Document:

Exhibit 10.1

LEESPORT FINANCIAL CORP.

SEVERANCE AGREEMENT AND GENERAL RELEASE

This severance agreement
and general release (“Agreement”) is made and entered into by and between
Leesport Financial Corp., (“Corporation”), and James E. Kirkpatrick (“Employee”).

WHEREAS, Employee, has
been employed by Leesport Bank, a division of Corporation, since December 14,
1998 and is currently Executive Vice President/Chief Lending Officer for
Leesport Bank; and

WHEREAS, effective November 1,
2006, Employee will separate from employment with Corporation, and the parties
agree that the separation is not a result of any disagreement with Corporation
on any matter relating to Corporation’s operations or policies; and

WHEREAS, Corporation and
Employee do not anticipate that there will be any disputes between them or
legal claims arising out of Employee’s separation from Corporation, but
nevertheless desire to ensure a completely amicable parting and to settle fully
and finally any and all differences or claims that might otherwise arise out of
Employee’s employment with Corporation or its termination.

NOW, THEREFORE, in
consideration of the mutual promises contained herein, it is agreed as follows:

1.  Separation.  The date of Employee’s termination from employment
with Corporation of Employee is November 1, 2006.  The parties acknowledge and agree that,
effective November 1, 2006, Employee hereby resigns from any other positions
Employee currently holds as an officer, director or employee of Corporation or
any of its direct or indirect subsidiaries, including without limitation,
Leesport Realty Solutions, LLC and Leesport Mortgage Holdings, LLC.

2.  Continuation of Pay.  Corporation and Employee agree that Employee will
receive twenty-one (21) weeks of severance pay, which is calculated based on his
salary and job grade level as of November 1, 2006 and his eight (8) years
of service, as per Corporation’s Severance Policy (“Policy”).  Although Employee is not entitled to benefits
under the Policy, Employee and Corporation have agreed to use the severance pay
schedule set forth in the Policy to establish the amount of severance pay set
forth above.  Employee will be paid
through the pay period ending November 18, 2006 utilizing remaining 2006
vacation days.  Severance pay will

 1
 

 

begin with the pay
period beginning November 19, 2006 (received on December 1, 2006) and end
with the pay period ending May 5, 2007 (received on May 11, 2007).

3.  Continuation of Benefits.  Corporation will continue Employee’s medical,
dental, vision and basic life insurance coverages while Employee receives the
payments described in Paragraph 2 above (less Employee’s normal bi-weekly
contribution).  Any 401(k) Employee
contribution and Corporation’s 401(k) match will not continue during the
severance pay period that begins with the pay period beginning November 19,
2006.  Employee’s eligibility for coverage under benefit plans other than
as provided for above, as may be applicable, will terminate on November 1, 2006
unless, to the extent provided for under the terms of specific benefit plans,
such benefits continue until the end of a month during which Employee’s
termination date occurs.

4.  Other Benefits.  Any benefits payable to Employee under Corporation’s
other plans or arrangements, including options granted under Corporation’s 1999
Employee Stock Incentive Plan and benefits payable to Employee under that
certain Supplemental Executive Retirement Plan, dated October 1, 2003, between
Leesport Bank and Employee (the “SERP”), shall be paid in accordance with the
terms of such plans or arrangements. 
Payments shall be paid to Employee under the SERP in accordance with the
terms thereof notwithstanding the provisions of Section 5.7.1 (relating to
Non-Compete Provision), which are hereby expressly waived.  For purposes of termination of outstanding
vested options granted under Corporation’s 1999 Stock Incentive Plan, (i)
Corporation, as permitted by the terms of the Plan, hereby waives the
applicable lapse provisions relating to such options and agrees that such options
can be exercised until the date that is the earlier of the termination date of
the applicable option or three months from the date of termination of
employment and (ii) Corporation agrees that the date of termination of
employment for purposes of determining the date on which outstanding options
lapse shall be November 18, 2006.

