Document:

Exhibit 10.1

KIM B.
CLARKE

RESTATED EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (as from time to time
amended in accordance with the provisions hereof, this “Agreement”), is
entered into by and between KIM B. CLARKE, whose address is                  ,
Houston, Texas 77042 (the “Executive”),
and KEY ENERGY SERVICES, INC., a Maryland corporation with executive offices at
1301 McKinney Street, Suite 1800, Houston, Texas 77010 (the “Company”).

WHEREAS,
in order to ensure that its compensation practices are competitive and
compensation and benefits are equitable among its Senior executives, the
Executive Committee (“Committee”)
of the Board of Directors of the Company (the “Board”) is the view that it is in the
best interests of the Company and its shareholders to replace Executive’s
Employment Agreement dated November 22, 2004 as amended; and

WHEREAS, the Company
desires to enter into this written Restated Employment Agreement with the
Executive, effective as of January 1, 2007 (the “Commencement Date”); and

WHEREAS, the Executive is
willing to serve as the Company’s Senior Vice President, Chief People Officer
pursuant to the terms and conditions set forth herein, effective as of the
Commencement Date.

NOW THEREFORE, in
consideration of the covenants and agreements herein contained, the Company and
the Executive hereby agree as follows:

1.             Employment; Term.

(a)           Effective as of the
Commencement Date, the Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment by the Company, as the Company’s Senior
Vice President, Chief People Officer, and the Executive shall hold such
position and continue employment with the Company hereunder until the close of
business on January 1, 2010, unless sooner terminated in accordance with
Section 5 hereof (the “Initial
Employment Period”). The above notwithstanding, at the close of
business on each anniversary of the conclusion of the Initial Employment Period
(an “Anniversary Date”),
commencing with January 1, 2010, the term of the Executive’s employment
hereunder shall be automatically extended for twelve (12) months (unless sooner
terminated in accordance with Section 5 hereof) unless either the Executive or
the Company shall have given written notice (in each case, a “Non-Renewal Notice”)
to the other that such automatic extension shall not occur, which Non-Renewal
Notice shall have been given no later than ninety (90) days next preceding the
relevant Anniversary Date (the Initial Employment Period, together with any
extensions, until termination in accordance herewith, is referred to hereby as
the “Employment Period”).

(b)           The Executive shall
have the responsibilities, duties and authority commensurate with her position
as the Senior Vice President, Chief People Officer of the Company, including without
limitation the general supervision and management of the Company’s Human
resources objectives, policies and programs and such other responsibilities,
duties, functions and authority as the Chief Executive Officer or, in certain
circumstances, the Board shall from time to time designate that do not effect a
material decrease in the responsibilities, importance, scope or dignity of the
Executive’s position with the Company compared with those of such position as
of the Commencement Date, subject, however, to the supervision of the Chief
Executive Officer. The Executive will report to the Chief Executive Officer.

(c)           The Executive will
devote her full time and her best efforts to the business and affairs of the
Company and its Subsidiaries; provided, however, that nothing contained in this
Section 1 shall be deemed to prevent or limit the Executive’s right to: (i)
make investments in the securities of any publicly-owned corporation; or (ii)
make any other investments with respect to which she is not obligated or
required to, and to which she does not in fact, devote managerial efforts that
interfere with her fulfillment of her duties hereunder; or (iii) to serve on
boards of directors and to serve in such other positions with non-profit and
for-profit organizations as to which the Board may from time to time consent,
which consent shall not be unreasonably withheld or delayed. Reference is made
to Section 6 hereof, which contains limitations on some of the above
activities.

(d)           The principal location
at which the Executive will substantially perform her duties will be the
Company’s Houston, Texas offices, or as otherwise designated by the Chief
Executive Officer.  The Executive
acknowledges that the Chief Executive Officer may decide that the Executive
should render her services hereunder at a location other than at such offices.
The Executive agrees to accept any such change in location, and the Company
will pay to the Executive, and reimburse the Executive for, the following
expenses and costs incurred in connection with any required relocations and
will pay to the Executive the bonus specified in clause (vii) below: (i) the
excess, if any, of (A) the Executive’s aggregate tax basis in her primary
residence at the time of its sale over (B) the proceeds realized by the
Executive from such sale net of ordinary and reasonable fees and expenses
incurred in connection with such sale (other than such fees and expenses
described in clause (ii) of this sentence), (ii) ordinary and reasonable
realtor fees and closing costs incurred in connection with the sale of the
Executive’s primary residence, (iii) ordinary and reasonable closing costs
incurred in connection with the purchase of the Executive’s new primary
residence in the vicinity of the new location at which the Executive is to
render her services hereunder, (iv) ordinary and reasonable costs incurred to
pack, transport, unpack, and insure the Executive’s household furnishings and
effects to her new primary residence, (v) ordinary and reasonable fees for
connecting utilities in her new primary residence, (vi) ordinary and reasonable
costs for trips to look for a new residence as well as up to thirty (30) days
of temporary housing, and (vii) a cash bonus calculated to pay all of the
federal, state and local income and payroll taxes which the Executive will
incur, if any, as a result of (A) the Company’s reimbursement of the preceding
expenses and (B) the amount of such bonus (that is, a “gross-up” bonus).

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2.             Salary; Bonuses; Expenses.

(a)           During the Employment
Period, the Company will pay base compensation to the Executive at the annual
rate of Two Hundred Fifty Thousand Dollars ($250,000.00) per year (the “Base Salary”),
payable in substantially equal installments in accordance with the Company’s
existing payroll practices, but no less frequently than monthly. The Company
will review the Base Salary on a yearly basis promptly following the end of
each fiscal year of the Company to determine if an increase is advisable, and
the Base Salary may be increased (but not decreased) at the discretion of the
Chief Executive Officer and the Compensation Committee (the “Compensation Committee”)
of the Board, taking into account, among other factors, the Executive’s
performance and the performance of the Company.

(b)           The Executive shall be
eligible to participate in all of the Company’s cash performance compensation
plans (collectively, the “Performance
Cash Compensation Plans”) for the Company’s executives providing
for the payment of cash bonuses or other cash incentives payable upon the
achievement of goals set forth in the Company’s strategic plan as developed by
the Compensation Committee after consultation with the Chief Executive Officer
and the Executive, payable in accordance with the provisions thereof.  The performance goals for the Performance
Cash Compensation Plans will be based on objective criteria specified in good
faith in advance by the Compensation Committee after consultation with the
Chief Executive Officer and the Executive. The Executive shall also receive such
bonuses other than pursuant to the Performance Cash Compensation Plans in such
amounts and at such times as the Compensation Committee, after consultation
with the Chief Executive Officer, in its discretion determines are appropriate
to recognize extraordinary performance by the Executive.  The Executive’s target bonus for each fiscal
year will be one hundred percent (100%) of Base Salary.

