjustments to Exercise Price

     15   

Section 4.02

 

Adjustments to Number of Warrants

     17   

Section 4.03

 

Certain Distributions of Rights and Warrants; Stockholder Rights Plan

     17   

Section 4.04

 

Restrictions on Adjustments

     18   

Section 4.05

 

Adjustment upon Reorganization Transaction

     18   

Section 4.06

 

Successor upon Consolidation or Merger

     19   

Section 4.07

 

Common Shares Outstanding; Common Shares Reserved for Issuance on Exercise

     19   

Section 4.08

 

Calculations; Instructions to Warrant Agent

     20   

Section 4.09

 

Notice of Adjustment

     20   

Section 4.10

 

Statements on Warrants

     20   

Section 4.11

 

Effect of Adjustment

     20   

Section 4.12

 

Warrant Agent Not Responsible for Adjustments or Validity

     20   

Article 5 Cash Exit Transaction

     21   

Section 5.01

 

Cash Exit Transaction

     21   

Article 6 Other Provisions Relating to Rights of Warrantholders

     21   

Section 6.01

 

No Rights as Stockholders

     21   

Section 6.02

 

Mutilated or Missing Global Warrant Certificates

     21   

Section 6.03

 

Modification, Waiver and Meetings

     21   

Section 6.04

 

Reorganization Transaction

     22   

Article 7 Concerning the Warrant Agent and Other Matters

     22   

Section 7.01

 

Change of Warrant Agent

     22   

Section 7.02

 

Compensation; Further Assurances

     23   

Section 7.03

 

Reliance on Counsel

     23   

Section 7.04

 

Proof of Actions Taken

     23   

Section 7.05

 

Correctness of Statements

     24   

Section 7.06

 

Validity of Agreement

     24   

 

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TABLE OF CONTENTS

(continued)

 

Section 7.07

 

Use of Agents

     24   

Section 7.08

 

Liability of Warrant Agent

     24   

Section 7.09

 

Legal Proceedings

     24   

Section 7.10

 

Actions as Agent

     25   

Section 7.11

 

Appointment and Acceptance of Agency

     25   

Section 7.12

 

Successors and Assigns

     25   

Section 7.13

 

Notices

     25   

Section 7.14

 

Applicable Law; Jurisdiction

     26   

Section 7.15

 

Waiver of Jury Trial

     26   

Section 7.16

 

Benefit of this Warrant Agreement

     26   

Section 7.17

 

Registered Warrantholder

     26   

Section 7.18

 

Headings

     27   

Section 7.19

 

Counterparts

     27   

Section 7.20

 

Entire Agreement

     27   

Section 7.21

 

Severability

     27   

Section 7.22

 

Termination

     27   

Section 7.23

 

Confidentiality

     27   

 

Exhibit A-1

 

    Form of 4-Year Global Warrant Certificate

Exhibit A-2

 

    Form of 4-Year Individual Warrant Certificate

Exhibit B-1

 

    Form of 5-Year Global Warrant Certificate

Exhibit B-2

 

    Form of 5-Year Individual Warrant Certificate

Exhibit C-1

 

    Form of Global Warrant Exercise Notice

Exhibit C-2

 

    Form of Individual Warrant Exercise Notice

Exhibit D

 

    Fee Schedule

Exhibit E

 

    Initial Cash-Out Warrantholders

Exhibit F

 

    Private Placement Legend for Individual Warrant Certificates

Exhibit G

 

    Private Placement Legend for Cash-Out Warrant Shares Acquired Upon Exercise
of Individual Warrant Certificates

 

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WARRANT AGREEMENT

Warrant Agreement (as it may be amended from time to time, this “Warrant
Agreement”), dated as of December 15, 2016, between Key Energy Services, Inc., a
Delaware corporation (the “Company”), and American Stock Transfer & Trust
Company, LLC, a New York State chartered limited purpose trust company (the
“Warrant Agent”).

WITNESSETH THAT:

WHEREAS, pursuant to the terms and conditions of the Plan of Reorganization,
dated September 21, 2016 (the “Plan”), relating to the reorganization under
Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) of the
Company and certain of its direct Subsidiaries (as hereinafter defined), certain
holders of the Company’s common stock to be cancelled on the date the Plan
becomes effective (the “Initial Beneficial Owners”) are to be issued the 4-Year
Warrants and the 5-Year Warrants to purchase 919,090 Common Shares (as
hereinafter defined) in the aggregate at an exercise price of $43.52 per share
for the 4-Year Warrants and 919,090 Common Shares in the aggregate at an
exercise price of $54.40 per share for the 5-Year Warrants, as the same may be
adjusted pursuant to Article 4 hereof;

WHEREAS, the Warrants have the terms, conditions and rights set forth in this
Warrant Agreement (including the Exhibits hereto);

WHEREAS, the Company desires that the Warrant Agent act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, exchange, Transfer, substitution and exercise of Warrants;

WHEREAS, the Plan Warrants (as hereinafter defined) and the Common Shares
underlying the Plan Warrants have been offered and sold in reliance on the
exemption from the registration requirements of the Securities Act and any
applicable state securities or “blue sky” laws (the “Securities Law Registration
Requirements”) afforded by Section 1145(a)(2) of the Bankruptcy Code; and

WHEREAS, the Cash-Out Warrants (as hereinafter defined) and the Common Shares
underlying the Cash-Out Warrants have been offered and sold in reliance on the
exemption from the Securities Law Registration Requirements set forth in Section
4(a)(2) of the Securities Act and Rule 506 promulgated thereunder.

NOW THEREFORE in consideration of the mutual agreements herein contained, the
Company and the Warrant Agent agree as follows:

Article 1

Definitions

Section 1.01 Certain Definitions. As used in this Warrant Agreement, the
following terms shall have their respective meanings set forth below:

“4-Year Global Warrant” means a 4-Year Warrant in the form of a Global Warrant
Certificate.

“4-Year Global Warrant Certificate” means any certificate representing the
4-Year Warrants satisfying the requirements set forth in Section 2.04(a).

“4-Year Exercise Price” means $43.52 per share, subject to adjustment pursuant
to Article 4.

“4-Year Expiration Date” means the Close of Business on December 15, 2020.

“4-Year Individual Warrant” means a 4-Year Warrant in the form of an Individual
Warrant Certificate.

“4-Year Individual Warrant Certificate” means any certificate representing the
4-Year Warrants satisfying the requirements set forth in Section 2.04(b).

 

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“4-Year Warrants” means the warrants of the Company which expire on the 4-Year
Expiration Date and are issued pursuant to this Warrant Agreement with the
terms, conditions and rights set forth herein.

“5-Year Global Warrant” means a 5-Year Warrant in the form of a Global Warrant
Certificate.

“5-Year Global Warrant Certificate” means any certificate representing the
5-Year Warrants satisfying the requirements set forth in Section 2.04(a).

“5-Year Exercise Price” means $54.40 per share, subject to adjustment pursuant
to Article 4.

“5-Year Expiration Date” means the Close of Business on December 15, 2021.

“5-Year Individual Warrant” means a 5-Year Warrant in the form of an Individual
Warrant Certificate.

“5-Year Individual Warrant Certificate” means any certificate representing the
5-Year Warrants satisfying the requirements set forth in Section 2.04(b).

“5-Year Warrants” means the warrants of the Company which expire on the 5-Year
Expiration Date and are issued pursuant to this Warrant Agreement with the
terms, conditions and rights set forth herein.

“Affiliate” shall mean, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such first specified Person. For
the purposes of this definition, “control” when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

“Appropriate Officer” has the meaning set forth in Section 2.02(a).

“Authentication Order” means a Company Order for authentication and delivery of
the Warrants.

“Bankruptcy Code” has the meaning set forth in the Recitals.

“Beneficial Owner” means any Person beneficially owning an interest in a Global
Warrant, which interest is credited to the account of a direct participant in
the Depository for the benefit of such Person through the book-entry system
maintained by the Depository (or its agent). For the avoidance of doubt, a
Participant may also be a Beneficial Owner.

“Board” means the board of directors of the Company.

“Business Day” means any day other than a Saturday, a Sunday, a day which is a
legal holiday in the State of New York, or a day on which banking institutions
and trust companies in the State of New York are authorized or obligated by Law,
regulation or executive order to close.

“Cash” means such coin or currency of the United States as at any time of
payment is legal tender for the payment of public and private debts.

“Cash Exit Transaction” means any Reorganization Transaction in which the Common
Shares would be converted into, changed into or exchanged for consideration
consisting solely of Cash.

“Cash-Out Warrants” means those (i) Warrants issued to the Initial Cash-Out
Warrantholders pursuant to the Equity Holder Cash-Out Subscription and (ii) any
Warrants issued pursuant to this Warrant Agreement in replacement or
substitution of, or upon Transfer of, any Warrants referred to in clause (i).

“Cash-Out Warrant Shares” has the meaning set forth in Section 2.04(c).

“Close of Business” means 5:00 p.m., New York City time.

 

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“Closing Date” means the effective date of the Plan.

“Common Shares” means shares of the common stock, par value $0.01 per share, of
the Company.

“Common Shares Deemed Outstanding” means, at any given time, the sum of (a) the
number of Common Shares actually outstanding at such time, plus (b) the number
of Common Shares issuable upon conversion or exchange of Convertible Securities
actually outstanding at such time, regardless of whether the Convertible
Securities are actually exercisable at such time, plus (c) the number of Common
Shares reserved for issuance at such time under the Company’s New MIP or any
other equity incentive plan of the Company, regardless of whether the Common
Shares are actually subject to outstanding options at such time or whether any
outstanding options are actually exercisable at such time; provided, that Common
Shares Deemed Outstanding at any given time shall not include shares owned or
held by or for the account of the Company or any of its wholly-owned
subsidiaries.

“Company” has the meaning set forth in the Preamble.

“Company Order” means a written request or order signed in the name of the
Company by any Appropriate Officer and delivered to the Warrant Agent.

“Convertible Securities” means options, rights, warrants or other securities
convertible into or exchangeable or exercisable for Common Shares (including the
Warrants).

“Depository” means The Depository Trust Company, its nominees, and their
respective successors.

“Equity Holder Cash-Out Subscription” has the meaning set forth in the Plan.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and the related rules and regulations promulgated thereunder.

“Exercise Date” has the meaning set forth in Section 3.02(c).

“Ex-Date” means with respect to a dividend or distribution to holders of the
Common Shares, the first date on which the Common Shares can be traded without
the right to receive such dividend or distribution.

“Exercise Notice” means a Global Warrant Exercise Notice or an Individual
Warrant Exercise Notice, as the case may be.

“Exercising Owner” means any Beneficial Owner that exercises Plan Warrants
pursuant to the terms hereof or any Warrantholder that exercises Cash-Out
Warrants pursuant to the terms hereof.

“Exercise Price” means the 4-Year Exercise Price or the 5-Year Exercise Price,
as applicable.

“Expiration Date” means the 4-Year Expiration Date or the 5-Year Expiration
Date, as applicable.

“Fair Value,” as of a specified date, means the price per Common Share or per
unit of other Securities or other distributed property determined as follows:

(i) in the case of Common Shares or other Securities listed on the New York
Stock Exchange or the NASDAQ Stock Market, the VWAP of a Common Share or a
single unit of such other Security for the 20 Trading Days ending on, but
excluding, the specified date (or if the Common Shares or other Securities have
been listed for less than 20 Trading Days, the VWAP for such lesser period of
time);

(ii) in the case of Common Shares or other Securities listed on a U.S. exchange
other than the New York Stock Exchange or the NASDAQ Stock Market, the VWAP of a
Common Share or a single unit of such other Security in composite trading for
the principal U.S. national or regional securities exchange on which such
Securities are then listed for the 20 Trading Days ending on, but excluding, the
specified date (or if the Common Shares or other Securities have been listed for
less than 20 Trading Days, the VWAP for such lesser period of time);

 

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(iii) in the case of Common Shares or other Securities that are publicly traded
but are not listed on a U.S. exchange, the average of the reported bid and ask
prices of a Common Share or a single unit of such other Security in the
over-the-counter market on which such Securities are then traded for the 20
Trading Days ending on, but excluding, the specified date (or if the Common
Shares or other Securities have been publicly traded (but not listed) for less
than 20 Trading Days, the average of the reported bid and ask prices for such
lesser period of time); or

(iv) in all other cases, the fair value per Common Share or per unit of other
Securities or other distributed property as of a date not earlier than 20
Business Days preceding the specified date as determined in good faith by the
Board (subject to the provisions of Section 3.03(c));

provided, however, that in the case of a determination of Fair Value of a Common
Share as a result of a Cash Exit Transaction, such Fair Value shall be equal to
the amount of the Cash consideration payable in respect of one Common Share in
such Cash Exit Transaction.

“Full Physical Settlement” means the settlement method pursuant to which an
Exercising Owner shall be entitled to receive from the Company, for each Warrant
exercised, a number of Common Shares equal to the Full Physical Share Amount in
exchange for payment in Cash by the Exercising Owner of the applicable Exercise
Price.

“Full Physical Share Amount” means, for each Warrant exercised as to which Full
Physical Settlement is applicable, one Common Share.

“Funds Account” has the meaning set forth in Section 3.02(e) hereof.

“Global Warrants” means the 4-Year Global Warrants or the 5-Year Global
Warrants, as applicable.

“Global Warrant Certificates” means the 4-Year Global Warrant Certificates or
the 5-Year Global Warrant Certificates, as applicable.

“Global Warrant Exercise Notice” means, for any Global Warrant, an exercise
notice substantially in the form set forth in Exhibit C-1 hereto.

“Global Warrantholder” means the Person acting as the Depository or nominee of
the Depository in whose name the applicable Warrants are registered in the
Warrant Register. The initial Global Warrantholder shall be Cede & Co., as the
Depository’s nominee.

“Independent Appraiser” shall mean a United States investment banking firm or
valuation firm of national or regional standing in the United States which firm
does not, and whose directors and officers or Affiliates do not, have a direct
or indirect financial interest in or prior material relationship with the
Company or any of its Affiliates.

“Individual Warrants” means the 4-Year Individual Warrants or the 5-Year
Individual Warrants, as applicable.

“Individual Warrant Certificates” means the 4-Year Individual Warrant
Certificates or the 5-Year Individual Warrant Certificates, as applicable.

“Individual Warrant Exercise Notice” means, for any Individual Warrant, an
exercise notice substantially in the form set forth in Exhibit C-2 hereto.

“Initial Beneficial Owners” has the meaning set forth in the Recitals.

“Initial Cash-Out Warrantholders” means the Persons set forth on Exhibit E
hereto.

“Law” means any federal, state, local, foreign or provincial law, statute,
ordinance, rule, regulation, judgment, order, injunction, decree or agency
requirement having the force of law or any undertaking to or agreement with any
governmental authority, including common law.