5.  Confidentiality.

(a)  Since, as part of his employment, Employee
had access to information of a nature not generally disclosed to the public, he
will be expected and agrees to keep confidential and not disclose said
information to anyone.  Following the
execution of this Agreement, each party agrees to keep the facts and terms of
this Agreement in strict confidence and refrain from making any negative or
critical remarks about the other party including Corporation, and its subsidiaries,
and affiliates and their respective officers, directors, employees, agents and
representatives.  Except for litigation
arising out of the breach or enforcement of this Agreement, this Agreement
shall not be admissible in any legal proceeding.

(b)  In consideration of the payments to Employee
set froth in Section 2 hereof, Employee agrees that, for a period of six (6)
months following termination of Employee’s employment, Employee will not, directly
or indirectly, on Employee’s own behalf or on behalf of any other person or
entity, employ, solicit, induce, or recruit any employee of Corporation or any
of its subsidiaries or advise, encourage or solicit any of such persons to
terminate their employment relationship with Corporation or any of such
subsidiaries.

 2
 

 

6.  References.  Employee agrees that any requests for
references will only be directed to Corporation’s Human Resources Division.  Corporation agrees that in response to such
reference requests, neutral references will be provided, i.e. Corporation will
provide or confirm the dates Employees was employed by Corporation and the job
title last held by Employee.  Corporation
will not be liable and Employee agrees to hold Corporation harmless with
respect to responses to any requests for references that are directed to any
person or entity one other than Corporation’s Human Resources Division.

7.  Outplacement.  Corporation will provide Employee with
outplacement services through Pennswood Partners for a period not to exceed six
(6) months, and up to but not exceeding $5,000.00 in cost.

8.  General Release of Claims.  In keeping with the parties’ intent to allow
for an amicable separation and as part of the parties’ accord, Employee, in
consideration for the promises made in this Agreement, specifically but not
limited to the payment, benefits, and rights detailed in paragraphs 2 and
3, which Employee agrees and acknowledges Employee would not otherwise be
entitled to unless Employee signed this Agreement, Employee hereby releases
Corporation, its successors and assigns, parent or holding companies,
subsidiaries, and affiliates and their respective officers, directors,
employees, agents and representatives (each a “Released Person”) of and from any
and all debts, actions, causes of action, accounts, covenants, contracts,
demands, obligations, agreements, promises, damages, costs and/or fees, and any
and all claims and liabilities whatsoever of every name and nature, both in law
and equity, including, without limitation, any and all claims Employee may have
arising under the common law or under Title VII of the Civil Rights Act of
1964, as amended, the Americans With Disabilities Act of 1990, as amended, the
Family and Medical Leave Act of 1993, as amended, the Equal Pay Act, as
amended, the Pennsylvania Human Relations Act, as amended, the Pennsylvania
Wage Payment and Collection Law, as amended, and any other federal, state, or
local statutes, regulations, ordinance, or common law creating employment-related
causes of action, and any and all claims in connection with or arising out of
or relating to Employee’s employment, including but not limited to the
termination of Employee’s employment, intentional or negligent infliction of
emotional distress, fraud, defamation, slander, libel, invasion of privacy,
negligence or wrongful discharge, that Employee has or may have arising up to
and including the date of the execution of this Agreement (collectively, “Claims”),
against all Released Persons that Employee now has or may have had, whether
known or unknown.  Nothing in this
paragraph will affect the ability of either Corporation or Employee to enforce
rights or entitlements specifically provided for under this Agreement as set
forth above.  Corporation’s obligations
under this Agreement are contingent upon Employee’s compliance with all terms
and conditions provided for herein, including Employee’s continued cooperation
with Corporation.