(c)           The Executive shall be
reimbursed by the Company for reasonable travel, lodging, meal, entertainment
and other expenses incurred by her in connection with performing her services
hereunder in accordance with the Company’s reimbursement policies from time to
time in effect.

3.             Equity-Based Incentives.  The Executive shall be eligible to participate
in awards of stock options, restricted stock, deferred stock and other
equity-based incentives (collectively, “Equity-Based Incentives”), at the discretion of the
Board or the Compensation Committee. The performance goals for the grant of
such Equity-Based Incentives will be based on objective criteria mutually
negotiated and agreed upon in good faith in advance by the Board or the
Compensation Committee after consultation with the Executive and the Chief
Executive Officer.

4.             Benefit Plans; Vacations.

In connection with the
Executive’s employment hereunder, she shall be entitled during the Employment
Period (and thereafter to the extent provided in Section 5(f) hereof) to the
following additional benefits:

(a)           At the Company’s
expense, such fringe benefits as the Company may provide from time to time for
its senior management, but in any case, at least the benefits described on
EXHIBIT A hereto.

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(b)           The Executive shall be
entitled to no less than the number of vacation days in each fiscal year
determined in accordance with the Company’s vacation policy as in effect from
time to time, but not less than 20 business days in any fiscal year (prorated
in any fiscal year during which she is employed hereunder for less than the
entire year in accordance with the number of days in such fiscal year in which
she is so employed) and subject to the Company’s policies on carryovers and
cashouts. The Executive shall also be entitled to all paid holidays and
personal days given by the Company to its senior management.

(c)           Nothing herein contained
shall preclude the Executive, to the extent she is otherwise eligible, from
participation in all group insurance programs or other fringe benefit plans
which the Company may from time to time in its sole and absolute discretion
make available generally to its personnel, or for personnel similarly situated,
but the Company shall not be required to establish or maintain any such program
or plan except as may be otherwise expressly provided herein.

5.             Termination, Change in Control and Reassignment of
Duties.

(a)           Termination by the
Company. The Company shall have the right to terminate the Executive’s
employment under this Agreement and the Employment Period for Cause (as defined
below) at any time without obligation to make any further payments to the Executive
hereunder except the compensation described in Section 5(g) hereof. Except as
otherwise provided in Section 5(b) hereof, which Section shall apply in the
event the Executive becomes unable to perform her obligations hereunder by
reason of Disability (as defined below), the Company shall have the right to
terminate the Executive’s employment hereunder and the Employment Period for
any reason other than for Cause (including, without limitation, by giving the
Executive a Non-Renewal Notice pursuant to Section 1(a) hereof) only upon at
least ninety (90) days prior written notice to her (provided that, in the event
the Company gives the Executive a Non-Renewal Notice pursuant to Section 1(a)
hereof, only the 90-day notice period therein provided shall be required). In
the event the Company terminates the Executive’s employment hereunder for any
reason other than for Disability or Cause (including, without limitation, by
giving the Executive a Non-Renewal Notice pursuant to Section 1(a) hereof),
then for the purpose of effecting a transition during the ninety (90) day
notice period of the Executive’s management functions from the Executive to
another person or persons, during such period the Company may reassign the
Executive’s duties hereunder to another person or other persons. Such
reassignment shall not reduce the Company’s obligations hereunder to make
salary, bonus and other payments to the Executive and to provide other benefits
to her during the remainder of her employment and, if applicable, following the
termination of employment. 
Notwithstanding a notice of termination that does not, when made,
specify Cause, the Company may, during the 90 day notice period (the “Cause Review Period”),
convert the termination to a Cause termination, subject to the procedural
safeguards specified in the next paragraph.

As used in this
Agreement, the term “Cause” shall mean (i) the
failure by the Executive to substantially perform the major functions of her
position in a satisfactory manner (other than (A) any such failure resulting
from her incapacity due to physical or mental illness or physical injury or (B)
any such actual or anticipated failure after the issuance of a notice of
termination by the Executive for Good Reason (as defined below)), after a
written demand for substantial performance is delivered by the Company to the
Executive that specifically identifies the manner

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in which the Company
believes the Executive has not substantially performed her duties; or (ii) the
engaging by the Executive in misconduct that is, or is reasonably likely to be,
materially injurious to the Company, monetarily or otherwise; or (iii) the
Executive’s conviction or plea of guilty or no contest to a felony (or to a
felony charge reduced to misdemeanor), or, with respect to her employment, to
any misdemeanor (other than a traffic violation) or, with respect to her
employment, knowing violation of any federal or state securities or tax laws;
or (iv) willful violation of the Key Energy Services, Inc. Amended and Restated
Policy Regarding Acquisition, Ownership and Disposition of Company Securities
or the Code of Business Conduct, as same may be amended from time to time.  Notwithstanding the foregoing, the Executive’s
employment shall not be deemed to have been terminated for Cause unless (A)
reasonable notice shall have been given to her setting forth in detail the
reasons for the Company’s intention to terminate for Cause, and if such
termination is pursuant to clause (i) or (ii) above and any damage to the
Company is curable, only if Executive has been provided a period of ten (10)
business days from receipt of such notice to cease the actions or inactions and
otherwise cure such damage, and she has not done so (provided that only one
such period needs to be provided in any period of three (3) consecutive
months); (B) an opportunity shall have been provided for the Executive to be
heard before the Board; and (C) if such termination is pursuant to clause (i)
or (ii) above, delivery shall have been made to the Executive of a notice of termination
from the Board finding that in the good faith opinion of a majority of the
Board (excluding the Executive, if applicable) she was guilty of conduct set
forth in clause (i) or (ii) above.

(b)           Termination upon
Disability and Temporary Reassignment of Duties Due to Disability; Termination
upon Death

(i)            If the Executive
becomes totally and permanently disabled during the Employment Period so that
she is unable to perform her obligations hereunder by reasons involving
physical or mental illness or physical injury for an aggregate of ninety (90)
days (whether or not consecutive) during any period of twelve (12) consecutive
months during the Employment Period (“Disability”), then the Executive’s employment
hereunder and the Employment Period may be terminated by the Company within
sixty (60) days after the expiration of such ninety (90) day period (whether or
not consisting of consecutive days), such termination to be effective ten (10)
days after written notice to the Executive. In the event the Company shall give
a notice of termination under this Section 5(b) (i), then the Company may
reassign the Executive’s duties hereunder to another person or other persons.
Such reassignment shall not reduce the Company’s obligations hereunder to make
salary, bonus and other payments to the Executive and to provide other benefits
to him, during the remainder of her employment and, if applicable, following
the termination of employment.