 

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“Net Share Amount” means for each Warrant exercised as to which Net Share
Settlement is applicable, a fraction of a Common Share equal to (i) the Fair
Value (as of the Exercise Date for such Warrant) of one Common Share minus the
Exercise Price therefor divided by (ii) such Fair Value. The number of Common
Shares issuable upon exercise, on the same Exercise Date, of Warrants as to
which Net Share Settlement is applicable shall be aggregated for each Beneficial
Owner or Warrantholder, as applicable, with any fractional Common Share rounded
down to the nearest whole share as provided in Section 3.05. In no event shall
the Company deliver a fractional Common Share in connection with an exercise of
Warrants as to which Net Share Settlement is applicable.

“Net Share Settlement” means the settlement method pursuant to which an
Exercising Owner shall be entitled to receive from the Company, for each Warrant
exercised, a number of Common Shares equal to the Net Share Amount without any
payment of Cash therefor.

“New MIP” has the meaning set forth in the Plan.

“Number of Warrants” means the “Number of Warrants” specified on the face of the
applicable Warrant Certificate, subject to adjustment pursuant to Article 4.

“Objecting Owner” means any Exercising Owner that delivers a written objection
to the determination of Fair Value pursuant to Section 3.03(c).

“Officer’s Certificate” means a certificate signed by any Appropriate Officer.

“Open of Business” means 9:00 a.m., New York City time.

“Participant” means any direct participant of the Depository, the account of
which is credited with a beneficial interest in the Global Warrant for the
benefit of a Beneficial Owner through the book-entry system maintained by the
Depository (or its agent).

“Person” means an individual, partnership, firm, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.

“Plan” has the meaning set forth in the Recitals.

“Plan Warrants” means all Warrants other than the Cash-Out Warrants.

“Private Placement Legend” has the meaning set forth in Section 2.04(c).

“Record Date” means, with respect to any dividend, distribution or other
transaction or event in which the holders of Common Shares have the right to
receive any Cash, Securities or other property or in which Common Shares (or
another applicable Security) are exchanged for or converted into, or any
combination of, Cash, Securities or other property, the date fixed for
determination of holders of Common Shares entitled to receive such Cash,
Securities or other property or participate in such exchange or conversion
(whether such date is fixed by the Board or by statute, contract or otherwise).

“Reference Property” has the meaning set forth in Section 4.05(a).

“Reorganization Transaction” means any (i) sale, lease, license, or other
disposition of all or substantially all of the assets of the Company and its
subsidiaries, taken as a whole, (ii) sale, transfer or other disposition of all
or substantially all of the outstanding Common Shares, (iii) merger or
consolidation of the Company into or with another person or entity or
(iv) recapitalization, reorganization, consolidation, reclassification, change
in the outstanding Common Shares (other than changes resulting from a
subdivision or combination to which Section 4.01(a) applies), statutory share
exchange or other transaction, in each case as a result of which the Common
Shares would be converted into, changed into or exchanged for Securities or
other property or assets (including Cash) or any combination thereof.

“Securities” means (i) any capital stock (whether common stock or preferred
stock, voting or nonvoting), partnership, membership or limited liability
company interest or other equity or voting interest, (ii) any right, option,

 

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warrant or other security or evidence of indebtedness convertible into, or
exercisable or exchangeable for, directly or indirectly, any interest described
in clause (i), (iii) any notes, bonds, debentures, trust receipts and other
obligations, instruments or evidences of indebtedness, and (iv) any other
“securities,” as such term is defined or determined under the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the related rules and regulations promulgated thereunder.

“Securities Law Registration Requirements” has the meaning set forth in the
Recitals.

“Settlement Date” means, in respect of a Warrant that is exercised hereunder,
(a) in all circumstances other than a Net Share Settlement where Fair Value has
been determined by the Board pursuant to clause (iv) of the definition thereof,
the third Business Day immediately following the Exercise Date for such Warrant,
and (b) in the event of a Net Share Settlement where Fair Value has been
determined by the Board pursuant to clause (iv) of the definition thereof, the
third Business Day immediately following (1) the determination of Fair Value by
the Independent Appraiser, (2) the election by the Exercising Owner pursuant to
Section 3.03(c) to have Full Physical Settlement apply or (3) if neither clause
(1) nor clause (2) applies, the tenth (10th) day after receipt by the Exercising
Owner of notice of such Fair Value and supporting documentation regarding such
determination, as required by Section 3.03(c).

“Subsidiary” means, as to any Person, any corporation, partnership, limited
liability company or other organization, whether incorporated or unincorporated,
of which at least a majority of the securities or other interests having by
their terms voting power to elect a majority of the Board or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly beneficially owned or controlled by such party or by any
one or more of its subsidiaries, or by such party and one or more of its
subsidiaries.

“Trading Day” means each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which Securities are not traded on the applicable securities
exchange.

“Transfer” means, with respect to any Warrant, to directly or indirectly
(whether by act, omission or operation of law), sell, exchange, transfer,
hypothecate, negotiate, gift, convey in trust, pledge, assign, encumber, or
otherwise dispose of, or by adjudication of a Person as bankrupt, by assignment
for the benefit of creditors, by attachment, levy or other seizure by any
creditor (whether or not pursuant to judicial process), or by passage or
distribution of Warrants under judicial order or legal process, carry out or
permit the transfer or other disposition of, all or any portion of such Warrant.

“Transferee” means a Person to whom any Warrant (or interest in a Global
Warrant) is Transferred.

“Trigger Event” has the meaning set forth in Section 4.03(a)(i).

“Unit of Reference Property” has the meaning set forth in Section 4.05(a).

“VWAP” means, for any Trading Day, the price for Securities (including Common
Shares) determined by the daily volume weighted average price per unit of such
Securities for such Trading Day on the trading market on which such Securities
are then listed or quoted, in each case, for the regular trading session
(including any extensions thereof, without regard to pre-open or after hours
trading outside of such regular trading session) as reported on the New York
Stock Exchange or NASDAQ Stock Market, or if such Securities are not listed or
quoted on the New York Stock Exchange or NASDAQ Stock Market, as reported by the
principal U.S. national or regional securities exchange on which such Securities
are then listed or quoted, whichever is applicable, as published by Bloomberg at
4:15 p.m., New York City time (or 15 minutes following the end of any extension
of the regular trading session), on such Trading Day, or if such volume weighted
average price is unavailable or in manifest error, the price per unit of such
Securities using a volume weighted average price method selected by an
Independent Appraiser selected by the Board in good faith.

“Warrant” or “Warrants” means the 4-Year Warrants and/or the 5-Year Warrants, as
applicable.

“Warrant Agent” has the meaning set forth in the Preamble.

 

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“Warrant Agreement” has the meaning set forth in the Preamble.

“Warrant Certificates” means the Global Warrant Certificates and the Individual
Warrant Certificates.

“Warrantholder” means each Person in whose name Warrants are registered in the
Warrant Register.

“Warrant Register” has the meaning set forth in Section 2.03(a).

Article 2

Issuance, Execution and Transfer of Warrants

Section 2.01 Issuance and Delivery of Warrants.

(a) On the Closing Date, the Company shall issue and execute the Global Warrant
Certificates (in accordance with Section 2.02) evidencing an initial number of
Plan Warrants equal to 899,700 in the aggregate in the case of the 4-Year
Warrants and 899,700 in the aggregate in the case of the 5-Year Warrants (each
such Number of Warrants to be subject to adjustment from time to time as
described herein) in accordance with the terms of this Warrant Agreement and
deliver such Global Warrant Certificates to the Warrant Agent for
authentication, along with duly executed Authentication Orders. The Warrant
Agent shall then register such Global Warrants in the name of the Global
Warrantholder, which will then credit interests in such Global Warrants to the
accounts of the applicable Participants for the benefit of the applicable
Initial Beneficial Owners pursuant to the procedures of the Depository and in
accordance with the Plan on the Closing Date.

(b) On the Closing Date, the Company shall issue and execute the Individual
Warrant Certificates (in accordance with Section 2.02) evidencing an initial
number of Cash-Out Warrants equal to 19,390 in the aggregate in the case of the
4-Year Warrants and 19,390 in the aggregate in the case of the 5-Year Warrants
(each such Number of Warrants to be subject to adjustment from time to time as
described herein) in accordance with the terms of this Warrant Agreement and the
Plan and deliver such Individual Warrant Certificates to the Warrant Agent for
authentication, along with duly executed Authentication Orders. The Warrant
Agent shall then deliver such Individual Warrant Certificates to the respective
Initial Cash-Out Warrantholders.

(c) The Warrant Certificates shall each evidence one or more Warrants. Each
Warrant evidenced thereby shall be exercisable, in the event of Full Physical
Settlement, for one Common Share upon payment of the applicable Exercise Price
and compliance with the procedures set forth in this Warrant Agreement. On the
Closing Date, the Warrant Agent shall, upon receipt of such Global Warrants,
Individual Warrants and Authentication Orders, authenticate such Global Warrants
and Individual Warrants in accordance with Section 2.02 and register such Global
Warrants and Individual Warrants in the Warrant Register. The Global Warrants
and Individual Warrants shall be dated as of the Closing Date and, subject to
the terms hereof, shall evidence the only Warrants issued or outstanding under
this Warrant Agreement as of the Closing Date. The Global Warrant Certificates
shall be deposited on the Closing Date with the Warrant Agent as custodian for
the Depository.

(d) All 4-Year Warrants and all 5-Year Warrants issued under this Warrant
Agreement shall in all respects be equally and ratably entitled to their
respective benefits hereof, without preference, priority, or distinction on
account of the actual time of the issuance and authentication or any other terms
thereof. Each Warrant shall be, and shall remain, subject to the provisions of
this Warrant Agreement until such time as all of the Warrants evidenced thereby
shall have been duly exercised or shall have expired or been canceled in
accordance with the terms hereof. Each Beneficial Owner and Warrantholder shall
be bound by all of the terms and provisions of this Warrant Agreement as fully
and effectively as if such Beneficial Owner or Warrantholder had signed the
same.

(e) Any Warrant that is included in an Unclaimed Distribution referred to in
paragraph (3)(d) of Section E of Article VI of the Plan shall be deemed
cancelled and no longer outstanding for all purposes of this Warrant Agreement.

 

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Section 2.02 Execution and Authentication of Warrants.

(a) Each of the Warrant Certificates shall be executed on behalf of the Company
by a duly authorized officer (each such officer, an “Appropriate Officer”) of
the Company. The signature of any of the Appropriate Officers on the Warrant
Certificates may be in the form of a facsimile or other electronically
transmitted signature (including, without limitation, electronic transmission in
portable document format (.pdf)).

(b) Any of the Warrant Certificates bearing the signatures of individuals, each
of whom was, at the time he or she signed any of the Warrant Certificates or his
or her facsimile signature was affixed to such Warrant Certificates, as the case
may be, an Appropriate Officer, shall bind the Company, notwithstanding that
such individuals or any of them have ceased to be such an Appropriate Officer
prior to the authentication of such Warrant Certificate by the Warrant Agent or
was not such an Appropriate Officer at the date of such Warrant Certificate.

(c) No Warrant shall be entitled to any benefit under this Warrant Agreement or
be valid or obligatory for any purpose unless there appears on the applicable
Warrant Certificate a certificate of authentication substantially in the form
provided for herein executed by the Warrant Agent, and such signature upon any
of the Warrant Certificates shall be conclusive evidence, and the only evidence,
that such Warrant Certificate has been duly authenticated and delivered
hereunder. The signature of the Warrant Agent on any of the Warrant Certificates
may be in the form of a facsimile or other electronically transmitted signature
(including, without limitation, electronic transmission in portable document
format (.pdf)).

Section 2.03 Registration, Transfer, Exchange and Substitution.

(a) The Company shall cause to be kept at the office of the Warrant Agent, and
the Warrant Agent shall maintain, a register (the “Warrant Register”) in which
the Company shall provide for the registration of any Warrants and any
Transfers, exchanges or substitutions of any Warrant as provided herein. Any
Warrant issued upon any registration of Transfer or exchange of or substitution
for any Warrant shall be a valid obligation of the Company, evidencing the same
obligations, and entitled to the same benefits under this Warrant Agreement, as
any Warrant surrendered for such registration of Transfer, exchange or
substitution. Upon the Company’s request, the Warrant Agent shall provide to the
Company as soon as reasonably practicable a copy of the Warrant Register as of
the date of such request.

(b) Transfers of a Global Warrant shall be limited to Transfers in whole, and
not in part, to the Company, the Depository, their successors, and their
respective nominees. A Global Warrant may be Transferred to such parties upon
the delivery of a written instruction of Transfer in form reasonably
satisfactory to the Warrant Agent and the Company, duly executed by the Global
Warrantholder or by such Global Warrantholder’s attorney, duly authorized in
writing. No such Transfer shall be effected until, and the Transferee shall
succeed to the rights of the Global Warrantholder only upon, final acceptance
and registration of the Transfer in the Warrant Register by the Warrant Agent.
Prior to the registration of any Transfer of a Global Warrant by the Global
Warrantholder as provided herein, the Company, the Warrant Agent, and any agent
of the Company or the Warrant Agent may treat the Person in whose name such
Global Warrant is registered as the owner thereof for all purposes,
notwithstanding any notice to the contrary. To permit a registration of a
Transfer of a Global Warrant, the Company shall execute the Global Warrant
Certificates at the Warrant Agent’s request and the Warrant Agent shall
authenticate such Global Warrant Certificates. Any of such Global Warrant
Certificates shall be deposited on or after the date hereof with the Warrant
Agent. No service charge shall be made for any such registration of Transfer. A
party requesting transfer of a Global Warrant must provide any evidence of
authority that may be required by the Warrant Agent, including but not limited
to, a signature guarantee from an eligible guarantor institution participating
in a signature guarantee program approved by the Securities Transfer
Association, Inc.

(c) Interests of Beneficial Owners in a Global Warrant registered in the name of
the Depository or its nominee shall only be Transferred in accordance with the
procedures of the Depository, the applicable Participant and applicable Law.

(d) So long as any Global Warrant is registered in the name of the Depository or
its nominee, the Beneficial Owners shall have no rights under this Warrant
Agreement with respect to such Global Warrant held on their behalf by the
Depository, and the Depository may be treated by the Company, the Warrant Agent
and any agent of the Company or the Warrant Agent as the absolute owner of such
Global Warrant for all purposes. Accordingly, any such Beneficial Owner’s
interest in such Global Warrant will be shown only on, and the Transfer

 

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of such interest shall be effected only through, records maintained by the
Depository or its nominee or the applicable Participant, and neither the Company
nor the Warrant Agent shall have any responsibility or liability with respect to
such records maintained by the Depository or its nominee or the applicable
Participant. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Warrant Agent or any agent of the Company or the Warrant Agent from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair the operation of customary practices of
the Depository or Participants governing the exercise of the rights of a
Beneficial Owner.