9.  Notice of Rights Under ADEA.  In addition to Employee specifically and
unconditionally releasing all the Released Persons from any and all Claims
which arose up to and including the date of this Agreement, Employee further
acknowledges with respect to Employee’s Release of Claims under the ADEA that:

(a)  Employee has waived Employee’s claims under
the ADEA knowingly and voluntarily in exchange for the payment, benefits and
rights set forth in paragraphs 2 and 3 of this

 3
 

 

Agreement, and that Employee would not
otherwise have been entitled to said payment, benefits, and rights;

(b)  By provision of this Agreement for Employee’s
review and consideration, Employee is advised in writing by Corporation to
consult with an attorney in connection with this Agreement;

(c)  Employee has been given a period of twenty-one
(21) days within which to consider this Agreement but Employee understands and
acknowledges that Employee need not consider this Agreement for that full
twenty-one (21) day period before signing it;

(d)  Employee may revoke this Agreement within
seven (7) days after the date Employee signs this Agreement and Employee’s
waiver of ADEA claims will not become effective until the seven (7) day
revocation period expires;

(e)  If Employee revokes this Agreement in
accordance with subparagraph (D) above, Employee will no longer be
eligible for the payments, benefits, and rights set forth in paragraphs 2 and
3; and

(f)  This release complies in all respects with
Section 7(f) of the ADEA, that is, the waiver provisions of the Older
Workers Benefit Protection Act.

10.  Entire Agreement; Modification.  This Agreement represents the entire
agreement between Employee and Corporation with respect to the subject matter
contained in this Agreement and supersedes all prior agreements, whether oral
or written, between Employee and Corporation. 
This Agreement may be amended only by a written instrument signed by
Employee and Corporation or its successors or assigns.

11.  Waiver.  No consent to or waiver of any breach or
default in the performance of any obligation under this Agreement shall be
deemed or construed to be a consent to or waiver of any other breach or default
in the performance of any of the same or any other obligations under this
Agreement.  No action or course of
conduct shall constitute a waiver of any of the terms of this Agreement and no
waiver under this Agreement shall be effective unless it is in writing and
signed by the party waiving the breach or default under this Agreement.

12.  Assignment.  This Agreement, and the rights and
obligations of Employee and Corporation under this Agreement, shall inure to
the benefit of and shall be binding upon Employee, Employee’s heirs and
representatives, and upon Corporation, its successors and assigns.  This Agreement may not be assigned by
Employee.

13.  Severability.

(a)  All headings and subdivisions of this
Agreement are for reference only and shall not affect its interpretation.

 4
 

 

(b)  If any provision of this Agreement is held
unenforceable by a court of competent jurisdiction, all remaining provisions
shall continue in full force without being impaired or invalidated in any way.

14.  No Restriction on Right to File
Administrative Charges or Complaints. 
Nothing in this Agreement means that Employee may not file a charge or
complaint of unlawful employment discrimination with, or assist in an
investigation of a charge or complaint of unlawful employment discrimination
by, the United States Equal Employment Opportunity Commission or any state or
local agency (“Agency”) authorized to investigate charges or complaints of
unlawful employment discrimination.  Employee
also agrees to waive, now and in the future, all rights to compensation,
damages or back pay resulting from a charge or complaint filed by Employee or
on Employee’s behalf with or by any Agency regarding Employee’s employment with
Corporation or the termination of that employment.

15.  Choice of Law.  This Agreement is intended to take effect as
a sealed instrument, and all disputes arising under or related to it shall be
governed by the law of the Commonwealth of Pennsylvania.

16.  Choice of Forum.  All disputes arising under or out of this
Agreement shall be brought in courts of competent jurisdiction located within
the Commonwealth of Pennsylvania.

17.  No Representations.  Employee acknowledges that Corporation has made
no representations or warranties to Employee concerning the terms,
enforceability or implications of this Agreement other than as are reflected in
this Agreement.

	
  November 1, 2006

  	
   

  	
  /s/ Robert D. Davis

  	
   

  
	
  Date

  	
   

  	
  Robert D. Davis

  
	
   

  	
   

  	
  President and Chief Executive Officer

  Leesport Financial Corp.