(ii)           During any period that
the Executive is totally disabled such that she is unable to perform her
obligations hereunder by reason involving physical or mental illness or
physical injury, as determined by a physician chosen by the Company and
reasonably acceptable to the Executive (or her legal representative), the
Company may reassign the Executive’s duties hereunder to another person or
other persons, provided if the Executive shall again be able to perform her
obligations hereunder prior to the Company’s termination of the Executive’s
employment hereunder and the Employment Period in accordance with the terms of
this Agreement, all such duties shall again be the Executive’s duties. The cost
of any examination by such physician shall be borne by the Company.
Notwithstanding the foregoing, if the Executive

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has been unable to
perform her obligations hereunder by reasons involving physical or mental
illness or physical injury for an aggregate of ninety (90) days (whether or not
consecutive) during any period of twelve (12) consecutive months during the
Employment Period, then a determination by a physician of disability will not
be required prior to any such reassignment. Any such reassignment shall not be
a termination of employment and in no event shall such reassignment reduce the
Company’s obligation to make salary, bonus and other payments to the Executive
and to provide other benefits to her under this Agreement during her employment
or, if applicable, following a termination of employment.

(iii)          The Executive’s
employment hereunder and the Employment Period shall automatically terminate
immediately upon the death of the Executive.

(c)           Termination by
Executive. The Executive’s employment hereunder and the Employment Period
may be terminated by the Executive by giving written notice to the Company as
follows: (i) at any time for any reason other than Good Reason (including,
without limitation, by giving the Company a Non-Renewal Notice pursuant to
Section 1(a) hereof) by notice of at least ninety (90) days (provided that, in
the event the Executive gives the Company a Non-Renewal Notice pursuant to
Section 1(a) hereof, only the 90-day notice period therein provided shall be
required); or (ii) at any time for Good Reason, effective upon the 16th
business day after Executive’s giving written notice in reasonable detail of
such (unless the Company corrects the condition Executive asserts gives her
Good Reason within fifteen (15) business days after such notice); provided that
the Executive can only give a notice of resignation for Good Reason in
connection with a “Change
in Control” (as defined in Exhibit B) beginning on the ninetieth
(90th) day after the closing of the Change in Control.  In the event of a termination by the
Executive of her employment, the Company may reassign the Executive’s duties
hereunder to another person or other persons.

As used herein, “Good Reason”
shall mean any of the following:

(1)           Failure
of the Board to elect the Executive as Senior Vice President of the Company, or
removal from the office of Senior Vice President of the Company provided that
such failure or removal is not in connection with a termination of the
Executive’s employment hereunder by the Company for Cause (in accordance with
Section 5(a) hereof), for Disability (in accordance with Section 5(b) hereof)
or other than for Cause or Disability (in accordance with Section 5(a) hereof
and including, without limitation, by giving the Executive a Non-Renewal Notice
pursuant to Section 1(a) hereof), and provided further that any notice of
termination hereunder shall be given by the Executive within ninety (90) days
of such failure or removal; or

(2)           Material change by the
Company in the Executive’s title, authority, functions, duties or
responsibilities as Senior Vice President of the Company (including without
limitation material changes in the control or structure of the Company) which
would cause her position with the Company to become of materially less
responsibility, importance, scope or dignity than her position as of the
Commencement Date, provided that such material change is not in connection with
a termination of Executive’s employment hereunder by the Company for Cause (in
accordance with Section 5(a) hereof), for Disability (in accordance with
Section 5(b) hereof) or other than for Cause or Disability (in accordance with
Section 5(a) hereof) (including, without limitation, by giving the Executive a
Non-Renewal Notice pursuant to Section 1(a) hereof); and

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provided, further, that
any notice of termination hereunder shall be given by the Executive within
ninety (90) days of when she becomes aware of such change; or

(3)           Failure by the Company
to comply with any provision of Section 1(d), 2 or 4 of this Agreement, which
has not been cured within fifteen (15) days after notice of such noncompliance
has been given by the Executive to the Company, provided any notice of
termination hereunder shall be given by the Executive within ninety (90) days
after the end of such fifteen (15) day period; or

(4)           Failure by the Company
to obtain an assumption of this Agreement (by operation of law or in writing)
by a successor in accordance with Section 17 hereof unless payment or provision
for payment and provision for continuation of benefits under this Agreement
have been made as required by Section 17 hereof; or

(5)           Any purported
termination by the Company of the Executive’s employment which is not effected
in accordance with the terms of this Agreement, including without limitation,
pursuant to a notice of termination not satisfying the requirements set forth
herein (and for purposes of this Agreement no such purported termination by the
Company shall be effective), which has not been cured within ten (10) days
after notice of such non-conformance has been given by the Executive to the
Company, provided any notice of termination hereunder shall be given by the
Executive within thirty (30) days of receipt of notice of such purported
termination.

(d)           Severance
Compensation.

(i)            Termination for
Good Reason or Other than for Cause. In the event the Executive’s
employment hereunder is terminated (A) by the Executive for Good Reason or
(B) by the Company other than for Cause or Disability, the Executive shall
be entitled, in addition to the other compensation and benefits herein provided
for, to severance compensation in an aggregate amount equal to two (2) times
her Base Salary at the rate in effect on the termination date, payable in
twenty-four (24) substantially equal monthly installments commencing at the end
of the calendar month in which the termination date occurs.  The preceding amounts shall be reduced to one
(1) times her Base Salary if the termination is a result of or after a
Non-Renewal Notice by the Company.

(ii)           Termination
following Disability. In the event the Executive’s employment should be
terminated by the Company as a result of Disability in accordance with Section
5(b) hereof, then the Executive shall be entitled, in addition to the other
compensation and benefits herein provided for, to severance compensation in an
aggregate amount equal to one (1) times her Base Salary at the rate in effect
on the termination date, payable in twelve (12) substantially equal monthly
installments commencing at the end of the calendar month in which the
termination date occurs, reduced by the amount of any employer-provided
disability insurance proceeds actually paid to the Executive or for her benefit
during such time period.