(e) Cash-Out Warrants may be Transferred only upon surrender of the Individual
Warrant Certificate representing such Warrants for registration of Transfer.
Individual Warrant Certificates may be presented for registration of Transfer
and exchange at the offices of the Warrant Agent upon the delivery of a written
instruction of Transfer in form reasonably satisfactory to the Warrant Agent and
the Company, duly executed by the holder thereof or by such holder’s attorney,
duly authorized in writing. No such Transfer shall be effected until, and the
Transferee shall succeed to the rights of the holder thereof only upon, final
acceptance and registration of the Transfer in the Warrant Register by the
Warrant Agent. Prior to the registration of any Transfer of a Cash-Out Warrant
represented by an Individual Warrant Certificate as provided herein, the
Company, the Warrant Agent, and any agent of the Company or the Warrant Agent
may treat the Person in whose name such Individual Warrant Certificate is
registered as the owner thereof for all purposes, notwithstanding any notice to
the contrary. To permit a registration of a Transfer of a Cash-Out Warrant, the
Company shall execute any Individual Warrant Certificate at the Warrant Agent’s
request and the Warrant Agent shall authenticate such Individual Warrant
Certificate. No service charge shall be made for any such registration of
Transfer. A party requesting Transfer of a Cash-Out Warrant mush provide any
evidence of authority that may be required by the Warrant Agent, including but
not limited to, a signature guarantee from an eligible guarantor institution
participating in a signature guarantee program approved by the Securities
Transfer Association, Inc. If less than all Cash-Out Warrants represented by an
Individual Warrant Certificate are Transferred, exchanged or substituted in
accordance with this Warrant Agreement, the Individual Warrant Certificate shall
be surrendered to the Warrant Agent and a new Individual Warrant Certificate for
a Number of Warrants equal to the Cash-Out Warrants represented by such
individual Warrant Certificate that were not Transferred, exchanged or
substituted, registered in such name or names as may be directed in writing by
the surrendering Warrantholder, shall be executed by the Company and delivered
to the Warrant Agent along with a duly executed Authentication Order and the
Warrant Agent shall authenticate such new Individual Warrant Certificate and
shall deliver such new Individual Warrant Certificate to the Person or Persons
entitled to receive the same. Upon the written request of a Warrantholder,
subject to applicable Law and receipt by the Company of an opinion of counsel
(which may be in-house counsel of such holder) or seller’s representation letter
reasonably satisfactory to the Company indicating that the Cash-Out Warrants of
such Warrantholder are no longer “restricted securities” under the applicable
federal securities laws of the United States, the Company shall enable eligible
Cash-Out Warrants held by such Warrantholder to be “DTC eligible” so that such
Cash-Out Warrants may be held in book-entry form through the Depository. Once
such Cash-Out Warrants become “DTC eligible,” any Individual Warrant
Certificates representing such Cash-Out Warrants may be presented to the Warrant
Agent by such Warrantholder in exchange for one or more Global Warrants up to
the aggregate number of such Cash-Out Warrants, to be registered in the name of
the Depository, or its nominee, for crediting to the accounts of its
participants pursuant to the procedures of the Depository. Upon such
presentation, the Company may execute one or more Global Warrant Certificates
representing the aggregate number of such Cash-Out Warrants and deliver the same
to the Warrant Agent for authentication and delivery in accordance with
Section 2.02. Such Global Warrant Certificates shall be deposited with the
Warrant Agent as custodian for the Depository. An Individual Warrant Certificate
representing Cash-Out Warrants may not be exchanged for a Global Warrant except
upon satisfaction of the requirements set forth above.

Section 2.04 Form of Warrant Certificates; Private Placement Legend.

(a) Each of the Global Warrant Certificates shall be in substantially the form
set forth in Exhibit A-1 hereto and shall have such insertions as are
appropriate or required by this Warrant Agreement and may have such letters,
numbers or other marks of identification and such legends and endorsements,
stamped, printed, lithographed or engraved thereon, as the Company may deem
appropriate and as are not inconsistent with the provisions of this Warrant
Agreement, such as may be required to comply with this Warrant Agreement, any
Law or any rule of any securities exchange on which Warrants may be listed, and
such as may be necessary to conform to customary usage.

 

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(b) Each Individual Warrant Certificate shall be in substantially the form set
forth in Exhibit A-2 hereto and shall have such insertions as are appropriate or
required by this Warrant Agreement and may have such letters, numbers or other
marks of identification and such legends and endorsements, stamped, printed,
lithographed or engraved thereon, as the Company may deem appropriate and as are
not inconsistent with the provisions of this Warrant Agreement, such as may be
required to comply with this Warrant Agreement, any Law or any rule of any
securities exchange on which Warrants may be listed, and such as may be
necessary to conform to customary usage.

(c) Except as provided below, each Individual Warrant Certificate shall bear a
legend substantially to the effect set forth in Exhibit F. Common Shares
issuable upon exercise of Warrants represented by an Individual Warrant
Certificate (the “Cash-Out Warrant Shares”) shall bear a legend substantially to
the effect set forth in Exhibit G. Each of such legends is referred to herein as
a “Private Placement Legend”.

Upon any Transfer of a Cash-Out Warrant Share pursuant to Rule 144 under the
Securities Act or under an effective registration statement under the Securities
Act, the Company shall permit the holder of such Cash-Out Warrant Share to
exchange such Cash-Out Warrant Share for a Common Share that does not bear the
Private Placement Legend subject to the following sentence. In the case of a
Transfer of Cash-Out Warrant Shares pursuant to Rule 144 under the Securities
Act, an opinion of counsel (which may be in-house counsel of such holder) or
seller’s representation letter reasonably satisfactory to the Company shall be
tendered therewith indicating that there are no impediments to the removal of
such Private Placement Legend under the applicable federal securities laws of
the United States. Once the Private Placement Legend has been removed with
respect to a Cash-Out Warrant Share, upon the written request of the holder
thereof, the Company will cooperate with such holder to register such Cash-Out
Warrant Shares in the name of the Depository, or its nominee or custodian for
crediting to the accounts of its participants pursuant to the procedures of the
Depository.

Section 2.05 Cancellation of the Warrant Certificates. Any Warrant Certificate
shall be promptly cancelled by the Warrant Agent upon the earlier of (i) its
Expiration Date, (ii) the consummation of a Cash Exit Transaction (as provided
in Section 5.01), (iii) the mutilation of the Warrant Certificate as described
in Section 6.02, or (iv) registration of Transfer or exercise of all Warrants
represented thereby and, except as provided in this Article 2 in case of a
Transfer or Section 6.02 in case of mutilation, no Warrant Certificate shall be
issued hereunder in lieu thereof. The Warrant Agent shall deliver to the Company
from time to time or otherwise dispose of such cancelled Warrant Certificates as
the Company may direct.

Section 2.06 Limitations on Transfer of Plan Warrants. Notwithstanding any other
provision of this Warrant Agreement, the Plan Warrants are being offered and
sold, and the Common Shares issuable upon exercise thereof are being offered and
sold, pursuant to an exemption from the registration requirement of Section 5 of
the Securities Act provided by Section 1145 of the Bankruptcy Code, and to the
extent that any Beneficial Owner is an “underwriter” as defined in
Section 1145(b)(1) of the Bankruptcy Code, such Beneficial Owner may not be able
to Transfer any Plan Warrants or Common Shares issuable upon exercise thereof in
the absence of an effective registration statement under the Securities Act or
an exemption from registration thereunder. Notwithstanding anything contained in
this Warrant Agreement (but without limiting or modifying any express obligation
of the Warrant Agent hereunder), the Warrant Agent shall not be under any duty
or responsibility to ensure compliance by the Company, the Global Warrantholder,
any Beneficial Owner of Plan Warrants or Common Shares issuable upon exercise
thereof or any other Person with any applicable federal or state securities or
bankruptcy Laws. By accepting a Transfer of a Plan Warrant or Common Share
issuable upon exercise thereof, (x) the applicable Participant agrees to inform
the Beneficial Owner of the limitations on Transfer set forth in this
Section 2.06, and shall instruct and direct such Beneficial Owner to conform to
the restrictions set forth herein and shall maintain any applicable legends in
its books and records and (y) the Beneficial Owner acknowledges the foregoing.

Section 2.07 Limitations on Transfer of Cash-Out Warrants. Notwithstanding any
other provision of this Warrant Agreement, the Cash-Out Warrants and the
Cash-Out Warrant Shares are being offered and sold pursuant to an exemption from
the registration requirement of Section 5 of the Securities Act provided by
Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder.
Warrantholders and the holders of Cash-Out Warrant Shares may not be able to
Transfer any Cash-Out Warrants or Cash-Out Warrant Shares in the absence of an
effective registration statement under the Securities Act or an exemption from
registration thereunder. Notwithstanding anything contained in this Warrant
Agreement (but without limiting or modifying any express

 

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obligation of the Warrant Agent hereunder), the Warrant Agent shall not be under
any duty or responsibility to ensure compliance by the Company, any
Warrantholders or holders of Cash-Out Warrant Shares or any other Person with
any applicable federal or state securities or bankruptcy Laws.

Article 3

Exercise and Settlement of Warrants

Section 3.01 Exercise of Warrants. At any time prior to Close of Business on its
Expiration Date or cancellation pursuant to Section 2.05, each Warrant may be
exercised in accordance with this Article 3. Subject to Section 5.01 hereof, any
Warrants not exercised prior to their applicable Expiration Date shall expire
unexercised and all rights thereunder and all rights in respect thereof under
this Warrant Agreement shall cease as of the Close of Business on their
applicable Expiration Date.

Section 3.02 Procedure for Exercise.

(a) To exercise a Plan Warrant, a Beneficial Owner must arrange for (i) the
delivery of the Exercise Notice duly completed and executed by its applicable
Participant to the principal office of each of the Warrant Agent and the
Company, (ii) if Full Physical Settlement is elected, payment to the Warrant
Agent in an amount equal to the respective Exercise Price for each Warrant to be
exercised together with all applicable taxes and charges thereto (except for
taxes and charges for which the Company is responsible pursuant to
Section 3.10), (iii) delivery of each Warrant to be exercised through the
facilities of the Depository and (iv) compliance with all other procedures
established by the Depository, the applicable Participant and the Warrant Agent
for the exercise of Warrants.

(b) To exercise a Cash-Out Warrant, a Warrantholder must (i) surrender the
Individual Warrant Certificate evidencing such Cash-Out Warrant at the principal
office of the Warrant Agent, (ii) arrange for the delivery of the Exercise
Notice duly completed and executed to the principal office of each of the
Warrant Agent and the Company and (iii) if Full Physical Settlement is elected,
pay to the Warrant Agent an amount equal to the Exercise Price for each Warrant
to be exercised together with all applicable taxes and charges thereto (except
for such taxes and charges for which the Company is responsible pursuant to
Section 3.10).

(c) The date on which all the requirements for exercise set forth in this
Section 3.02 in respect of a Warrant are satisfied is the “Exercise Date” for
such Warrant.

(d) Subject to Section 3.02(f) and Section 3.02(g), any exercise of a Warrant
pursuant to the terms of this Warrant Agreement shall be irrevocable and
enforceable in accordance with its terms.

(e) All funds received by the Warrant Agent under this Warrant Agreement that
are to be distributed or applied by the Warrant Agent in the performance of
services in accordance with this Warrant Agreement (the “Funds”) shall be held
by the Warrant Agent as agent for the Company and deposited in one or more bank
accounts to be maintained by the Warrant Agent in its name as agent for the
Company (the “Funds Account”). Until paid pursuant to the terms of this Warrant
Agreement, the Warrant Agent will hold the Funds through the Funds Account in
deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or
with an average rating above investment grade by S&P (LT Local Issuer Credit
Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default
Rating), each as reported by Bloomberg Finance L.P. The Warrant Agent shall have
no responsibility or liability for any diminution of the Funds that may result
from any deposit made by the Warrant Agent in accordance with this paragraph,
including any losses resulting from a default by any bank, financial institution
or other third party. The Warrant Agent may from time to time receive interest,
dividends or other earnings in connection with such deposits.

(f) The Company shall use commercially reasonable efforts to assist and
cooperate with any Exercising Owner required to make any governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
a Warrant (including, without limitation, making any filings required to be made
by the Company), and any exercise of a Warrant may be made contingent upon the
making of any such filing and the receipt of any such approval.

 

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(g) Notwithstanding any other provision of this Warrant Agreement, if the
exercise of any Warrant is to be made in connection with a registered public
offering or a Reorganization Transaction, such exercise may, upon proper
election in the Exercise Notice, be conditioned upon consummation of such
offering or transaction in which case such exercise shall not be deemed
effective until the consummation of such offering or transaction.

(h) The Warrant Agent shall forward funds deposited in the Funds Account in a
given week by the fifth Business Day of the following week by wire transfer to
an account designated by the Company.

(i) In the case of Full Physical Settlement, payment of the applicable Exercise
Price upon exercise of Warrants shall be by federal wire or other immediately
available funds payable to the account maintained by the Warrant Agent in its
name as agent for the Company. The Warrant Agent shall provide an exercising
Beneficial Owner or Warrantholder, as the case may be, upon request, with the
appropriate payment instructions.

Section 3.03 Settlement of Warrants.

(a) Full Physical Settlement shall apply to each Warrant unless the Exercising
Owner elects for Net Share Settlement to apply upon exercise of such Warrant.
Such election shall be made in the Exercise Notice for such Warrant or as
otherwise provided in Section 3.03(c).

(b) If Full Physical Settlement applies to the exercise of a Warrant, upon the
proper and valid exercise thereof by an Exercising Owner, the Company shall
cause to be delivered to the Exercising Owner, the Full Physical Settlement
Amount on the Settlement Date.

(c) If Net Share Settlement applies to the exercise of a Warrant and Fair Value
has been determined by the Board pursuant to clause (iv) of the definition
thereof, then the Company shall provide each Exercising Owner with written
notice of such Fair Value and supporting documentation regarding such
determination as reasonably requested by such Exercising Owner. An Exercising
Owner may, within 10 days after its receipt of notice of such Fair Value and
supporting documentation:

(1) deliver to the Company and the Warrant Agent a written objection to such
determination, in which case the Fair Value shall be determined by an
Independent Appraiser selected by the Company in good faith, subject to the
following:

(i) The Independent Appraiser’s determination shall be based upon the fair
market value of the Company determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant factors
determinative of value. In determining the Fair Value of any Common Shares, no
consideration shall be given to any restrictions on transfer of the Common
Shares imposed by agreement or by federal or state securities laws, or to the
existence or absence of, or any limitations on, voting rights; and

(ii) The Independent Appraiser shall be instructed to deliver a written opinion
regarding Fair Value within 30 days after submission to it of such objection.
Such opinion shall be final and binding on the Company and the Objecting Owner.
The reasonable costs and expenses of the Independent Appraiser in making such
determination shall be borne equally by the Company and the Objecting Owner; or

(2) elect to have Full Physical Settlement apply to the exercise of each such
Warrant by (x) delivering written notice of such election to the Company and the
Warrant Agent, and (y) making payment to the Warrant Agent in an amount equal to
the Exercise Price for each such Warrant together with all applicable taxes and
charges thereto (except for taxes and charges for which the Company is
responsible pursuant to Section 3.10).