  

 

 5
 

 

I HAVE READ AND CAREFULLY
CONSIDERED THIS AGREEMENT AND HAVE HAD AN OPPORTUNITY TO ASK QUESTIONS ABOUT IT
AND HAVE HAD MY QUESTIONS, IF ANY, ANSWERED. 
FURTHER, CORPORATION HAS INDICATED THAT I AM FREE TO DISCUSS THIS
AGREEMENT WITH MY FAMILY AND MY ATTORNEY. 
I HEREBY STATE THAT I KNOW AND UNDERSTAND THAT, BY ACCEPTING BENEFITS
UNDER THIS AGREEMENT AND SIGNING THIS AGREEMENT, I AM GIVING UP ANY RIGHT I
MIGHT HAVE TO BRING A CLAIM AGAINST CORPORATION RELATED TO MY EMPLOYMENT OR THE
TERMINATION OF THAT EMPLOYMENT.  I ALSO
STATE THAT I KNOW AND UNDERSTAND THAT I WOULD NOT RECEIVE THE SEVEREANCE
BENEFITS UNDER THIS AGREEMENT IF I DID NOT KNOWINGLY AND VOLUNTARILY ENTER INTO
THIS AGREEMENT.  I FURTHER STATE THAT I
AM SIGNING THIS AGREEMENT COMPLETELY WILLINGLY AND VOLUNTARILY AND THERE IS NO
MEDICAL OR OTHER CONDITION THAT WOULD PREVENT ME FROM DOING SO.  I AGREE THAT CORPORATION HAS NOT SUBJECTED ME
TO ANY COERCION OR DURESS AND HAVE DONE NOTHING TO FORCE ME TO SIGN THIS
AGREEMENT.  I AGREE THAT IF I ASSERT
OTHERWISE IN THE FUTURE I WILL NOT THEN BE TRUTHFUL.  I AM SIGNING THIS AGREEMENT FREELY AND
VOLUNTARILY.

	
  November 15, 2006

  	
   

  	
  /s/ James E. Kirkpatrick

  	
   

  
	
  Date

  	
   

  	
  James E. Kirkpatrick, Signature

  

 

 6Exhibit
10.1

SECOND AMENDMENT
TO CREDIT AGREEMENT

DATED AS OF NOVEMBER 21, 2006

This SECOND AMENDMENT
TO CREDIT AGREEMENT (together with all Exhibits, Schedules and
Annexes hereto, this “Amendment”) is among KEY
ENERGY SERVICES, INC., a Delaware corporation (the “Borrower”),
the Guarantors signatory hereto, the LENDERS
(as defined in the Credit Agreement), and LEHMAN
COMMERCIAL PAPER INC., as administrative agent for the Lenders (in
such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders
and other Secured Parties (in such capacity, the “Collateral Agent”).

PRELIMINARY
STATEMENTS

A.            The Borrower, the Lenders, the Administrative Agent,
Wells Fargo Foothill, Inc., as Revolving Administrative Agent, Lehman Brothers
Inc., as sole lead arranger and sole bookrunner, and the other agents party
thereto, entered into a Credit Agreement dated as of July 29, 2005 (together
with all Annexes, Exhibits and Schedules thereto, and as heretofore amended, the
“Credit
Agreement”).  Capitalized
terms used and not otherwise defined in this Amendment shall have the meanings
given them in the Credit Agreement.

B.            The Borrower desires to amend the Credit Agreement to,
among other things, permit the incurrence of additional Indebtedness, in the
form of new Tranche C Term Loans, to be used for the purpose of prepaying the
Tranche B Term Loans, to replace the existing Funded Letter of Credit Facility
(the “Existing Funded L/C Facility”) with a new funded letter of credit
facility and to increase the Borrower’s ability to make Restricted Payments,
Permitted Acquisitions and Capital Expenditures.