(iii)          Change in Control.
If the Executive’s employment is terminated in anticipation of, or within one
(1) year following, a Change in Control and the Executive is entitled to
severance compensation pursuant to Section 5(d)(i) or 5(d)(ii) hereof as a
result of

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such termination, the
severance compensation otherwise payable to the Executive (A) shall be
increased to an amount equal to three (3) times the Base Salary then in effect
plus an amount equal to three (3) times the Executive’s annual target cash
bonus as provided in Section 2 (b) above and (B) shall be payable in one lump
sum on the effective date of such termination.  
In the event there is a Change in Control after the Executive’s
employment is terminated while the Executive is entitled to severance
compensation pursuant to Section 5(d)(i) or 5(d)(ii) hereof, any severance
compensation which remains unpaid as of the Change in Control shall be paid in
one lump sum as of the Change in Control. 
In the event severance compensation becomes payable in a lump sum
pursuant to this Section 5(d)(iii), and if the Executive’s employment is or has
been terminated for Disability, such lump sum shall be reduced by a good faith
estimate of the aggregate amount of any disability insurance proceeds which
will be actually paid to the Executive or for her benefit (but only those
proceeds from disability insurance provided by the Company to the Executive
pursuant to Section 4(a) hereof) during the remaining period over which such
severance would otherwise have been paid.

(iv)          Termination for Death.
In the event of the Executive’s death during the Employment Period, the
Executive’s estate shall not be entitled to any severance compensation.

(v)           Termination by
Executive other than for Good Reason or by Company for Cause. In the event
of the Executive’s termination by resignation under Section 5(c)(i) (i.e.,
other than for Good Reason) or by the Company for Cause, the Executive shall
not be entitled to any severance under Section 5(d) or otherwise, any continued
benefits under Section 5(f) (other than as required by statute), or any accrued
compensation under Section 5(g)(ii) (for unpaid vacation, except as otherwise
required by law), or Section 5(g)(iii) (for prior year bonuses, to the extent
specified in that clause).  Under the
foregoing situations, the treatment of equity incentives shall be as specified
in Section 5(e)(ii), and the Executive shall receive the accrued compensation described
in Section 5(g)(i), (iv) and (v).

(vi)          Release.  Executive agrees that all payments under
Subsections (d), (e), (f), and (g)(ii) of this Section 5 are conditioned on the
Executive’s prior execution and non-revocation of a full release of the Company
and its officers, employees, affiliates and agreements for all claims relating
to her employment, compensation, and termination and such other matters as the
Company reasonably requests on termination; provided,
however, that any Release
previously executed under this Section 5(d)(vi) will be null and void if the
Company reaches a determination of Cause within the Cause Review Period.

(e)           Effect of
Termination or Change in Control upon Equity-Based Incentives.

(i)            In the event the
Executive’s employment hereunder is terminated by the Company for any reason
other than for Cause or Disability (including, without limitation, by giving
the Executive a Non-Renewal Notice pursuant to Section 1(a) hereof), or in the
event the Executive should terminate her employment for Good Reason, then any
Equity-Based Incentives held by the Executive which have not vested prior to
the effective date of such termination shall immediately vest and shall remain
exercisable until the earlier to occur of (x) the first anniversary of the
effective date of such termination and (y) the final stated expiration date of
the Equity-Based Incentive. In addition, in the event of such a termination,
any Equity-Based Incentives held by the Executive which have vested prior to
the effective date of such

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termination shall remain
exercisable until the earlier to occur of (x) the first anniversary of the
effective date of such termination and (y) the final stated expiration date of
the Equity-Based Incentive.

(ii)           In the event the
Executive’s employment hereunder is terminated by the Company for Cause or is
terminated by the Executive other than for Good Reason (including, without
limitation, by giving the Company a Non-Renewal Notice pursuant to Section 1(a)
hereof), then effective upon the date such termination is effective, any Equity-Based
Incentives which have not vested prior to the effective date of such
termination shall be forfeited. Any Equity-Based Incentives held by the
Executive entitling the Executive to retain or purchase securities of the
Company which have vested prior to the effective date of such termination shall
remain subject to the terms and provisions of the plan and/or the agreement
under which they were awarded.

(iii)          In the event of the
Executive’s death while employed by the Company or in the event that the Executive’s
employment should terminate as a result of Disability, then, unless the
provisions of Section 5(e)(iv) hereof regarding Change in Control shall apply,
any Equity-Based Incentives held by the Executive which have not vested prior
to the effective date of such termination shall immediately vest and shall also
remain exercisable until the earlier to occur of (x) the first anniversary of
the death of the Executive or the effective date of such termination and (y)
the final stated expiration date of the Equity-Based Incentives. In addition,
in the event of such death or such a termination, any Equity-Based Incentives
held by the Executive which have vested prior to the effective date of such
death or termination shall remain exercisable until the earlier to occur of (x)
the first anniversary of the effective date of such death or termination and
(y) the final stated expiration date of the Equity-Based Incentives.

(iv)          In the event of a
conflict between the preceding terms and provisions of this Section 5(e) and
any other terms and provisions governing any Equity-Based Incentives held (now
or in the future) by the Executive (including without limitation the terms and
provisions contained in the agreements and/or plans pursuant to which such
Equity-Based Incentives were (or will in the future be) granted), the preceding
terms and provisions of this Section 5(e) shall control; provided, however,
that, if an Equity-Based Incentive does not by its terms require any exercise,
no requirement of exercise shall be implied from the preceding terms and
provisions of this Section 5(e).

(f)            Continuation of
Benefits.

(i)            Subject to Section
5(f)(ii) hereof, in the event that Executive’s employment hereunder is
terminated by the Executive for Good Reason or by the Company for Disability or
other than for Cause (including, without limitation, by giving the Executive a
Non-Renewal Notice pursuant to Section 1(a) hereof) and not as a result of the
death of the Executive, the Executive shall continue to be entitled, at the Company’s
expense, to the post-employment benefits under Section 4(a), if any, that such
benefits provide under their terms for a period of time following the
termination date ending on the first to occur of (I) the second anniversary of
the termination date, (II) the last date of eligibility under the applicable
benefits or (III) the date on which the Executive commences full-time
employment with another employer.  The
Company will pay the premiums for COBRA health coverage for Executive and her
covered

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family members for the
period COBRA provides. At such time as the Company is no longer required to
provide the Executive with life and/or disability insurance, as the case may
be, the Executive shall be entitled, at the Executive’s expense, to convert
such life and disability insurance, as the case may be, into individually owned
policies, except if and to the extent such conversion is not available from the
provider of such insurance.