(d) If Net Share Settlement applies to the exercise of a Warrant, upon the
proper and valid exercise thereof by an Exercising Owner, the Company shall
cause to be delivered to the Exercising Owner, the Net Share Amount on the
Settlement Date, with any fractional Common Share rounded down to the nearest
whole share as provided in Section 3.05.

 

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(e) If there is a dispute as to the determination of the applicable Exercise
Price or the calculation of the number of Common Shares to be delivered to an
Exercising Owner, the Company shall cause to be promptly delivered to the
Exercising Owner, the number of Common Shares that is not in dispute.

Section 3.04 Delivery of Common Shares.

(a) In connection with the exercise of Warrants, the Warrant Agent shall:

(1) examine all Exercise Notices and all other documents delivered to it to
ascertain whether, on their face, such Exercise Notices and any such other
documents have been executed and completed in accordance with their terms;

(2) where an Exercise Notice or other document appears on its face to have been
improperly completed or executed or some other irregularity in connection with
the exercise of the Warrant exists, endeavor to inform the appropriate parties
(including the Person submitting such instrument) of the need for fulfillment of
all requirements, specifying those requirements which appear to be unfulfilled;

(3) inform the Company of and cooperate with and assist the Company in resolving
any reconciliation problems between the Exercise Notices received and delivery
of Warrants to the Warrant Agent’s account;

(4) advise the Company with respect to an exercise, no later than three Business
Days following the satisfaction of each of the applicable procedures for
exercise set forth in Section 3.02(a) or Section 3.02(b), as the case may be, of
(v) the receipt of such Exercise Notice and the number of Warrants exercised in
accordance with the terms and conditions of this Warrant Agreement, (w) if Full
Physical Settlement applies, the number of Common Shares to be delivered by the
Company, (x) the instructions with respect to issuance of the Common Shares,
subject, in the case of exercise of a Global Warrant, to the timely receipt from
the Depository of the necessary information, (y) the number of Persons who will
become holders of record of the Company (who were not previously holders of
record) as a result of receiving Common Shares upon exercise of the Warrants and
(z) such other information as the Company shall reasonably require;

(5) promptly deposit in the Funds Account all Funds received in payment of the
applicable Exercise Price in connection with Full Physical Settlement of
Warrants;

(6) promptly cancel and destroy the applicable Warrant Certificate if all
Warrants represented thereby have been exercised in full and deliver a
certificate of destruction to the Company, unless the Company shall otherwise
direct in writing;

(7) if all Warrants represented by a Warrant Certificate shall not have been
exercised in full, (i) in respect of a Global Warrant Certificate, note and
authenticate such decrease in the Number of Warrants on Schedule A of such
Global Warrant Certificate and (ii) in respect of an Individual Warrant
Certificate, deliver a new Individual Warrant Certificate, authenticated by the
Warrant Agent, for the balance of the number of Warrants represented by the
surrendered Individual Warrant Certificate; and

(8) provide to the Company, upon the Company’s request, the number of Warrants
previously exercised, the number of Common Shares issued in connection with such
exercises and the number of remaining outstanding Warrants.

 

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(b) With respect to each properly exercised Warrant in accordance with this
Warrant Agreement, the Company shall cause its transfer agent to issue, in
book-entry form at the transfer agent or through the Depository, the Common
Shares due in connection with such exercise for the benefit and in the name of
the Person designated by the Beneficial Owner or Warrantholder submitting the
applicable Exercise Notice. The Person on whose behalf and in whose name any
Common Shares are registered shall for all purposes be deemed to have become the
holder of record of such Common Shares as of the Close of Business on the
applicable Exercise Date.

(c) Promptly after the Warrant Agent shall have taken the action required by
this Section 3.04 (or at such later time as may be mutually agreeable to the
Company and the Warrant Agent), the Warrant Agent shall account to the Company
with respect to the consummation of any exercise of any Warrants.

Section 3.05 No Fractional Common Shares to Be Issued.

(a) Notwithstanding anything to the contrary in this Warrant Agreement, the
Company shall not be required to issue any fraction of a Common Share upon
exercise of any Warrants.

(b) If any fraction of a Common Share would, except for the provisions of this
Section 3.05, be issuable on the exercise of any Warrants, the Company shall
instead round down to the nearest whole share the number of Common Shares that
such Person designated in the applicable Exercise Notice shall receive. All
Warrants exercised by a Beneficial Owner or Warrantholder on the same Exercise
Date shall be aggregated for purposes of determining the number of Common Shares
to be delivered pursuant to Section 3.04(b).

(c) Each Beneficial Owner and Warrantholder, by its acceptance of an interest in
a Warrant, expressly waives its right to any fraction of a Common Share upon its
exercise of such Warrant.

Section 3.06 Acquisition of Warrants by Company. The Company shall have the
right, except as limited by Law, to purchase or otherwise to acquire one or more
Warrants at such times, in such manner and for such consideration as agreed by
the Company and the applicable Beneficial Owner or Warrantholder.

Section 3.07 Validity of Exercise. All questions as to the validity, form and
sufficiency (including time of receipt) of a Warrant exercise shall be
determined by the Company in good faith, which determination shall be final and
binding with respect to the Warrant Agent. The Warrant Agent shall incur no
liability for or in respect of and, except to the extent such liability arises
from the Warrant Agent’s gross negligence, willful misconduct or bad faith (as
determined by a court of competent jurisdiction in a final non-appealable
judgment), shall be indemnified and held harmless by the Company for acting or
refraining from acting upon, or as a result of such determination by the
Company. The Company reserves the absolute right to waive any of the conditions
to the exercise of Warrants or defects in Exercise Notices with regard to any
particular exercise of Warrants.

Section 3.08 Certain Calculations.

(a) The Warrant Agent shall be responsible for performing all calculations, save
for in the case of Net Share Settlements, required in connection with the
exercise and settlement of the Warrants as described in this Article 3. In
connection therewith, the Warrant Agent shall provide prompt written notice to
the Company, in accordance with Section 3.04(a)(4), of the number of Common
Shares deliverable upon exercise and settlement of Warrants. The Company shall
be responsible for all calculations and determinations required in connection
with any Net Share Settlements and shall provide written notification to the
Warrant Agent of the Net Share Amount to be issued on the Settlement Date for
any Net Share Settlement. For the avoidance of doubt, the Warrant Agent shall
not be responsible for performing the calculations set forth in Article 4 or the
calculations delegated to the Independent Appraiser in accordance with this
Warrant Agreement.

(b) The Warrant Agent shall not be accountable with respect to the validity or
value of any Common Shares or Units of Reference Property that may at any time
be issued or delivered upon the exercise of any Warrant, and it makes no
representation with respect thereto. The Warrant Agent shall not be responsible,
to the extent not arising from the Warrant Agent’s gross negligence, willful
misconduct or bad faith (as determined by a court of competent jurisdiction in a
final non-appealable judgment), for any failure of the Company to issue,
transfer or deliver any Common Shares or Units of Reference Property, or to
comply with any of the covenants of the Company contained in this Article 3.

 

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Section 3.09 Reservation and Listing of Shares. The Company will at all times
reserve and keep available, out of its authorized but unissued Common Shares,
solely for the purpose of providing for the exercise of the Warrants, the
aggregate number of Common Shares then issuable upon exercise of the Warrants at
any time. The Company will use its commercially reasonable efforts to
(A) procure, at its sole expense, the listing of the Common Shares issuable upon
exercise of the Warrants (other than Cash-Out Warrant Shares that contain a
Private Placement Legend) at any time, subject to issuance or notice of
issuance, on all principal stock exchanges on which the Common Shares are then
listed or traded and (B) maintain such listings of such Common Shares at all
times after issuance. The Company will use commercially reasonable efforts to
ensure that the Common Shares may be issued without violation of any applicable
law or regulation or of any requirement of any securities exchange on which the
Common Shares are listed or traded.

Section 3.10 Charges, Taxes and Expenses. Issuance of the Warrants and issuance
of Common Shares upon the exercise of the Warrants shall be made without charge
for any issue or transfer tax or other incidental expense in respect of the
issuance thereof, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any Transfer involved in the issuance and delivery
of such Warrants or Common Shares (including certificates therefor) in a name
other than the Beneficial Owner or Warrantholder of the Warrant surrendered upon
exercise or Transfer of the Warrant, and the Company shall not be required to
issue or deliver such Warrants or Common Shares, as applicable, unless and until
the Persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.

Article 4

Adjustments

Section 4.01 Adjustments to Exercise Price. After the date on which the Warrants
are first issued and while any Warrants remain outstanding and unexpired, the
Exercise Prices shall be subject to adjustment (without duplication) upon the
occurrence of any of the following events:

(a) The issuance of Common Shares as a dividend or distribution to all holders
of Common Shares, or a subdivision, combination, split, reverse split or
reclassification of the outstanding Common Shares into a greater or smaller
number of Common Shares, in which event the Exercise Prices shall be adjusted
based on the following formula:

 

E1 = E0 x

 

N0

    N1  

where:

 

E1    =    the applicable Exercise Price in effect immediately after (i) the
Open of Business on the Ex-Date in the case of a dividend or distribution or
(ii) the consummation of the transaction in the case of a subdivision,
combination, split, reverse split or reclassification; E0    =    the applicable
Exercise Price in effect immediately prior to (i) the Open of Business on the
Ex-Date in the case of a dividend or distribution or (ii) the consummation of
the transaction in the case of a subdivision, combination, split, reverse split
or reclassification; N0    =    the number of Common Shares Deemed Outstanding
immediately prior to (i) the Open of Business on the Record Date in the case of
a dividend or distribution or (ii) the consummation of the transaction in the
case of a subdivision, combination, split, reverse split or reclassification;
and N1    =    the number of Common Shares equal to (i) in the case of a
dividend or distribution, the sum of the number of Common Shares Deemed
Outstanding immediately prior to the Open of Business on the Record Date for
such dividend or distribution plus the total number of Common Shares issued
pursuant to such dividend or distribution or (ii) in the case of a subdivision,
combination, split, reverse split or reclassification, the number of Common
Shares Deemed Outstanding immediately after such subdivision, combination,
split, reverse split or reclassification.

 

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Such adjustment shall become effective immediately after (i) the Open of
Business on the Ex-Date in the case of a dividend or distribution or (ii) the
consummation of the transaction in the case of a subdivision, combination,
split, reverse split or reclassification. If any dividend or distribution or
subdivision, combination, split, reverse split or reclassification of the type
described in this Section 4.01(a) is declared or announced but not so paid or
made, the Exercise Prices shall again be adjusted to the applicable Exercise
Prices that would then be in effect if such dividend or distribution or
subdivision, combination, split, reverse split or reclassification had not been
declared or announced, as the case may be.

(b) The issuance as a dividend or distribution to all holders of Common Shares
of evidences of indebtedness, Securities of the Company or any other Person
(other than Common Shares), Cash or other property (excluding any dividend or
distribution covered by Section 4.01(a)), in which event the Exercise Prices
will be adjusted based on the following formula:

 

E1 = E0 x

 

P – FMV

    P  

where:

 

E1    =    the applicable Exercise Price in effect immediately after the Open of
Business on the Ex-Date for such dividend or distribution; E0    =    the
applicable Exercise Price in effect immediately prior to the Open of Business on
the Ex-Date for such dividend or distribution; P    =    the Fair Value of a
Common Share as of immediately prior to the Open of Business on the second
Business Day preceding the Ex-Date for such dividend or distribution; and FMV   
=    the Fair Value of the portion of such dividend or distribution applicable
to one Common Share as of the Open of Business on the date of such dividend or
distribution.

Such decrease shall become effective immediately after the Open of Business on
the Ex-Date for such dividend or distribution. In the event that such dividend
or distribution is declared or announced but not so paid or made, the Exercise
Prices shall again be adjusted to be the Exercise Prices which would then be in
effect if such distribution had not been declared or announced.

(c) If any single action would require adjustment of the Exercise Prices
pursuant to more than one subsection of this Section 4.01, only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest, relative to the rights and interests of the registered holders of the
Warrants then outstanding, absolute value.

(d) The Company may from time to time, to the extent permitted by Law, decrease
the Exercise Prices and/or increase the Number of Warrants by any amount for any
period of at least twenty days. In that case, the Company shall give the Global
Warrantholder, the Warrantholders and the Warrant Agent at least ten days’ prior
written notice of such increase or decrease, and such notice shall state the
applicable decreased Exercise Prices and/or increased Number of Warrants and the
period during which the decrease and/or increase will be in effect. The Company
may make such decreases in the Exercise Prices and/or increases in the Number of
Warrants, in addition to those set forth in this Article 4, as the Board deems
advisable, including to avoid or diminish any income tax to holders of the
Common Shares resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes.

(e) Notwithstanding this Section 4.01 or any other provision of this Warrant
Agreement or the Warrants, if an Exercise Prices adjustment becomes effective on
any Ex-Date, and a Warrant has been exercised

 

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on or after such Ex-Date and on or prior to the related Record Date resulting in
the Person issued Common Shares being treated as the record holder of the Common
Shares on or prior to the Record Date, then, notwithstanding the Exercise Prices
adjustment provisions in this Section 4.01, the Exercise Prices adjustment
relating to such Ex-Date will not be made with respect to such Warrant. Instead,
such Person will be treated as if it were the record owner of Common Shares on
an un-adjusted basis and participate in the related dividend, distribution or
other event giving rise to such adjustment.

Section 4.02 Adjustments to Number of Warrants. Concurrently with any adjustment
to the Exercise Prices under Section 4.01, the Number of Warrants in respect of
each Warrant Certificate will be adjusted such that the Number of Warrants in
effect immediately following the effectiveness of such adjustment will be equal
to the Number of Warrants in effect immediately prior to such adjustment,
multiplied by a fraction, (i) the numerator of which is the applicable Exercise
Price in effect immediately prior to such adjustment and (ii) the denominator of
which is the applicable Exercise Price in effect immediately following such
adjustment.

Section 4.03 Certain Distributions of Rights and Warrants; Stockholder Rights
Plan.