C.            Each existing Lender with outstanding Tranche B Term
Loans (an “Existing Tranche B Term Loan Lender”) and each Lender that is
a Funded L/C Participant (an “Existing Funded L/C Participant”) that
executes and delivers to the Administrative Agent a consent to this Amendment
together with a conversion notice in the form attached hereto as Exhibit A
(each, a “Conversion Notice”), will be considered a continuing Lender
(each a “Continuing Lender”) and will exchange all of its outstanding
Tranche B Term Loans for Tranche C Term Loans on the Amendment Effective Date
and will exchange its reversionary interest in the existing Credit Linked
Deposit (the “Existing Credit Linked Deposit”) for a reversionary
interest in the Credit Linked Deposit established pursuant to this Amendment.

D.            Each Person (other than a Continuing Lender) that agrees
to make Tranche C Term Loans or to provide a Funded Letter of Credit Commitment
on the Amendment Effective Date (an “Additional Lender”) will execute
and deliver to the Administrative Agent, on or prior to the Amendment Effective
Date, a Lender Addendum, in the form attached hereto as Exhibit B and make such
Tranche C Term Loans to the Borrower or make a deposit with the Revolving
Administrative Agent in the manner contemplated by Section 2 of this Amendment.

NOW, THEREFORE, in
consideration of the premises and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

1.             Amendments to Credit Agreement.  Subject to the satisfaction of the conditions
set forth in Section 4 hereof, the Credit Agreement is amended as follows:

(a)           The following new
definitions are hereby added to Section 1.1 of the Credit Agreement in the
appropriate alphabetical order:

 

“Conversion Notice”:  as defined in the Second Amendment.

“Second Amendment”:  the Second Amendment to this Agreement, dated
as of November 21, 2006.

“Second Amendment Effective Date”:  the Amendment Effective Date, as defined in
the Second Amendment.

“Tranche C Term Loan”:  as defined in Section 2.1.

“Tranche C Term Loan Commitments”:  as to any Lender, the obligation of such
Lender, if any, to make a Tranche C Term Loan to the Borrower hereunder and
under the Second Amendment in a principal amount not to exceed the amount set
forth in the Conversion Notice or the Lender Addendum delivered by such Lender,
or as the case may be, in the Assignment and Acceptance pursuant to which such
Lender became a party hereto, as the same may be changed from time to time
pursuant to the terms hereof.  The
original aggregate amount of the Tranche C Term Commitments is $397,000,000.

“Tranche C Term Loan Facility”:  as defined in the definition of “Facility” in
this Section 1.1.

“Tranche C Term Loan Lender”:  each Lender that has a Tranche C Term Loan
Commitment or is the holder of a Tranche C Term Loan.

“Tranche C Term Loan Percentage”:  as to any Tranche C Term Loan Lender at any
time, the percentage which such Lender’s Tranche C Term Loan Commitment then
constitutes of the aggregate Tranche C Term Loan Commitments (or, at any time
after the Second Amendment Effective Date, the percentage which the aggregate
principal amount of such Lender’s Tranche C Term Loans then outstanding
constitutes of the aggregate principal amount of the Tranche C Term Loans then
outstanding).

(b)           The definition of “Aggregate
Exposure” contained in Section 1.1 of the Credit Agreement is hereby amended to
replace the words “Tranche B” in clause (b)(i) thereof, with the words “Tranche
C”.

(c)           The definition of “Applicable
Margin” contained in Section 1.1 of the Credit Agreement is hereby amended and
restated to read as follows:

“Applicable Margin”:  for each Type of Loan under each Facility,
the rate per annum set forth opposite such Facility under the relevant column
heading below:

	
  

  	
   

  	
  Eurodollar 

  Loans

  	
   

  	
  Base Rate

  Loans

  	
   

  
	
  Revolving Credit
  Facility

  	
   

  	
  3.75

  	
  %

  	
  2.75

  	
  %

  
	
  Swing Line Loans

  	
   

  	
  —

  	
   

  	
  2.75

  	
  %

  
	
  Tranche C Term Loan
  Facility

  	
   

  	
  2.50

  	
  %

  	
  1.50

  	
  %

  

 

provided,
that on and after the first date on which the Facilities are rated by both
S&P and Moody’s, the Applicable Margins will be determined pursuant to the
Pricing Grid.