(ii)           In the event the
Executive’s employment hereunder is terminated by the Company within one (1)
year of a Change in Control (other than a termination because of the Executive’s
death) or is terminated by the Company other than for Cause in anticipation of
a Change in Control, the Company shall pay to the Executive, in lieu of providing
the benefits contemplated by Section 5(f)(i) above, an amount in cash equal to
the aggregate reasonable expenses that the Company would incur if it were to
provide such benefits for a period of time following the termination date
ending on the second anniversary of the termination date, which amount shall be
paid in one lump sum on the date of such termination.

(iii)          In the event the
Executive’s employment hereunder is terminated by reason of death, the
Executive’s spouse and her dependents shall be entitled at the Company’s
expense to continued health coverage under COBRA under the Company’s group
medical and dental plans applicable to executives (with the Company’s payment
of premiums lasting for a period of twenty-four months or such shorter period
as COBRA provides because of replacement coverage).

(g)           Accrued Compensation.
In the event of any termination of the Executive’s employment for any reason,
the Executive (or her estate) shall be paid (i) any unpaid portion of her Base
Salary through the effective termination date, (ii) for any accrued but unused
vacation (payable in an amount equal to the Base Salary divided by 255 and
multiplied by the number of accrued but unused vacation days), (iii) any prior
fiscal year bonus earned, but not paid (other than on a resignation by
Executive without Good Reason or termination for Cause), (iv) any amounts for
expense reimbursement and similar items which have been properly incurred in
accordance with the provisions hereof prior to termination and have not yet
been paid, including without limitation any sums due under Sections 2(c), 2(d),
and 4(c) hereof, and (v) any Gross-Up Payment which may become due under the
terms of Section 5(i) hereof. Such amounts shall be paid within ten (10) days
of the termination date.

(h)           Director/Officer
Resignations. If the Executive’s employment hereunder shall be terminated
by her or by the Company in accordance with the terms set forth herein, then
effective upon the date such termination is effective, she will be deemed to have
resigned from all positions as an officer and director of the Company and of
any of its Subsidiaries, except as the parties may otherwise agree.

(i)            Certain Tax
Consequences.

(i)            (A)  Whether or not the Executive becomes entitled
to the payments and benefits described in this Section 5, if any of the
payments or benefits received or to be received by the Executive in connection
with a change in ownership or control of the Company, as defined in section
280G of the Code (a “Statutory
Change in Control”), or the Executive’s termination of
employment (whether pursuant to the terms of this Agreement or any other plan,

 10
 

arrangement
or agreement with the Company, any person whose actions result in a Statutory
Change in Control or any person affiliated with the Company or such person)
(collectively, the “Severance
Benefits “) will be subject to any excise tax (the “Excise Tax”) imposed
under section 4999 of the Code after giving effect to Section 5(i)(i)(B), the
Company shall pay to the Executive an additional amount equal to the Excise
Tax, plus any amount necessary to “gross up” the Executive for additional taxes
resulting from the payments to the Executive by the Company under this Section
5(i)(i) (the “Excise Tax
Payment”). Each Excise Tax Payment shall be made not less than
five (5) business days prior to the due date for payment of the Excise Tax.

(B)  Notwithstanding the foregoing, if it shall be
determined that the Executive would be entitled to an Excise Tax Payment, but
that if the Severance Benefits could be reduced by an amount necessary such
that the receipt of the Company Payments would not give rise to any Excise Tax
(the “Reduced Benefits”)
and the Reduced Benefits would
not be less than ninety percent (90%) of the Severance Benefits before such reduction,
then no Excise Tax Payment shall be made to the Executive and the Severance
Benefits, in the aggregate, shall be reduced to the Reduced Benefits.  To determine the Reduced Benefits, payments
shall be reduced in the following order (1) acceleration of vesting of any
stock options for which the exercise price exceeds the then fair market value,
(2) any cash severance based on a multiple of Base Salary or Bonus, (3) any
other cash amounts payable to the Executive, (4) any benefits valued as
parachute payments; and (5) acceleration of vesting of any equity not covered
by (1) above, unless the Executive elects another method of reduction by
written notice to the Company prior to the change of ownership or effective
control.

(ii)           For
purposes of determining whether any of the Severance Benefits will be subject
to the Excise Tax and the amount of such Excise Tax:

(A)  
all of the Severance Benefits shall be treated as “parachute payments” within
the meaning of Code section 280G(b)(2) if the aggregate present value
(determined as provided in Code Section 280G(d)(4)) of such Severance Benefits
equals or exceeds three times the Executive’s “Base Amount” (within the meaning of Code
Section 280G(b)(3)), and all “excess parachute payments” within the meaning of
Code section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
the Executive receives a written opinion from a nationally recognized law or
accounting firm (“280G
Advisers”) selected by the Compensation Committee or the Board,
and reasonably acceptable to the Executive, that such other payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of Code section 280G(b)(4)(A), or such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered, within the meaning of Code section 280G(b)(4)(B), in excess of the “Base Amount” as
defined in Code section 280G(b)(3) allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax; and

(B)   the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by a certified public accountant or appraisal company of recognized
national standing forming part of or selected by 280G Adviser and reasonably
acceptable to the Executive, in accordance with the principles of Code section
280G(d)(3) and (4).

(iii)          In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder, the Executive shall repay to the Company, at the time