(a) (i) Rights or warrants distributed by the Company to all holders of Common
Shares entitling the holders thereof to subscribe for or purchase the Company’s
Securities (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events (a “Trigger
Event”):

(1) are deemed to be transferred with such Common Shares;

(2) are not exercisable; and

(3) are also issued in respect of future issuances of Common Shares,

shall be deemed not to have been distributed for purposes of Article 4 (and no
adjustment to the Exercise Price or the Number of Warrants under this Article 4
will be made) until the occurrence of the earliest Trigger Event, whereupon such
rights and warrants shall be deemed to have been distributed and an appropriate
adjustment (if any is required) to the Exercise Prices and the Number of
Warrants shall be made under this Article 4 (subject in all respects to
Section 4.04).

(ii) If any such right or warrant is subject to events, upon the occurrence of
which such rights or warrants become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the date of the
occurrence of any and each such event shall be deemed to be the date of
distribution and Record Date with respect to new rights or warrants with such
rights (subject in all respects to Section 4.03(b)).

(iii) In addition, except as set forth in Section 4.03(b), in the event of any
distribution (or deemed distribution) of rights or warrants, or any Trigger
Event or other event (of the type described in clause (ii) above) with respect
thereto that was counted for purposes of calculating a distribution amount for
which an adjustment to the Exercise Prices and the Number of Warrants under
Article 4 was made:

(1) in the case of any such rights or warrants that shall all have been redeemed
or repurchased without exercise by the holders thereof, the Exercise Prices and
the Number of Warrants shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, equal to the per share redemption or repurchase price received by a holder
or holders of Common Shares with respect to such rights or warrants (assuming
such holder had retained such rights or warrants) made to all holders of Common
Shares as of the date of such redemption or repurchase; and

(2) in the case of such rights or warrants that shall have expired or been
terminated without exercise by the holders thereof, the Exercise Prices and the
Number of Warrants shall be readjusted as if such rights and warrants had not
been issued or distributed.

 

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(b) If the Company has a stockholder rights plan in effect with respect to the
Common Shares, upon exercise of a Warrant the holder shall be entitled to
receive, in addition to the Common Shares, the rights under such stockholder
rights plan, unless, prior to such exercise, such rights have separated from the
Common Shares, in which case the Exercise Prices and the Number of Warrants
shall be adjusted at the time of separation as if the Company had made a
distribution to all holders of Common Shares as described in the first paragraph
of Section 4.01(b), subject to readjustment in the event of the expiration,
termination or redemption of such rights.

Section 4.04 Restrictions on Adjustments.

(a) No adjustment shall be made to the 4-Year Exercise Price or the 5-Year
Exercise Price under Section 4.01, nor will any corresponding adjustment be made
to the Number of Warrants under Section 4.02, unless the adjustment would result
in a change of at least 1% of the 4-Year Exercise Price or the 5-Year Exercise
Price, as the case may be; provided, however, that any adjustment of less than
1% that was not made by reason of this Section 4.04(a) shall be carried forward
and made as soon as such adjustment, together with any other adjustments not
previously made by reason of this Section 4.04(a), would result in a change of
at least 1% in the aggregate. All calculations under this Article 4 shall be
made to the nearest cent or to the nearest 1/100th of a Common Share, as the
case may be.

(b) In no event shall the Company adjust the 4-Year Exercise Price or the 5-Year
Exercise Price or make a corresponding adjustment to the number of Common Shares
issuable upon exercise of any Warrant to the extent that the adjustment would
reduce the applicable Exercise Price below the par value of the Common Shares.

(c) No adjustment shall be made to the 4-Year Exercise Price or the 5-Year
Exercise Price under Section 4.01, nor will any corresponding adjustment be made
to the Number of Warrants under Section 4.02, upon: (i) the issuance of any
Securities by the Company on the Effective Date and pursuant to the Plan,
(ii) the issuance of any Common Shares pursuant to any present or future plan
providing for the reinvestment of dividends or interest payable on the Company’s
Securities and the investment of additional optional amounts in Common Shares
under any plan, (iii) the issuance of Securities by the Company to employees,
officers, directors or consultants of the Company or its Subsidiaries pursuant
to the New MIP or other management or director incentive plans or stock or stock
option compensation plans, including pursuant to any employment, severance or
consulting agreements, or (iv) a change in par value of the Common Shares.

(d) If the Company takes a record of the holders of Common Shares for the
purpose of entitling them to receive a dividend or other distribution, and
thereafter (and before the dividend or distribution has been paid or delivered
to members) legally abandons its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment to the Exercise Prices or the Number
of Warrants then in effect shall be required by reason of the taking of such
record.

Section 4.05 Adjustment upon Reorganization Transaction.

(a) If there occurs any Reorganization Transaction (other than a Cash Exit
Transaction) while any Warrants remain outstanding and unexpired, then following
the effective time of the Reorganization Transaction, the right to receive
Common Shares upon exercise of a Warrant shall be changed to a right to receive,
upon exercise of such Warrant, the kind and amount of shares of stock, other
securities or other property or assets (including Cash or any combination
thereof) (the “Reference Property”) that a holder of one Common Share would have
owned or been entitled to receive in connection with such Reorganization
Transaction (such kind and amount of Reference Property per Common Share, a
“Unit of Reference Property”). In the event holders of Common Shares have the
opportunity to elect the form of consideration to be received in a
Reorganization Transaction, the type and amount of consideration into which the
Warrants shall be exercisable from and after the effective time of such
Reorganization Transaction shall be deemed to be the weighted average of the
types and amounts of consideration received by the holders of Common Shares in
such Reorganization Transaction. The Company hereby agrees not to become a party
to any Reorganization Transaction unless its terms are consistent with this
Section 4.05.

 

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(b) At any time from, and including, the effective time of a Reorganization
Transaction:

(1) each Warrant shall be exercisable for a single Unit of Reference Property
instead of one Common Share; and

(2) any calculation of Fair Value shall be made with respect to a Unit of
Reference Property.

(c) On or prior to the effective time of any Reorganization Transaction, the
Company or the successor or purchasing Person, as the case may be, shall execute
an amendment to this Warrant Agreement providing that the Warrants shall be
exercisable for Units of Reference Property in accordance with the terms of this
Section 4.05. If the Reference Property in connection with any Reorganization
Transaction includes shares of stock or other securities and assets of a Person
other than the successor or purchasing Person, as the case may be, in such
Reorganization Transaction, then the Company shall cause such amendment to this
Warrant Agreement to be executed by such other Person and such amendment shall
contain such additional provisions to protect the interests of the Global
Warrantholder (for the benefit of the Beneficial Owners) and the Warrantholders
as the Board shall reasonably consider necessary by reason of the foregoing. Any
such amendment to this Warrant Agreement shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 4. In the event the Company shall execute an amendment to
this Warrant Agreement pursuant to this Section 4.05, the Company shall promptly
file with the Warrant Agent an Officer’s Certificate briefly stating the reasons
therefor, the kind or amount of Cash, securities or property or assets that will
comprise a Unit of Reference Property after the relevant Reorganization
Transaction, any adjustment to be made with respect thereto and that all
conditions precedent have been complied with. The Company shall cause notice of
the execution of the amendment to be mailed to the Global Warrantholder and the
Warrantholders within 20 Business Days after execution thereof.

(d) The above provisions of this Section 4.05 shall similarly apply to
successive Reorganization Transactions.

Section 4.06 Successor upon Consolidation or Merger.

(a) The Company may consolidate or merge with another Person only (i) if the
Company is the surviving Person or (ii) if the Company is not the surviving
Person, then:

(1) the successor to the Company assumes all of the Company’s obligations under
this Warrant Agreement; and

(2) the successor to the Company provides written notice of such assumption to
the Warrant Agent prior to the consummation of such consolidation or merger,
together with such identifying corporate information as may be reasonably
requested by the Warrant Agent.

(b) Such successor to the Company thereafter may cause to be signed, and may
issue any or all of, the Global Warrants issuable pursuant to this Warrant
Agreement which theretofore shall not have been issued by the Company; and, upon
the order of such successor Person, instead of the Company, and subject to all
the terms, conditions and limitations in this Warrant Agreement, the Warrant
Agent shall authenticate and deliver, as applicable, any Global Warrants that
previously shall have been signed and delivered by the officers of the Company
to the Warrant Agent for authentication, and any Warrants which such successor
to the Company thereafter shall cause to be signed and delivered to the Warrant
Agent for such purpose.

Section 4.07 Common Shares Outstanding; Common Shares Reserved for Issuance on
Exercise.

(a) For the purposes of this Article 4, the number of Common Shares at any time
outstanding shall not include Common Shares held, directly or indirectly, by the
Company or any of its Subsidiaries.

(b) Such number of Common Shares as will be issuable upon the exercise of all
outstanding Warrants for Common Shares have been authorized and reserved for
issuance. The Company covenants that all Common Shares that shall be so issuable
shall be duly and validly issued, fully paid and non-assessable.

 

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(c) The Company agrees to authorize and direct its current and future transfer
agents for the Common Shares to reserve for issuance the number of Common Shares
specified in this Section 4.07 and shall take all action required to increase
the authorized number of Common Shares if at any time there shall be
insufficient authorized but unissued Common Shares to permit such reservation or
to permit the exercise of a Warrant. Promptly after each of the Expiration
Dates, the Warrant Agent shall certify to the Company the aggregate Number of
Warrants then outstanding, and thereafter no Common Shares shall be required to
be reserved in respect of such Warrants.

Section 4.08 Calculations; Instructions to Warrant Agent. The Company shall be
responsible for making all calculations called for under this Article 4 for
purposes of determining any adjustments to the Exercise Prices and the Number of
Warrants, including determinations as to Fair Value and the composition of Units
of Reference Property. Such calculations and determinations shall be final and
binding on the Global Warrantholder and all Beneficial Owners and Warrantholders
absent manifest error. The Company shall provide a schedule of the Company’s
calculations and determinations to the Warrant Agent, and the Warrant Agent is
entitled to rely upon the accuracy of the Company’s calculations without
independent verification.

Section 4.09 Notice of Adjustment. The Company shall mail, or cause to be
mailed, to the Global Warrantholder, the Warrantholders and the Warrant Agent,
in accordance with Section 7.13, a notice of any adjustment or readjustment to
the Exercise Prices or the Number of Warrants no less than three Business Days
prior to the effective date of such adjustment or readjustment. The Company
shall file with the Warrant Agent such notice and an Officer’s Certificate
setting forth such adjustment or readjustment and kind and amount of securities,
Cash or other property for which a Warrant shall thereafter be exercisable and
the applicable Exercise Price, showing in reasonable detail the facts upon which
such adjustment or readjustment is based. The Officer’s Certificate shall be
conclusive evidence that the adjustment or readjustment is correct, and the
Warrant Agent shall not be deemed to have any knowledge of any adjustments or
readjustments unless and until it has received such Officer’s Certificate. The
Warrant Agent shall not be under any duty or responsibility with respect to any
such Officer’s Certificate except to exhibit the same to the Global
Warrantholder and the Warrantholders.

Section 4.10 Statements on Warrants. Other than notation of any applicable
increase or decrease in the Number of Warrants on Schedule A of each Global
Warrant Certificate, the form of each Global Warrant Certificate need not be
changed because of any adjustment or readjustment made pursuant to this
Article 4, and Global Warrant Certificates issued after such adjustment or
readjustment may state the same information (other than the applicable adjusted
Exercise Price and the adjusted Number of Warrants) as are stated in the Global
Warrant Certificates initially issued pursuant to this Warrant Agreement.

Section 4.11 Effect of Adjustment. The Depository and applicable Participants
shall effect any applicable adjustments, changes or payments to the Beneficial
Owners with respect to beneficial interests in the Global Warrants resulting
from any adjustments or readjustments, changes or payments effected pursuant to
this Article 4 in accordance with the procedures of the Depository and the
applicable Participants.

Section 4.12 Warrant Agent Not Responsible for Adjustments or Validity. The
Warrant Agent shall at no time be under any duty or responsibility to determine
whether any facts exist that may require an adjustment or readjustment of the
Exercise Prices and the Number of Warrants, or with respect to the nature or
extent of any such adjustment or readjustment when made, or with respect to the
method employed, herein or in any supplemental agreement provided to be
employed, in making the same. The Warrant Agent shall have no duty to verify or
confirm any calculation called for hereunder. The Warrant Agent shall have no
liability for any failure or delay in performing its duties hereunder caused by
any failure or delay of the Company in providing such calculations to the
Warrant Agent. The Warrant Agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any Common Shares or of any
Securities or property which may at any time be issued or delivered upon the
exercise of any Warrant or upon any adjustment or readjustment pursuant to this
Article 4, and it makes no representation with respect thereto. The Warrant
Agent shall not be responsible for any failure of the Company to make any Cash
payment or to issue, transfer or deliver any Common Shares or stock certificates
or other securities or property or scrip upon the surrender of any Warrant for
the purpose of exercise or upon any adjustment pursuant to this Article 4, or to
comply with any of the covenants of the Company contained in this Article 4. The
Warrant Agent shall have no implied duties or obligations and shall not be
charged with knowledge or notice of any fact or circumstance not specifically
set forth herein or in any notice from the Company. The Warrant Agent may rely

 

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conclusively, and shall be protected in acting, upon any notice, instruction,
request, order, judgment, certification, opinion or advice of counsel,
statement, demand or other instrument or document, not only as to its due
execution, validity (including the authority of the person signing or presenting
the same) and effectiveness, but also as to the truth and accuracy of any
information contained therein, which the Warrant Agent shall believe to be
genuine and to have been signed or presented by the person or parties purporting
to sign the same.

Article 5

Cash Exit Transaction

Section 5.01 Cash Exit Transaction. Upon consummation of a Cash Exit
Transaction, all unexercised Warrants shall be automatically cancelled for no
consideration; provided, however, that in the case of a Cash Exit Transaction in
which the Cash consideration paid per Common Share exceeds the exercise price of
any Warrant, each such Warrant shall be deemed to have been, for all purposes,
exercised immediately prior to consummation of such Cash Exit Transaction for
the Net Share Amount.

Article 6

Other Provisions Relating to Rights of Warrantholders

Section 6.01 No Rights as Stockholders. Nothing contained in this Warrant
Agreement or in any Warrant Certificate shall be construed as conferring upon
any Person, by virtue of holding or having a beneficial interest in a Warrant,
the right to vote, to consent, to receive any Cash dividends, stock dividends,
allotments or rights or other distributions paid, allotted or distributed or
distributable to the holders of Common Shares, or to exercise any rights
whatsoever as a stockholder of the Company unless, until and only to the extent
such Persons become holders of record of Common Shares issued upon settlement of
Warrants.