 2
 

 

(d)           The definition of “Commitment”
contained in Section 1.1 of the Credit Agreement is hereby amended and restated
as follows:

“Commitment”:
with respect to any Lender, the sum of the Tranche C Term Loan Commitment, the
Revolving Credit Commitment of such Lender and the Funded Letter of Credit
Commitment of such Lender.

(e)           The definition of “Facility”
in Section 1.1 of the Credit Agreement is hereby amended and restated as
follows:

“Facility”:  each of (a) the Tranche C Term Loan
Commitments and the Tranche C Term Loans made thereunder (the “Tranche C
Term Loan Facility”), (b) the Revolving Credit Commitments and the
extensions of credit made thereunder (the “Revolving Credit Facility”)
and (c) the Funded Letter of Credit Commitments established on the Second
Amendment Effective Date and the extensions of credit made thereunder (the “Funded
Letter of Credit Facility”).

(f)            The definition of “Funded
Letter of Credit Commitment” in Section 1.1 of the Credit Agreement is hereby
amended and restated as follows:

“Funded Letter of Credit
Commitment”:  as to any Lender, the
obligation of such Lender, if any, to make or otherwise fund or maintain a
Credit Linked Deposit, in an aggregate principal amount not to exceed the
amount set forth under the heading “Funded Letter of Credit Commitment”
opposite such Lender’s name on Schedule 1 to the Lender Addendum delivered by
such Lender or in the applicable Assignment and Acceptance pursuant to which
such Lender became a party hereto, as the same may be changed from time to time
pursuant to the terms hereof; provided that the amount of each Lender’s
Funded Letter of Credit Commitment established in connection with the Second
Amendment, if any, is set forth on the Conversion Notice or Lender Addendum, as
applicable, executed by such Lender.  The
aggregate amount of the Funded Letter of Credit Commitments established on the
Second Amendment Effective Date is $82,250,000.

(g)           The definition of “Funded
Letter of Credit Commitment Period” in Section 1.1 of the Credit Agreement is
hereby amended to insert the following proviso at the end thereof: “; provided
that, with respect to the Funded Letter of Credit Facility established in
connection with the Second Amendment, the Funded Letter of Credit Commitment
Period shall be the period from and including the Second Amendment Effective
Date to the Funded Letter of Credit Termination Date with respect to such
Funded Letter of Credit Commitments”.

(h)           The definition of “Interest
Period” in Section 1.1 of the Credit Agreement is hereby amended to delete the
words “Tranche B” in each place they appear in clause (y) thereof and by
substituting the words “Tranche C” in place thereof:

(i)            The definition of “Lender
Addendum” in Section 1.1 of the Credit Agreement is hereby amended and restated
as follows:

“Lender
Addendum”:  with respect to any
applicable Lender, a Lender Addendum, substantially in the form of
Exhibit C to the Second Amendment.

 3
 

 

(j)            Clause (d) of the
proviso in the definition of “Material Adverse Effect” contained in Section 1.1
of the Credit Agreement is hereby amended by deleting “July 21, 2005” and
substituting the words “the Second Amendment Effective Date” in place thereof.

(k)           The definition of “Report
Date” in Section 1.1 of the Credit Agreement is hereby amended and restated as
follows:

“Report
Date”:  July 31, 2007.

(l)            The definition of “Restatement”
in Section 1.1 of the Credit Agreement is hereby amended and restated as
follows:

“Restatement”:  (i) the restatement and adjustment of the
Borrower’s financial statements with respect to the year ended December 31,
2003, and prior periods as a result of write downs, write offs, charges or
other adjustments, in each case, to the extent reflected in the Borrower’s
press releases and filings with the SEC (including its report on Form 8-K/A
filed with the SEC on October 26, 2006, and the 2003 Financial and
Informational Report filed therewith) prior to the Second Amendment Effective
Date, and (ii) the adjustments to subsequent periods as a result of or arising
from the changes in accounting methodology or charges and other adjustments
recorded or otherwise reflected in the 2003 Financial and Informational Report,
including the financial statements and notes contained therein.