 11
 

that
the amount of such reduction in Excise Tax is finally determined (the “Reduced Excise Tax”),
an amount (the “Gross-Up
Repayment”) equal to the sum of (A) the difference of the Excise
Tax Payment and the Reduced Excise Tax plus
(B) an amount representing the difference between (1) the amount paid by the
Company to the Executive to “gross up” the Executive for taxes on payments made
by the Company to the Executive in respect of the Excise Tax and (2) the amount
which should have been paid to the Executive by the Company to “gross up” the
Executive for taxes on payments made by the Company to the Executive in respect
of the Reduced Excise Tax; provided,
however, that in no event shall
the Gross-Up Repayment exceed the actual aggregate cash refunds of, or cash
reductions in, taxes paid by the Executive by virtue of paying the Gross-Up
Repayment; and provided, further, that if such refunds or reductions are
realized from time to time, the Executive shall make a repayment to the Company
at the time of each such realization equal to the excess of the Gross-Up
Repayment due after giving effect to such realization over the Gross-Up
Repayment due immediately prior to giving effect to such realization. The
Executive shall (1) take such actions with respect to taxes and tax returns as
the Company may from time to time request in order to obtain such refunds and
reductions, including, without limitation, by taking positions on tax returns
and filing amended tax returns, (2) provide the Company with copies of all tax
returns filed by the Executive which reflect such refunds or reductions or are
otherwise requested by the Company in order to determine the Executive’s
compliance with the immediately preceding clause (1), (3) permit the Company to
participate in any proceedings relating to such refunds and reductions and (4)
take all such other actions as may be reasonably requested by the Company from
time to time in connection with the realization of such refunds or reductions,
including, without limitation, borrowing money from the Company (on terms and
conditions reasonably satisfactory to the Executive and the Company, including,
without limitation, having the Company make the Executive whole, on an
after-tax basis, for any interest costs) so that the payments made from time to
time by the Executive to the Company hereunder maximize (to the extent
reasonably possible) such refunds and reductions, the aggregate amount of such
payments by the Executive not to exceed the Gross-Up Repayment (computed
without regard to the provisos to the first sentence of this Section
5(i)(iii)); provided, however, that the Company shall bear and
directly pay, or shall promptly reimburse the Executive for, all costs and
expenses (including any additional penalties and interest) incurred by the
Executive in connection with any actions taken or omitted by the Executive in
accordance with instructions from the Company pursuant to this sentence, and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including any additional penalties and interest)
imposed as a result of the Company’s payment of such costs and expenses. In the
event that the Excise Tax is subsequently determined to exceed the amount taken
into account hereunder (including by reason of any payment the existence or
amount of which could not be determined at the time of the Excise Tax Payment),
the Company shall make an additional Excise Tax Payment in respect of such
excess (together with any interest or penalties payable by the Executive with
respect to such excess) at the time that the amount of such excess if finally
determined, plus any additional taxes resulting from the payment to the
Executive by the Company for such excess and the interest and penalties
thereon. The Executive and the Company shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax with respect to the
Severance Benefits.

 12

(iv)          The
Executive shall give the Company written notice of any determination by the
Executive, or any claim by any taxing authority, that she owes Excise Tax on
any Severance Benefit. Such notice shall be given as soon as practicable but no
later than ten (10) business days after the Executive makes such determination
or is informed of such claim, and shall, to the extent Executive has or may
reasonably obtain such information, apprise the Company of the amount of such
Excise Tax and the date on which it is required to be paid. If the Company
gives the Executive written notice at least thirty (30) days prior to the due
date for payment of such Excise Tax, or within ten (10) business days of having
received the foregoing notice from the Executive (whichever is later), that it
disagrees with or wishes to contest the amount of the Excise Tax, the Company
and the Executive shall consult with each other and their respective tax
advisors regarding the amount and payment of any Excise Tax. In the event there
is a contest with any taxing authority regarding the amount of the Excise Tax,
the Company shall bear and pay directly all costs and expenses (including
additional interest, penalties and legal fees) incurred in connection with any
such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, to the extent not otherwise paid hereunder, on (x) the Excise
Tax Payment (including any interest and penalties with respect thereto) and (y)
the Company’s payment of the Executive’s costs and expenses hereunder.

6.             Limitation on Competition.

The Executive
acknowledges that she has immediate and continuing access to the ever-changing
trade secrets, confidential and proprietary information and “know-how” of the
Company (“Confidential Information”).  As an agreement ancillary to the receipt of
such information and the other undertakings in this Agreement, the Executive
covenants as follows:

During the Employment
Period, and for such period thereafter (A) as the Executive is entitled to
receive severance compensation under this Agreement, or (B) in the event
payment of the Executive’s severance compensation is accelerated due to a
Change in Control, for a period of three (3) years following the end of the
Employment Period, or (C) in the event the Executive’s employment is terminated
by the Company for Cause or the Executive terminates her employment for any
reason other than Good Reason (including, without limitation, by giving the
Company a Non-Renewal Notice pursuant to Section 1(a) hereof), for a period of
twelve months following the Employment Period:

(a)           the Executive shall
not, directly or indirectly, without the Company’s prior written consent,
participate or engage in, whether as a director, officer, employee, advisor,
consultant, investor, lender, stockholder, partner, joint venturer, owner or in
any other capacity, any Competitive Business (as defined below) conducted in
any Competitive Market Area (as defined below); provided, however, that the
Executive shall not be deemed to be participating or engaging in any such
business solely by virtue of her ownership of not more than five percent of any
class of stock or other securities which is publicly traded on a national
securities exchange or in a recognized over-the-counter market;

(b)           the Executive shall
not, without the Company’s prior written consent, (i) solicit (other than by
way of generalized employment advertising undertaken in the ordinary course of
business) the service of or employ any employee of the Company for the
Executive’s own benefit or for the benefit of any person or entity other than
the Company, (ii) induce any

 13
 

such employee to leave
employment with the Company, or (iii) employ or cause any other person or
entity other than the Company to employ any former employee of the Company
whose termination of employment with the Company occurred less than six (6)
months prior to such employment by the Executive or such other person or
entity; and

(c)           the Executive shall
not, without the Company’s prior written consent, (i) induce or attempt to
induce any customer, supplier or contractor of the Company to terminate or
breach any agreement or arrangement with the Company or otherwise to cease
doing business with the Company, or (ii) induce or attempt to induce any
customer, supplier or contractor of the Company (including any prospective
customer, supplier or contractor which the Company is actively pursuing prior
to the Executive’s termination of employment), not to enter into any agreement
or arrangement with the Company or not to do business with the Company.

As used herein, the term “Competitive Business”
shall mean any business: (1) that is competitive with any business (A) which
was conducted by the Company or any of its affiliated companies during the
Employment Period or on the date of termination of Executive’s employment
hereunder or (B) which, on the date of such termination or during the twelve
months immediately preceding such termination, the Company or any of its
affiliated companies was actively investigating with a view to conducting or
was actively pursuing a plan to conduct; and (2) from which the Company and
such affiliated companies derive (or reasonably expect to derive) annual
revenues of not less than $1,000,000. As used herein, the term “Competitive Market Area”
shall mean any geographic market area (1) if the Company or any of its
affiliated companies conducted business in such geographic market area during
the Employment Period or on the date of termination of Executive’s employment
hereunder, or (2) if, on the date of such termination or during the twelve
months immediately preceding such termination, the Company or any of its
affiliated companies was actively investigating with a view to conducting
business in such geographic market area or was actively pursuing a plan to
conduct business in such geographic market area.

The Executive agrees and
acknowledges that a portion of the consideration to be paid by the Company to
the Executive pursuant to this Agreement is in consideration of the covenants
under this Section 6 and that such consideration is fair and adequate, even
though the Executive will not receive any severance compensation in the event
she terminates her employment with the Company other than for Good Reason or
the Company terminates her employment for Cause. The Executive acknowledges and
agrees that any breach or anticipatory breach by her of any of the provisions
of this Section 6 would cause the Company irreparable injury not compensable by
monetary damages alone and that, accordingly, in any such event, the Company
shall be entitled to injunctions, both preliminary and permanent, enjoining or
restraining such breach or anticipatory breach without the necessity of showing
irreparable injury (and the Executive hereby consents to the issuance thereof
without bond by a court of competent jurisdiction).