Section 6.02 Mutilated or Missing Global Warrant Certificates. If any Warrant
Certificate is mutilated, defaced, lost, destroyed or stolen, then on the terms
set forth in this Warrant Agreement, such Warrant Certificate may be replaced
with a new Warrant Certificate, of like date and tenor and representing the same
number of Warrants, at the cost of the Company at the office of the Warrant
Agent subject to the replacement procedures of the Warrant Agent which shall
include obtaining an open penalty surety bond satisfactory to the Warrant Agent
holding the Company and the Warrant Agent harmless. Any such new Warrant
Certificate shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
Certificate shall be at any time enforceable by anyone. All Warrant Certificates
shall be issued upon the express condition that the foregoing provisions are
exclusive with respect to the substitution for lost, stolen, mutilated or
destroyed Warrant Certificates, and shall preclude any and all other rights or
remedies notwithstanding any Law or statute existing or hereafter enacted to the
contrary with respect to the substitution for and replacement of negotiable
instruments or other securities without their surrender.

Section 6.03 Modification, Waiver and Meetings.

(a) This Warrant Agreement may be modified or amended by the Company and the
Warrant Agent, without the consent of any Warrantholder, any Beneficial Owner of
any Warrant, or any applicable Participant with respect to any Warrant, for the
purposes of curing any ambiguity or correcting or supplementing any defective
provision contained in this Warrant Agreement or to make any other provisions in
regard to matters or questions arising in this Warrant Agreement which the
Company and the Warrant Agent may deem necessary or desirable; provided that
such modification or amendment does not adversely affect the interests of the
Warrantholders or the Beneficial Owners in any material respect. As a condition
precedent to the Warrant Agent’s execution of any amendment, the Company shall
deliver to the Warrant Agent a certificate from an Appropriate Officer that
states that the proposed amendment is in compliance with the terms of this
Section 6.03.

(b) Modifications and amendments to this Warrant Agreement or to the terms and
conditions of Warrants not contemplated by Section 6.03(a) may also be made by
the Company and the Warrant Agent, and noncompliance with any provision of the
Warrant Agreement or Warrants may be waived, by the Beneficial Owners and
Warrantholders (pursuant to a proper vote or consent of a majority of the
Warrants at the time outstanding).

 

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(c) However, no modification, amendment or waiver may, without the written
consent of the Beneficial Owners and Warrantholders of the 4-Year Warrants (if
such modification, amendment or waiver relates to the 4-Year Warrants) or the
5-Year Warrants (if such modification, amendment or waiver relates to the 5-Year
Warrants), pursuant to a proper vote or consent of each applicable Warrant:

(A) change the applicable Expiration Date; or

(B) increase the applicable Exercise Price or decrease the applicable Number of
Warrants (except as set forth in Article 4).

Section 6.04 Reorganization Transaction. In the event of any Reorganization
Transaction, then, and in each such case, the Company will mail or cause to be
mailed to the Global Warrantholder and each other Warrantholder, as promptly as
reasonably practicable upon execution of the agreement providing for such
Reorganization Transaction, a notice specifying the effective date on which such
Reorganization Transaction is or is expected to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Shares (or such
other stock or Securities at the time deliverable upon the exercise of a
Warrant) shall be entitled to exchange their Common Shares (or such other stock
or Securities) for Securities or other property deliverable upon such
Reorganization Transaction.

Article 7

Concerning the Warrant Agent and Other Matters

Section 7.01 Change of Warrant Agent.

(a) The Warrant Agent, or any successor to it hereafter appointed, may resign
its duties and be discharged from all further duties and liabilities hereunder
(except for liability arising as a result of the Warrant Agent’s own gross
negligence, willful misconduct or bad faith) after giving sixty (60) days’
notice in writing to the Company, except that such shorter notice may be given
as the Company shall, in writing, accept as sufficient. If the office of the
Warrant Agent becomes vacant by resignation or incapacity to act or otherwise,
the Company shall appoint in writing a successor warrant agent in place of the
Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated warrant agent or by
the Global Warrantholder or Beneficial Owners and Warrantholders representing a
majority of the Warrants at the time outstanding, then the Global Warrantholder
or Beneficial Owners and Warrantholders representing a majority of the Warrants
at the time outstanding may appoint a successor warrant agent.

(b) The Warrant Agent may be removed by the Company at any time upon thirty
(30) days’ written notice to the Warrant Agent; provided, however, that the
Company shall not remove the Warrant Agent until a successor warrant agent
meeting the qualifications hereof shall have been appointed; provided, further,
that, until such successor warrant agent has been appointed, the Company shall
compensate the Warrant Agent in accordance with Section 7.02.

(c) Any successor warrant agent, whether appointed by the Company or by such a
court, shall be a corporation or banking association organized, in good standing
and doing business under the Laws of the United States of America or any state
thereof or the District of Columbia, and authorized under such Laws to exercise
corporate trust powers and subject to supervision or examination by federal or
state authority and having a combined capital and surplus of not less than
$50,000,000. The combined capital and surplus of any such successor warrant
agent shall be deemed to be the combined capital and surplus as set forth in the
most recent report of its condition published prior to its appointment; provided
that such reports are published at least annually pursuant to Law or to the
requirements of a federal or state supervising or examining authority. After
acceptance in writing of such appointment by the successor warrant agent, such
successor warrant agent shall be vested with all the authority, powers, rights,
immunities, duties and obligations of its predecessor warrant agent with like
effect as if originally

 

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named as warrant agent hereunder, without any further act or deed; but if for
any reason it becomes necessary or appropriate, the predecessor warrant agent
shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor warrant agent all the authority, powers and
rights of such predecessor warrant agent hereunder; and upon request of any
successor warrant agent, the Company shall make, execute, acknowledge and
deliver any and all instruments in writing to more fully and effectually vest in
and conform to such successor warrant agent all such authority, powers, rights,
immunities, duties and obligations. Upon assumption by a successor warrant agent
of the duties and responsibilities hereunder, the predecessor warrant agent
shall deliver and transfer, at the expense of the Company, to the successor
warrant agent any property at the time held by it hereunder. As soon as
practicable after such appointment, the Company shall give notice thereof to the
predecessor warrant agent, the Global Warrantholder and each transfer agent for
its Common Shares. Failure to give such notice, or any defect therein, shall not
affect the validity of the appointment of the successor warrant agent.

(d) Any entity into which the Warrant Agent may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
Person succeeding to all or substantially all of the corporate trust or agency
business of the Warrant Agent, shall be the successor warrant agent under this
Warrant Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided that such entity would be
eligible for appointment as a successor warrant agent under Section 7.01(c). In
case at the time such successor to the Warrant Agent shall succeed to the agency
created by this Warrant Agreement, any Global Warrant Certificate shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent and deliver such
Global Warrant Certificate so countersigned, and in case at that time any Global
Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Global Warrant Certificate either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant Agent;
and in all such cases such Global Warrant Certificate shall have the full force
provided in the Global Warrant Certificate and in this Warrant Agreement.

(e) In case at any time the name of the Warrant Agent shall be changed and at
such time any Global Warrant Certificate shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Global Warrant Certificate so countersigned; and in case
at that time any Global Warrant Certificate shall not have been countersigned,
the Warrant Agent may countersign such Global Warrant Certificate either in its
prior name or in its changed name; and in all such cases such Global Warrant
Certificate shall have the full force provided in the Global Warrant Certificate
and in this Warrant Agreement.

Section 7.02 Compensation; Further Assurances. The Company agrees that it will
(a) pay the Warrant Agent reasonable compensation for its services as Warrant
Agent in accordance with Exhibit D attached hereto and, except as otherwise
expressly provided, will pay or reimburse the Warrant Agent upon written demand
for all reasonable and documented expenses, disbursements and advances incurred
or made by the Warrant Agent in accordance with any of the provisions of this
Warrant Agreement (including the reasonable and documented compensation,
expenses and disbursements of its counsel incurred in connection with the
execution and administration of this Warrant Agreement), except any such
expense, disbursement or advance as may arise from its or any of their gross
negligence, willful misconduct or bad faith, and (b) perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
of the provisions of this Warrant Agreement. The Warrant Agent agrees to provide
the Company with prior written notice of the retention of counsel whose
compensation, expenses and disbursements are to be paid or reimbursed by the
Company under this Section 7.02.

Section 7.03 Reliance on Counsel. The Warrant Agent may consult with legal
counsel (who may be legal counsel for the Company), and the written opinion of
such counsel or any advice of legal counsel subsequently confirmed by a written
opinion of such counsel shall be full and complete authorization and protection
to the Warrant Agent as to any action taken or omitted by it in good faith and
in accordance with such written opinion or advice.

Section 7.04 Proof of Actions Taken. Whenever in the performance of its duties
under this Warrant Agreement the Warrant Agent shall deem it necessary or
desirable that any matter be proved or established by the

 

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Company prior to taking or suffering or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of bad faith on the part of the Warrant Agent,
be deemed to be conclusively proved and established by an Officer’s Certificate
delivered to the Warrant Agent; and such Officer’s Certificate shall, in the
absence of bad faith on the part of the Warrant Agent, be relied upon by the
Warrant Agent for any action taken, suffered or omitted in good faith by it
under the provisions of this Warrant Agreement; but in its discretion the
Warrant Agent may in lieu thereof accept other evidence of such fact or matter
or may require such further or additional evidence as to it may seem reasonable.

Section 7.05 Correctness of Statements. The Warrant Agent shall not be liable
for or by reason of any of the statements of fact or recitals contained in this
Warrant Agreement or any Warrant Certificate (except its countersignature
thereof) or be required to verify the same, and all such statements and recitals
are and shall be deemed to have been made by the Company only.

Section 7.06 Validity of Agreement. From time to time, the Warrant Agent may
apply to any Appropriate Officer for instruction and the Company shall provide
the Warrant Agent with such instructions concerning the services to be provided
hereunder. The Warrant Agent shall not be held to have notice of any change of
authority of any Person, until receipt of notice thereof from the Company. The
Warrant Agent shall not be under any responsibility in respect of the validity
of this Warrant Agreement or the execution and delivery hereof or in respect of
the validity or execution of any Global Warrant Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Warrant Agreement or in
any Warrant Certificate; nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Common
Shares to be issued pursuant to this Warrant Agreement or any Warrants or as to
whether any Common Shares will, when issued, be validly issued and fully paid
and non-assessable. The Warrant Agent and its agents and subcontractors shall
not be liable and shall be indemnified by the Company for any action taken or
omitted by Warrant Agent in reliance in good faith upon any Company instructions
except to the extent that the Warrant Agent had actual knowledge of facts and
circumstances that would render such reliance unreasonable.

Section 7.07 Use of Agents. The Warrant Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents provided that the Warrant Agent
shall remain responsible for the activities or omissions of any such agent or
attorney and reasonable care has been exercised in the selection and in the
continued employment of such attorney or agent.

Section 7.08 Liability of Warrant Agent. The Warrant Agent shall incur no
liability or responsibility to the Company or to any Beneficial Owner or
Warrantholder for any action taken or not taken (i) in reliance on any notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties or (ii) in relation to its services
under this Warrant Agreement, unless such liability arises out of or is
attributable to the Warrant Agent’s gross negligence, material breach of this
Warrant Agreement, or willful misconduct or bad faith. The Company agrees to
indemnify the Warrant Agent and save it harmless against any and all losses,
expenses and liabilities, including judgments, costs and reasonable counsel
fees, for anything done or omitted in good faith by the Warrant Agent in the
execution of this Warrant Agreement or otherwise arising in connection with this
Warrant Agreement, except as a result of the Warrant Agent’s gross negligence,
material breach of this Warrant Agreement, willful misconduct or bad faith (as
determined by a court of competent jurisdiction in a final non-appealable
judgment). The Warrant Agent shall be liable hereunder only for its gross
negligence, material breach of this Warrant Agreement, willful misconduct or bad
faith (as determined by a court of competent jurisdiction in a final
non-appealable judgment), for which the Warrant Agent is not entitled to
indemnification under this Warrant Agreement.

Section 7.09 Legal Proceedings. The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company, any Warrantholder or any
applicable Participant on behalf of a Beneficial Owner shall furnish the Warrant
Agent with reasonable indemnity for any costs and expenses which may be
incurred, but this provision shall not affect the power of the Warrant Agent to
take such action as the Warrant Agent may consider proper, whether with or
without any such security or indemnity. The Warrant Agent shall promptly notify
the Company and each Beneficial Owner and Warrantholder in writing of any claim
made or action, suit or proceeding instituted against it arising out of or in
connection with this Warrant Agreement.

 

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Section 7.10 Actions as Agent. The Warrant Agent shall act hereunder solely as
agent and not in a ministerial or fiduciary capacity, and its duties shall be
determined solely by the provisions hereof. The duties and obligations of the
Warrant Agent shall be determined solely by the express provisions of the
Warrant Agreement, and the Warrant Agent shall not be liable except for the
performance of such duties and obligations as are specifically set forth in the
Warrant Agreement. No implied covenants or obligations shall be read into the
Warrant Agreement against the Warrant Agent. The Warrant Agent shall not be
liable for anything that it may do or refrain from doing in good faith in
connection with this Warrant Agreement except for its own negligence, willful
misconduct or bad faith.

Section 7.11 Appointment and Acceptance of Agency. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth in this Warrant Agreement, and the Warrant Agent hereby
accepts the agency established by this Warrant Agreement and agrees to perform
the same upon the terms and conditions herein set forth or as the Company and
the Warrant Agent may hereafter agree.

Section 7.12 Successors and Assigns. All the covenants and provisions of this
Warrant Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder. The Warrant Agent may assign this Warrant Agreement or any rights and
obligations hereunder, in whole or in part, to an Affiliate thereof with the
prior consent of the Company, provided that the Warrant Agent may make such an
assignment without consent of the Company to any successor to the Warrant Agent
by consolidation, merger or transfer of its assets subject to the terms and
conditions of the Warrant Agreement.

Section 7.13 Notices. Any notice or demand authorized by this Warrant Agreement
to be given or made to the Company shall be sufficiently given or made if sent
by mail first-class, postage prepaid, addressed (until another address is filed
in writing by the Company with the Warrant Agent) or electronic mail, as
follows:

Key Energy Services, Inc.

1301 McKinney Street, Suite 1800

Houston, Texas 77010

Attention: Katherine Hargis – Vice President, Chief Legal Officer and Secretary

Email: khargis@keyenergy.com

with a copy (which shall not constitute notice) to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Joshua A. Feltman

Email: jafeltman@WLRK.com

and to:

Sidley Austin LLP

555 West Fifth Street, Suite 4000

Los Angeles, California 90013

Attention: Jeffrey E. Bjork

Email: jbjork@sidley.com

Any notice or demand authorized by this Warrant Agreement to be given or made to
the Warrant Agent shall be sufficiently given or made if sent by mail
first-class, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) or electronic mail, as follows:

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Attention: Reorg Department

Email: Info@amstock.com

 

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Any notice or demand authorized by this Warrant Agreement to be given or made to
the Global Warrantholder or any other Warrantholder shall be sufficiently given
or made if sent by first-class mail, postage prepaid or electronic mail to the
last address of the Global Warrantholder or other Warrantholder as it shall
appear on the Warrant Register.