 14
 

7.             Confidential Information.

The Executive acknowledges that during the course of
her employment with the Company she will have access to the Company’s Confidential
Information. Except in the ordinary course of properly performing her
duties for the Company, the Executive shall not at any time, without the
Company’s prior written consent while employed or after termination of her
employment, disclose, communicate or divulge, or use for the benefit of herself
or of any third party, any of the Confidential Information of the Company. In
the event the Executive learns during her employment with the Company any trade
secrets, confidential or proprietary information or know-how of any customer,
supplier or contractor of the Company, the Executive shall maintain the
confidence of such information.

8.             Return of Materials.

Upon termination of the
Executive’s employment for any reason, the Executive shall promptly deliver to
the Company or, with the Company’s consent, destroy all documents and other
materials in the Executive’s possession or custody (whether prepared by the
Executive or others) that the Executive obtained from the Company or a
customer, supplier or contractor of the Company during the Employment Period and
which relate to the past, present or anticipated business and affairs of the
Company, including without limitation, any Confidential Information.

9.             Enforceability.

If any provision of this
Agreement shall be deemed invalid or unenforceable as written, this Agreement
shall be construed, to the greatest extent possible, or modified, to the extent
allowable by law, in a manner which shall render it valid and enforceable and
any limitation on the scope or duration of any such provision necessary to make
it valid and enforceable shall be deemed to be a part thereof. No invalidity or
unenforceability of any provision contained herein shall affect any other
portion of this Agreement unless the provision deemed to be so invalid or
unenforceable is a material element of this Agreement, taken as a whole.

10.           Legal Expenses.

The Company shall pay the
Executive’s reasonable fees for legal and other related expenses associated
with any disputes arising hereunder or under any other agreements, arrangements
or understandings regarding Executive’s employment with the Company (including,
without limitation, all agreements, arrangements and understandings regarding
bonuses, Equity-Based Incentives, employee benefits or other compensation
issues) if either a court of competent jurisdiction or an arbitrator shall
render a final judgement or an arbitrator’s final decision in favor of the
Executive on the issues in such dispute, from which there is no further right
of appeal. If it shall be determined in such judicial adjudication or
arbitration that the Executive is successful on some of the issues in such
dispute, but not all, then the Executive shall be entitled to receive a portion
of such legal fees and other expenses as shall be appropriately prorated.

 15
 

11.           Notices.

All notices which the
Company is required or permitted to give to the Executive shall be given by
registered or certified mail or overnight courier, with a receipt obtained,
addressed to the Executive at her primary residence, or at such other place as
the Executive may from time to time designate in writing, or by personal
delivery to the Executive, or by facsimile to the Executive with oral
confirmation of her receipt and with a copy immediately sent to the Executive
by first class U.S. Mail, and to counsel for the Executive as may be requested
in writing by the Executive from time to time. All notices which the Executive
is required or permitted to give to the Company shall be given by registered or
certified mail or overnight courier, with a receipt obtained, addressed to the
Company at the address set forth above, or at such other address as the Company
may from time to time designate in writing, or by personal delivery to the
Chief Executive Officer of the Company, or by facsimile to the Chief Executive
Officer with oral confirmation of her receipt and with a copy immediately sent
to the Chief Executive Officer by first class U.S. Mail, and to counsel for the
Company as may be requested in writing by the Company. A notice will be deemed
given upon personal delivery, the mailing thereof or delivery to an overnight
courier for delivery the next business day, or the oral confirmation of receipt
by facsimile, except for a notice of change of address, which will not be
effective until receipt, and except as otherwise provided in Section 5(a)
hereof.

12.           Waivers.

No waiver by either party
of any breach or nonperformance of any provision or obligation of this
Agreement shall be deemed to be a waiver of any preceding or succeeding breach
of the same or any other provision of this Agreement. Any waiver of any
provision of this Agreement must be in writing and signed by the party granting
the waiver.

13.           Headings; Other Language.

The headings contained in
this Agreement are for reference purposes only and shall in no way affect the
meaning or interpretation of this Agreement. In this Agreement, as the context
may require, the singular includes the plural and the singular, the masculine
gender includes both male and female reference, the word “or” is used in the
inclusive sense and the words “including,” “includes,” and “included” shall not be limiting.  As used herein, the term “Subsidiary” shall
mean any corporation or other entity the voting equity of which the Company or
another Subsidiary holds at least fifty percent.

14.           Withholding and Timing of Payments.

The Executive
acknowledges and agrees that any or all payments under this Agreement may be
subject to reduction for tax and other required withholdings.  Notwithstanding any provision of this
Agreement, if the payment of any severance compensation or severance benefits
under this Agreement would be subject to additional taxes and interest under
Section 409A of the Internal Revenue Code because the timing of such payment is
not delayed as provided in Section 409A(a) (2) (B) of the Internal Revenue
Code, then any such payments that Executive would otherwise be entitled to
during the first six months following the date of Executive’s termination of
employment shall be accumulated and paid on the date that is six months after
the date of

 16
 

Executive’s termination
of employment (or if such payment date does not fall on a business day of the
Company, the next following business day of the Company), or such earlier date
upon which such amount can be paid under Section 409A of the Internal Revenue
Code without being subject to such additional taxes and interest.

15.           Counterparts.

This Agreement may be
executed in duplicate counterparts, each of which shall be deemed to be an
original and all of which, taken together, shall constitute one agreement.

16.           Agreement Complete; Amendments.

Effective as of the
Commencement Date, this Agreement, together with the Exhibits hereto, the
agreements referred to herein, and the instruments, agreements, plans,
resolutions and other documents pursuant to which any Equity-Based Incentives
are held (now or in the future) by the Executive, constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.  This Agreement may not be amended,
supplemented, canceled or discharged except by a written instrument executed by
both of the parties hereto, provided, however, that the immediately foregoing
provision shall not prohibit the termination of rights and obligations under
this Agreement which termination is made in accordance with the terms of this
Agreement.