Section 7.14 Applicable Law; Jurisdiction. The validity, interpretation and
performance of this Warrant Agreement and of the Warrant Certificates shall be
governed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of Laws thereof. The parties hereto
irrevocably consent to the exclusive jurisdiction of the courts of the State of
Delaware and any federal court located in such state in connection with any
action, suit or proceeding arising out of or relating to this Warrant Agreement.
Each party agrees to commence any such suit, action or proceeding either in the
Court of Chancery of the State of Delaware or any court of the United States
located in the State of Delaware. Each party hereto hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any suit, action or proceeding with respect to this Warrant
Agreement, any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason other than the failure to serve process in
accordance with this Section 7.14, that its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable law, that the suit, action or
proceeding in any such court is brought in an inconvenient forum, or that this
Warrant Agreement, or the subject matter hereof, may not be enforced in or by
such courts and further irrevocably waives, to the fullest extent permitted by
applicable law, the benefit of any defense that would hinder, fetter or delay
the levy, execution or collection of any amount to which the party is entitled
pursuant to the final judgment of any court having jurisdiction. Each party
irrevocably consents to the service of process out of any of the aforementioned
courts in any such suit, action or proceeding by the mailing of copies thereof
by registered mail, postage prepaid, to such party at its mailing address
determined in accordance with this Warrant Agreement, such service of process to
be effective upon acknowledgment of receipt of such registered mail. Nothing
herein shall affect the right of any party to serve process in any other manner
permitted by law.

Section 7.15 Waiver of Jury Trial. EACH OF THE COMPANY AND THE WARRANT AGENT
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS WARRANT
AGREEMENT OR A WARRANT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES,
AND THEREFORE EACH SUCH PERSON HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PERSON MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS WARRANT AGREEMENT OR A
WARRANT. EACH OF THE COMPANY AND THE WARRANT AGENT CERTIFIES AND ACKNOWLEDGES
THAT (a) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) SUCH PERSON
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (c) SUCH PERSON
MAKES THIS WAIVER VOLUNTARILY, AND (d) SUCH PERSON HAS BEEN INDUCED TO ENTER
INTO THIS WARRANT AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

Section 7.16 Benefit of this Warrant Agreement. Nothing in this Warrant
Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
Person or corporation other than the parties hereto and the Beneficial Owners
and Warrantholders any right, remedy or claim under or by reason of this Warrant
Agreement or of any covenant, condition, stipulation, promise or agreement
hereof, and all covenants, conditions, stipulations, promises and agreements in
this Warrant Agreement contained shall be for the sole and exclusive benefit of
the parties hereto, Beneficial Owners, the Warrantholders and their respective
successors.

Section 7.17 Registered Warrantholder. Prior to due presentment for registration
of Transfer, the Company and the Warrant Agent may deem and treat the Person in
whose name any Warrants are registered in the Warrant Register as the absolute
owner thereof for all purposes whatever (notwithstanding any notation of

 

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ownership or other writing thereon made by anyone other than the Company or the
Warrant Agent) and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary or be bound to recognize any equitable or other
claim to or interest in any Warrants on the part of any other Person and shall
not be liable for any registration of Transfer of Warrants that are registered
or to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration of Transfer or with such
knowledge of such facts that its participation therein amounts to bad faith.

Section 7.18 Headings. The Article and Section headings herein are for
convenience only and are not a part of this Warrant Agreement and shall not
affect the interpretation thereof.

Section 7.19 Counterparts. This Warrant Agreement may be executed in any number
of counterparts on separate counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.

Section 7.20 Entire Agreement. This Warrant Agreement and the Warrant
Certificates constitute the entire agreement of the Company, the Warrant Agent
and the Beneficial Owners and Warrantholders with respect to the subject matter
hereof and supersede all prior agreements and undertakings, both written and
oral, among the Company, the Warrant Agent and the Beneficial Owners and
Warrantholders with respect to the subject matter hereof.

Section 7.21 Severability. Wherever possible, each provision of this Warrant
Agreement shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Warrant Agreement shall be
prohibited by or invalid under applicable Law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Warrant Agreement.

Section 7.22 Termination. This Warrant Agreement, as it relates to the 4-Year
Warrants and the 5-Year Warrants shall terminate at the 4-Year Expiration Date
and the 5-Year Expiration Date, respectively (or Close of Business on the
Settlement Date with respect to any Exercise Notice delivered or deemed
delivered prior to the applicable Expiration Date). Notwithstanding the
foregoing, this Warrant Agreement, as it relates to the 4-Year Warrants and the
5-Year Warrants will terminate on such earlier date on which all outstanding
4-Year Warrants or the 5-Year Warrants have been exercised, respectively. All
provisions regarding indemnification, warranty, liability and limits thereon
shall survive the termination or expiration of this Warrant Agreement.

Section 7.23 Confidentiality. The Warrant Agent and the Company agree that
personal, non-public Global Warrantholder, Beneficial Owner and Warrantholder
information which is exchanged or received pursuant to the negotiation or the
carrying out of this Warrant Agreement shall remain confidential, and shall not
be voluntarily disclosed to any other person, except disclosures pursuant to
applicable securities Laws or otherwise as may be required by Law, including,
without limitation, pursuant to subpoenas from state or federal government
authorities.

[signature pages follow]

 

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IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties
hereto as of the day and year first above written.

 

KEY ENERGY SERVICES, INC. By:  

/s/ Robert W. Drummond

  Name: Robert W. Drummond   Title: President and Chief Executive Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC By:  

/s/ Carlos Pinto

  Name: Carlos Pinto   Title: Senior Vice President

[SIGNATURE PAGE TO WARRANT AGREEMENT]

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EXHIBIT A-1

FORM OF 4-YEAR GLOBAL WARRANT CERTIFICATE

No. 1

CUSIP NO. 49309J 111

UNLESS THIS GLOBAL WARRANT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO KEY ENERGY
SERVICES, INC. (THE “COMPANY”), THE CUSTODIAN OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

TRANSFER OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT
IN PART, TO THE COMPANY, DTC, THEIR SUCCESSORS AND THEIR RESPECTIVE NOMINEES.

 

A1-1

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Key Energy Services, Inc.

December 15, 2016

NUMBER OF WARRANTS: Initially, 899,700 Warrants, subject to adjustment as
described in the Warrant Agreement dated as of December 15, 2016 between Key
Energy Services, Inc. and American Stock Transfer & Trust Company, LLC, as
Warrant Agent (as supplemented or amended, the “Warrant Agreement”), each of
which is exercisable for one Common Share.

EXERCISE PRICE: Initially, $43.52 per Warrant, subject to adjustment as
described in the Warrant Agreement.

FORM OF SETTLEMENT:

Full Physical Settlement: If Full Physical Settlement is applicable, the Company
shall deliver, against payment of the Exercise Price, a number of Common Shares
equal to the number of Warrants exercised.

Net Share Settlement: If Net Share Settlement is applicable, the Company shall
deliver, without any Cash payment therefor, a number of Common Shares equal to
the quotient determined by dividing (i) the Fair Value (as of the Exercise Date)
of the number of Common Shares deliverable pursuant to Full Physical Settlement
minus the aggregate Exercise Price that would be payable pursuant to Full
Physical Settlement by (ii) the Fair Value (as of the Exercise Date) of the
number of Common Shares deliverable pursuant to Full Physical Settlement.

DATES OF EXERCISE: At any time, and from time to time, prior to the Close of
Business on the Expiration Date.

EXPIRATION DATE: The Close of Business on December 15, 2020.

This Global Warrant Certificate certifies that:

Cede & Co., or its registered assigns, is the Global Warrantholder of the Number
of Warrants (the “Warrants”) specified above (such number subject to adjustment
from time to time as described in the Warrant Agreement).

Reference is hereby made to the further provisions of this Global Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth in this place.

This Global Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.

In the event of any inconsistency between the Warrant Agreement and this Global
Warrant Certificate, the Warrant Agreement shall govern.

 

A1-2

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IN WITNESS WHEREOF, Key Energy Services, Inc. has caused this instrument to be
duly executed as of the date first written above.

 

KEY ENERGY SERVICES, INC.

By:

 

 

Name:

 

Title:

 

 

A1-3

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Certificate of Authentication

These are the Warrants referred to in the above-mentioned Warrant Agreement.
Countersigned as of the date above written:

 

American Stock Transfer & Trust Company, LLC,

as Warrant Agent

By:  

 

  Authorized Officer

 

A1-4

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KEY ENERGY SERVICES, INC.

The Warrants evidenced by this Global Warrant Certificate are part of a duly
authorized issue of Warrants issued by the Company pursuant to the Warrant
Agreement, dated as of December 15, 2016 (as it may be amended or supplemented,
the “Warrant Agreement”), between the Company and American Stock Transfer &
Trust Company, LLC, as Warrant Agent, and are subject to the terms and
provisions contained in the Warrant Agreement, to all of which terms and
provisions the Global Warrantholder consents by issuance of this Global Warrant
Certificate. Without limiting the foregoing, all capitalized terms used herein
and not otherwise defined shall have the meanings set forth in the Warrant
Agreement.

The Warrant Agreement and the terms of the Warrants are subject to amendment as
provided in the Warrant Agreement.

This Warrant Certificate shall be governed by, and interpreted in accordance
with, the laws of the State of Delaware.

 

A1-5

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FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the Warrant(s)
represented by this Certificate to:

 

 

Name, Address and Zip Code of Assignee

  

 

and irrevocably appoints

  

Name of Agent

as its agent to transfer this Warrant Certificate on the books of the Warrant
Agent.

[Signature page follows]

Date: [            ]

 

 

Name of Assignor By:  

 

  Name:   Title: (Sign exactly as your name appears on this Certificate)

NOTICE: The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.

 

A1-6

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Schedule A

SCHEDULE OF INCREASES OR DECREASES IN 4-YEAR GLOBAL WARRANTS

The initial Number of 4-Year Global Warrants is 899,700. In accordance with the
Warrant Agreement dated as of December 15, 2016 among the Company and American
Stock Transfer & Trust Company, LLC, as Warrant Agent, the following increases
or decreases in the Number of 4-Year Global Warrants have been made:

 

Date

 

Amount of increase in
Number of 4-Year
Global Warrants
evidenced by this
Global Warrant

 

Amount of

decrease in

Number of 4-Year

Global Warrants

evidenced by this

Global Warrant

  

Number of 4-Year

Global Warrants

evidenced by this

Global Warrant

following such

decrease or increase

  

Signature of

authorized signatory

                   

 

A1-7

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EXHIBIT A-2

FORM OF 4-YEAR INDIVIDUAL WARRANT CERTIFICATE

[FACE]

No. [●]

CUSIP NO. 49309J 111

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VARIOUS TERMS,
PROVISIONS AND CONDITIONS, INCLUDING CERTAIN RESTRICTIONS ON THE SALE, TRANSFER,
ASSIGNMENT, DISTRIBUTION OR OTHER DISPOSITION (EACH, A “TRANSFER”) OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE, IN THAT CERTAIN WARRANT AGREEMENT
DATED AS OF DECEMBER 15, 2016 (THE “WARRANT AGREEMENT”), BETWEEN THE COMPANY AND
THE WARRANT AGENT NAMED THEREIN. THE COMPANY WILL NOT REGISTER THE TRANSFER OF
SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS
BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE WARRANT AGREEMENT. A COPY OF THE
WARRANT AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
ISSUER OF THIS CERTIFICATE.

 

A2-1

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Key Energy Services, Inc.

December 15, 2016

NUMBER OF WARRANTS: Initially, [●] Warrants, subject to adjustment as described
in the Warrant Agreement dated as of December 15, 2016 between Key Energy
Services, Inc. and American Stock Transfer & Trust Company, LLC, as Warrant
Agent (as supplemented or amended, the “Warrant Agreement”), each of which is
exercisable for one Common Share.

EXERCISE PRICE: Initially, $43.52 per Warrant, subject to adjustment as
described in the Warrant Agreement.

FORM OF SETTLEMENT:

Full Physical Settlement: If Full Physical Settlement is applicable, the Company
shall deliver, against payment of the Exercise Price, a number of Common Shares
equal to the number of Warrants exercised.

Net Share Settlement: If Net Share Settlement is applicable, the Company shall
deliver, without any Cash payment therefor, a number of Common Shares equal to
the quotient determined by dividing (i) the Fair Value (as of the Exercise Date)
of the number of Common Shares deliverable pursuant to Full Physical Settlement
minus the aggregate Exercise Price that would be payable pursuant to Full
Physical Settlement by (ii) the Fair Value (as of the Exercise Date) of the
number of Common Shares deliverable pursuant to Full Physical Settlement.

DATES OF EXERCISE: At any time, and from time to time, prior to the Close of
Business on the Expiration Date.

EXPIRATION DATE: The Close of Business on December 15, 2020.

This Warrant Certificate certifies that:

[            ], or its registered assigns, is the holder of the Number of
Warrants (the “Warrants”) specified above (such number subject to adjustment
from time to time as described in the Warrant Agreement).

Reference is hereby made to the further provisions of this Warrant Certificate
set forth on the reverse hereof, and such further provisions shall for all
purposes have the same effect as though fully set forth in this place.

This Warrant Certificate shall not be valid unless countersigned by the Warrant
Agent.

In the event of any inconsistency between the Warrant Agreement and this Warrant
Certificate, the Warrant Agreement shall govern.

 

A2-2

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IN WITNESS WHEREOF, Key Energy Services, Inc. has caused this instrument to be
duly executed as of the date first written above.

 

KEY ENERGY SERVICES, INC. By:  

 

Name:   Title:  

 

A2-3

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Certificate of Authentication

These are the Warrants referred to in the above-mentioned Warrant Agreement.
Countersigned as of the date above written:

 

American Stock Transfer & Trust Company, LLC,

as Warrant Agent

By:  

 

  Authorized Officer

 

A2-4

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[Form of Reverse of Warrant Certificate]

The Warrants evidenced by this Warrant Certificate are part of a duly authorized
issue of Warrants issued by the Company pursuant to the Warrant Agreement, dated
as of December 15, 2016 (as it may be amended or supplemented, the “Warrant
Agreement”), between the Company and American Stock Transfer & Trust Company,
LLC, as Warrant Agent, and are subject to the terms and provisions contained in
the Warrant Agreement, to all of which terms and provisions the holder consents
by issuance of this Warrant Certificate. Without limiting the foregoing, all
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Warrant Agreement.

The Warrant Agreement and the terms of the Warrants are subject to amendment as
provided in the Warrant Agreement.

This Warrant Certificate shall be governed by, and interpreted in accordance
with, the laws of the State of Delaware.

 

A2-5

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FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the Warrant(s)
represented by this Certificate to:

 

     

Name, Address and Zip Code of Assignee   

 

and irrevocably appoints   

Name of Agent

as its agent to transfer this Warrant Certificate on the books of the Warrant
Agent.

[Signature page follows]

Date: [            ]

 

 

Name of Assignor By:  

 

  Name:   Title: (Sign exactly as your name appears on this Certificate)

NOTICE: The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.

 

A2-6

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EXHIBIT B-1

FORM OF 5-YEAR GLOBAL WARRANT CERTIFICATE

No. 1

CUSIP NO. 49309J 129

UNLESS THIS GLOBAL WARRANT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO KEY ENERGY
SERVICES, INC. (THE “COMPANY”), THE CUSTODIAN OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

TRANSFER OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT
IN PART, TO THE COMPANY, DTC, THEIR SUCCESSORS AND THEIR RESPECTIVE NOMINEES.

 

B1-1

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Key Energy Services, Inc.

December 15, 2016

NUMBER OF WARRANTS: Initially, 899,700 Warrants, subject to adjustment as
described in the Warrant Agreement dated as of December 15, 2016 between Key
Energy Services, Inc. and American Stock Transfer & Trust Company, LLC, as
Warrant Agent (as supplemented or amended, the “Warrant Agreement”), each of
which is exercisable for one Common Share.

EXERCISE PRICE: Initially, $54.40 per Warrant, subject to adjustment as
described in the Warrant Agreement. FORM OF SETTLEMENT:

Full Physical Settlement: If Full Physical Settlement is applicable, the Company
shall deliver, against payment of the Exercise Price, a number of Common Shares
equal to the number of Warrants exercised.

Net Share Settlement: If Net Share Settlement is applicable, the Company shall
deliver, without any Cash payment therefor, a number of Common Shares equal to
the quotient determined by dividing (i) the Fair Value (as of the Exercise Date)
of the number of Common Shares deliverable pursuant to Full Physical Settlement
minus the aggregate Exercise Price that would be payable pursuant to Full
Physical Settlement by (ii) the Fair Value (as of the Exercise Date) of the
number of Common Shares deliverable pursuant to Full Physical Settlement.

DATES OF EXERCISE: At any time, and from time to time, prior to the Close of
Business on the Expiration Date.

EXPIRATION DATE: The Close of Business on December 15, 2021.

This Global Warrant Certificate certifies that:

Cede & Co., or its registered assigns, is the Global Warrantholder of the Number
of Warrants (the “Warrants”) specified above (such number subject to adjustment
from time to time as described in the Warrant Agreement).

Reference is hereby made to the further provisions of this Global Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth in this place.

This Global Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.

In the event of any inconsistency between the Warrant Agreement and this Global
Warrant Certificate, the Warrant Agreement shall govern.

 

B1-2

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IN WITNESS WHEREOF, Key Energy Services, Inc. has caused this instrument to be
duly executed as of the date first written above.

 

KEY ENERGY SERVICES, INC. By:  

 

Name:   Title:  

 

B1-3

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Certificate of Authentication

These are the Warrants referred to in the above-mentioned Warrant Agreement.
Countersigned as of the date above written:

 

American Stock Transfer & Trust Company, LLC,

as Warrant Agent

By:  

 

  Authorized Officer

 

B1-4

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KEY ENERGY SERVICES, INC.

The Warrants evidenced by this Global Warrant Certificate are part of a duly
authorized issue of Warrants issued by the Company pursuant to the Warrant
Agreement, dated as of December 15, 2016 (as it may be amended or supplemented,
the “Warrant Agreement”), between the Company and American Stock Transfer &
Trust Company, LLC, as Warrant Agent, and are subject to the terms and
provisions contained in the Warrant Agreement, to all of which terms and
provisions the Global Warrantholder consents by issuance of this Global Warrant
Certificate. Without limiting the foregoing, all capitalized terms used herein
and not otherwise defined shall have the meanings set forth in the Warrant
Agreement.

The Warrant Agreement and the terms of the Warrants are subject to amendment as
provided in the Warrant Agreement.

This Warrant Certificate shall be governed by, and interpreted in accordance
with, the laws of the State of Delaware.

 

B1-5

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FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the Warrant(s)
represented by this Certificate to:

 

 

Name, Address and Zip Code of Assignee

  

 

and irrevocably appoints

  

Name of Agent

as its agent to transfer this Warrant Certificate on the books of the Warrant
Agent.

[Signature page follows]

Date: [            ]

 

 

Name of Assignor By:  

 

  Name:   Title: (Sign exactly as your name appears on this Certificate)

NOTICE: The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.

 

B1-6

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Schedule A

SCHEDULE OF INCREASES OR DECREASES IN 5-YEAR GLOBAL WARRANTS

The initial Number of 5-Year Global Warrants is 899,700. In accordance with the
Warrant Agreement dated as of December 15, 2016 among the Company and American
Stock Transfer & Trust Company, LLC, as Warrant Agent, the following increases
or decreases in the Number of 5-Year Global Warrants have been made:

 

        Date         

   Amount of increase
in Number of 5-Year
Global Warrants
evidenced by this
Global Warrant      Amount of decrease in
Number of 5-Year
Global Warrants
evidenced by this
Global Warrant      Number of 5-Year
Global Warrants
evidenced by this
Global Warrant
following such
decrease or
increase      Signature of
authorized signatory                          

 

B1-7

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EXHIBIT B-2

FORM OF 5-YEAR INDIVIDUAL WARRANT CERTIFICATE

[FACE]

No. [●]

CUSIP NO. 49309J 129

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VARIOUS TERMS,
PROVISIONS AND CONDITIONS, INCLUDING CERTAIN RESTRICTIONS ON THE SALE, TRANSFER,
ASSIGNMENT, DISTRIBUTION OR OTHER DISPOSITION (EACH, A “TRANSFER”) OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE, IN THAT CERTAIN WARRANT AGREEMENT
DATED AS OF DECEMBER 15, 2016 (THE “WARRANT AGREEMENT”), BETWEEN THE COMPANY AND
THE WARRANT AGENT NAMED THEREIN. THE COMPANY WILL NOT REGISTER THE TRANSFER OF
SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS
BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE WARRANT AGREEMENT. A COPY OF THE
WARRANT AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
ISSUER OF THIS CERTIFICATE.

 

B2-1

--------------------------------------------------------------------------------

Key Energy Services, Inc.

December 15, 2016

NUMBER OF WARRANTS: Initially, [●] Warrants, subject to adjustment as described
in the Warrant Agreement dated as of December 15, 2016 between Key Energy
Services, Inc. and American Stock Transfer & Trust Company, LLC, as Warrant
Agent (as supplemented or amended, the “Warrant Agreement”), each of which is
exercisable for one Common Share.

EXERCISE PRICE: Initially, $54.40 per Warrant, subject to adjustment as
described in the Warrant Agreement.

FORM OF SETTLEMENT:

Full Physical Settlement: If Full Physical Settlement is applicable, the Company
shall deliver, against payment of the Exercise Price, a number of Common Shares
equal to the number of Warrants exercised.

Net Share Settlement: If Net Share Settlement is applicable, the Company shall
deliver, without any Cash payment therefor, a number of Common Shares equal to
the quotient determined by dividing (i) the Fair Value (as of the Exercise Date)
of the number of Common Shares deliverable pursuant to Full Physical Settlement
minus the aggregate Exercise Price that would be payable pursuant to Full
Physical Settlement by (ii) the Fair Value (as of the Exercise Date) of the
number of Common Shares deliverable pursuant to Full Physical Settlement.

DATES OF EXERCISE: At any time, and from time to time, prior to the Close of
Business on the Expiration Date.

EXPIRATION DATE: The Close of Business on December 15, 2021.

This Warrant Certificate certifies that:

[            ], or its registered assigns, is the holder of the Number of
Warrants (the “Warrants”) specified above (such number subject to adjustment
from time to time as described in the Warrant Agreement).

Reference is hereby made to the further provisions of this Warrant Certificate
set forth on the reverse hereof, and such further provisions shall for all
purposes have the same effect as though fully set forth in this place.

This Warrant Certificate shall not be valid unless countersigned by the Warrant
Agent.

In the event of any inconsistency between the Warrant Agreement and this Warrant
Certificate, the Warrant Agreement shall govern.

 

B2-2

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Key Energy Services, Inc. has caused this instrument to be
duly executed as of the date first written above.

 

KEY ENERGY SERVICES, INC. By:  

 

Name:   Title:  

 

B2-3

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Certificate of Authentication

These are the Warrants referred to in the above-mentioned Warrant Agreement.
Countersigned as of the date above written:

 

American Stock Transfer & Trust Company, LLC,

as Warrant Agent

By:  

 

  Authorized Officer

 

B2-4

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[Form of Reverse of Warrant Certificate]

The Warrants evidenced by this Warrant Certificate are part of a duly authorized
issue of Warrants issued by the Company pursuant to the Warrant Agreement, dated
as of December 15, 2016 (as it may be amended or supplemented, the “Warrant
Agreement”), between the Company and American Stock Transfer & Trust Company,
LLC, as Warrant Agent, and are subject to the terms and provisions contained in
the Warrant Agreement, to all of which terms and provisions the holder consents
by issuance of this Warrant Certificate. Without limiting the foregoing, all
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Warrant Agreement.

The Warrant Agreement and the terms of the Warrants are subject to amendment as
provided in the Warrant Agreement.

This Warrant Certificate shall be governed by, and interpreted in accordance
with, the laws of the State of Delaware.

 

B2-5

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FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the Warrant(s)
represented by this Certificate to:

 

 

Name, Address and Zip Code of Assignee

  

 

and irrevocably appoints

  

Name of Agent

as its agent to transfer this Warrant Certificate on the books of the Warrant
Agent.

[Signature page follows]

Date: [            ]

 

 

Name of Assignor By:  

 

  Name:   Title: (Sign exactly as your name appears on this Certificate)

NOTICE: The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.

 

B2-6

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EXHIBIT C-1

Form of Global Warrant Exercise Notice

[Address]

Attention: Transfer Department

 

Re: Warrant Agreement dated as of December 15, 2016 between Key Energy Services,
Inc. (the “Company”) and American Stock Transfer & Trust Company, LLC, as
Warrant Agent (as it may be supplemented or amended, the “Warrant Agreement”)

The undersigned hereby irrevocably elects to exercise the right, represented by
the Global Warrant Certificate No.          held for its benefit through the
book-entry facilities of The Depository Trust Company (the “Depository”), to
exercise          Warrants and receive the consideration deliverable in exchange
therefor pursuant to the following settlement method (check one):

☐ Full Physical Settlement

☐ Net Share Settlement

If Full Physical Settlement is elected, the undersigned shall tender payment of
the Exercise Price therefore in accordance with instructions received from the
Warrant Agent.

Please check below if this exercise is contingent upon a registered public
offering or any Reorganization Transaction in accordance with Section 3.02(g) of
the Warrant Agreement.

☐ This exercise is being made in connection with a registered public offering or
any other Reorganization Transaction; provided, that in the event that such
transaction shall not be consummated, then this exercise shall be deemed
revoked.

THIS EXERCISE NOTICE MUST BE DELIVERED TO THE WARRANT AGENT, PRIOR TO CLOSE OF
BUSINESS ON THE EXPIRATION DATE. THE WARRANT AGENT SHALL NOTIFY YOU OF THE
ADDRESS AND PHONE NUMBER WHERE YOU CAN CONTACT THE WARRANT AGENT AND TO WHICH
WARRANT EXERCISE NOTICES ARE TO BE SUBMITTED.

All capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Warrant Agreement.

 

By:  

 

  Authorized Signature   Address:   Telephone:

 

C1-1

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EXHIBIT C-2

FORM OF INDIVIDUAL WARRANT EXERCISE NOTICE

[Address]

Attention: Transfer Department

 

Re: Warrant Agreement dated as of December 15, 2016 between Key Energy Services,
Inc. (the “Company”) and American Stock Transfer & Trust Company, LLC, as
Warrant Agent (as it may be supplemented or amended, the “Warrant Agreement”)

The undersigned hereby irrevocably elects to exercise the right, represented by
the Warrant Certificate No.         , to exercise          Warrants and receive
the consideration deliverable in exchange therefor pursuant to the following
settlement method (check one):

☐ Full Physical Settlement

☐ Net Share Settlement

If Full Physical Settlement is elected, the undersigned shall tender payment of
the Exercise Price therefore in accordance with instructions received from the
Warrant Agent.

Please check below if this exercise is contingent upon a registered public
offering or any Reorganization Transaction in accordance with Section 3.02(g) of
the Warrant Agreement.

☐ This exercise is being made in connection with a registered public offering or
any other Reorganization Transaction; provided, that in the event that such
transaction shall not be consummated, then this exercise shall be deemed
revoked.

THIS EXERCISE NOTICE MUST BE DELIVERED TO THE WARRANT AGENT, PRIOR TO CLOSE OF
BUSINESS ON THE EXPIRATION DATE. THE WARRANT AGENT SHALL NOTIFY YOU OF THE
ADDRESS AND PHONE NUMBER WHERE YOU CAN CONTACT THE WARRANT AGENT AND TO WHICH
WARRANT EXERCISE NOTICES ARE TO BE SUBMITTED.

All capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Warrant Agreement.

 

By:  

 

  Authorized Signature   Address:   Telephone:

 

C2-1

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EXHIBIT D

Fee Schedule

The Company shall pay the Warrant Agent for performance of its services under
this Warrant Agreement such compensation as shall be agreed in writing between
the Company and the Warrant Agent.

 

D-1

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EXHIBIT E

INITIAL CASH-OUT WARRANTHOLDERS

 

Name

   No. of 4-Year Warrants      No. of 5-Year Warrants  

Ambrosiani Pastore Foundation, Inc.

     9,695         9,695   

Restated Jack & Mary Jo Ambrosiani Family

Trust u/a July 18, 1997, Jack Ambrosiani, Trustee

     9,695         9,695   

 

E-1

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EXHIBIT F

PRIVATE PLACEMENT LEGEND FOR INDIVIDUAL WARRANT CERTIFICATES

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.

 

F-1

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EXHIBIT G

PRIVATE PLACEMENT LEGEND FOR

CASH-OUT WARRANT SHARES ACQUIRED UPON

EXERCISE OF INDIVIDUAL WARRANT CERTIFICATES

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.

 

G-1