17.           Benefit of the Successors and Permitted Assigns of the Respective Parties
Hereto.

This Agreement and the
rights and obligations hereunder are personal to the Company and the Executive
and are not assignable or transferable to any other person, firm or corporation
without the consent of the other party, except as contemplated hereby;
provided, however, in the event of the sale, merger or consolidation of the
Company, whether or not the Company is the surviving or resulting corporation,
the transfer of all or substantially all of the assets of the Company, or the
voluntary or involuntary dissolution of the Company, then the surviving or
resulting corporation or the transferee or transferees of the Company’s assets
shall be bound by this Agreement and the Company shall take all actions
necessary to insure that such corporation, transferee or transferees are bound
by the provisions of this Agreement; and provided, further, this Agreement
shall inure to the benefit of the Executive’s estate, heirs, executors,
administrators, personal and legal representatives, distributees, devisees, and
legatees. Notwithstanding the foregoing provisions of this Section 17, the
Company shall not be required to take all actions necessary to insure that a
buyer, survivor, transferee or transferees of the Company’s assets (“Transferee”) are
bound by the provisions of this Agreement and such Transferee shall not be
bound by the obligations of the Company under this Agreement if the Company
shall have (a) paid to the Executive or made provision satisfactory to the
Executive for payment to her of all amounts which are or may become payable to
her hereunder in accordance with the terms hereof and (b) made provision
satisfactory to the Executive for the continuance of all benefits required to
be provided to her in accordance with the terms hereof, in each case as if the
Executive had been terminated without Cause in anticipation of a Change in
Control.

 17
 

18.           Governing Law.

This Agreement will be governed and construed in
accordance with the laws of Texas applicable to agreements made and to be
performed entirely within such state, without giving effect to any choice or
conflicts of laws principles which would cause the application of the domestic
substantive laws of any other jurisdiction.

19.           Survival.

The covenants,
agreements, representations, warranties and provisions contained in this
Agreement that are intended to survive the termination of the Executive’s
employment hereunder and the termination of the Employment Period shall so
survive such termination.

20.           Interpretation.

The Company and the
Executive each acknowledge and agree that this Agreement has been reviewed and
negotiated by such party and its or her counsel, who have contributed to its
revision, and the normal rule of construction, to the effect that any
ambiguities are resolved against the drafting party, shall not be employed in
the interpretation of it.

IN WITNESS WHEREOF,
the parties have executed this Agreement, this 27th day of April, 2007.

	
   

  	
  KEY ENERGY SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/

  	
  Richard J.
  Alario

  	
   

  
	
   

  	
   

  	
   

  	
  Richard J. Alario

  
	
   

  	
   

  	
   

  	
  Chairman, President, and Chief Executive

  
	
   

  	
   

  	
   

  	
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/

  	
  Kim B. Clarke

  	
   

  	
   

  
	
   

  	
  Kim B. Clarke

  	
   

  	
   

  

 

 18
 

EXHIBIT A

Company Paid Coverages

1.             Medical and Dental Plan. Comprehensive
medical and dental plans available to the Company’s senior management, pursuant
to which all medical and dental expenses incurred by the Executive, her spouse
and her children will be reimbursed by the Company, through insurance or, in
the absence of insurance, directly by the Company, so that the Executive has no
out-of-pocket cost with respect to such expenses.

2.             Director and Officer
Liability Insurance.

3.             Voluntary annual
physicals at the Executive’s option while employed, with a report by the
examining physician, if requested, to the Board regarding the Executive’s
ability to perform job related functions.

 19
 

EXHIBIT B

Definition
of “Change in Control”

The occurrence of any of
the following shall constitute a “Change in Control” of the Company:

(a)           If any person (as
defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as from time
to time in effect (the “Exchange
Act”), or any successor provision), other than the Company,
becomes the beneficial owner directly or indirectly of more than fifty percent
(50%) of the outstanding Common Stock of the Company, determined in accordance
with Rule 13d-3 under the Exchange Act (or any successor provision), or
otherwise becomes entitled to vote more than fifty percent (50%) of the voting
power entitled to be cast at elections for directors (“Voting Power”) of the
Company;

(b)           If the Company is
subject to the reporting requirements of Section 13 or 15(d) (or any successor
provision) of the Exchange Act, and any person (as defined in Section 3(a)(9)
of the Exchange Act, or any successor provision), other than the Company,
purchases shares pursuant to a tender offer or exchange offer to acquire Common
Stock of the Company (or securities convertible into or exchangeable for or
exercisable for Common Stock) for cash, securities or any other consideration,
if after consummation of the offer, the person in question is the beneficial
owner, directly or indirectly, of more than fifty percent (50%) of the
outstanding Common Stock of the Company, 
determined in accordance with Rule 13d-3 under the Exchange Act (or any
successor provision);

(c)           If the stockholders or
the Board approve any consolidation or merger of the Company (i) in which the
Company is not the continuing or surviving corporation unless such merger is
with a Subsidiary at least fifty percent (50%) of the Voting Power of which is
held by the Company or (ii) pursuant to which the holders of the Company’s
shares of Common Stock immediately prior to such merger or consolidation would
not be the holders immediately after such merger or consolidation of at least a
majority of the Voting Power of the Company;

(d)           The stockholders or the
Board shall have approved any sale, lease, exchange or other transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of the Company;

(e)           Upon the election of
one or more new directors of the Company, a majority of the directors holding
office, including the newly elected directors, were not nominated as candidates
by a majority of the directors in office immediately before such election

As used in this
definition of “Change in
Control,” “Common
Stock” means the Common Stock, or if changed, the capital stock
of the Company as it shall be constituted from time to time entitling the
holders thereof to share generally in the distribution of all assets available
for distribution to the Company’s stockholders after the distribution to any
holders of capital stock with preferential rights.

 20EXHIBIT 10(f)

Amendment to The Dow
Chemical Company 1988 Award and Option Plan

RESOLVED, that Section 15.08(i) of The Dow Chemical
Company 1988 Award and Option Plan (the “Plan”) is hereby amended and restated
as follows (the “Amendment”):

15.08       Notwithstanding
any other provision of the Plan to the contrary:

(i)  Deferred
Stock:  Upon the occurrence of a Change
in Control, an Awardee’s right to receive the number of shares of Deferred
Stock credited to the account of the Awardee shall not be forfeitable under any
circumstances, including but not limited to those circumstances set forth in
Section 12 of the Plan.  The Company
shall deliver to the Awardee the shares of Deferred Stock credited to the
account of the Awardee on the thirtieth day following the occurrence of a
Change in Control.

FURTHER RESOLVED, that the Amendment applies to all grants of
deferred stock made pursuant to the Plan, whether currently outstanding or made
in the future; and

FURTHER RESOLVED, that
all other provisions of the Plan shall remain the same, in full force and
effect.

 39

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