(m)          The definition of “Term
Loan Facility” in Section 1.1 of the Credit Agreement is hereby amended and
restated as follows:

“Term Loan Facility”:  the
Tranche C Term Loan Facility.

(n)           The definition of “Term
Loan Lenders” in Section 1.1 of the Credit Agreement is hereby amended and
restated as follows:

“Term Loan
Lenders”:  the Tranche C Term Loan Lenders.

(o)           The definition of “Term
Loans” in Section 1.1 of the Credit Agreement is hereby amended and restated as
follows:

“Term Loans”:  the Tranche C Term Loans.

(p)           Section 2.1 is
hereby amended and restated in its entirety to read as follows:

Subject to the terms and conditions hereof
and of the Second Amendment, the Tranche C Term Loan Lenders severally agree to
make (or convert Tranche B Term Loans) term loans (each, a “Tranche C Term
Loan”) to the Borrower on the Second Amendment Effective Date in an amount
for each Tranche C Term Loan Lender equal to the amount of the Tranche C Term
Loan Commitment of such Lender.  The Term
Loans may from time to time be Eurodollar Loans or Base Rate Loans, as
determined in accordance with Section 2 of the Second Amendment or Section 2.13
hereof.

(q)           Section 2.2 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

 4
 

 

Procedure for Term Loan
Borrowing.  Each
Tranche C Term Loan shall be made in accordance with Section 2 of the Second
Amendment.

(r)            Section 2.3 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

Repayment of Term Loans.  The Tranche C Term Loan of each Tranche C
Term Loan shall mature in 23 consecutive quarterly installments, commencing on
December 31, 2006, each of which shall be in an amount equal to such Lender’s
Tranche C Term Loan Percentage multiplied by the amount set forth below
opposite such installment:

	
  Installment

  	
   

  	
  Principal Amount

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  September 30,
  2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  September 30,
  2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  December 31,
  2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  September 30,
  2009

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  December 31,
  2009

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  September 30,
  2010

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  December 31, 2010

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  March 31, 2011

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  June 30, 2011

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  September 30,
  2011

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  December 31,
  2011

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  March 31, 2012

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  June 30, 2012

  	
   

  	
  $

  	
  375,000,000

  	
   

  

 

(s)           Section 2.12 of the
Credit Agreement is hereby amended to delete clause (c) thereof.

(t)            Section 2.18 of the
Credit Agreement is hereby amended to replace the words “Tranche B” in each
place they appear in clause (a) and (b) thereof with the words “Tranche C”.

(u)           Section 3.5 of the
Credit Agreement is hereby amended to add the following new section (d) at the
end thereof:

(d)           The
Borrower and each Additional Lender and each Continuing Lender (as defined in
the Second Amendment) that is a Funded L/C Participant hereby confirm and agree
that each Funded Letter of Credit issued under this Agreement, as in effect
immediately prior to the effectiveness of the Second Amendment, shall continue
to be a Funded Letter of Credit issued under this Agreement, after giving
effect to the Second Amendment, and the Borrower and each Additional Lender and
each Continuing Lender that is a Funded L/C Participant hereby confirm that
they are bound by the provisions of

 5
 

 

this Section 3.5 and each other provision of this
Agreement with respect to such Funded Letters of Credit as if such Funded
Letters of Credit were issued under this Agreement, after giving effect to the
Second Amendment.

(v)           Section 3.7(a) of
the Credit Agreement is hereby amended to replace the words “Closing Date” in
each place they appear therein with the words “Second Amendment Effective Date”.

(w)          Section 4.1 of the
Credit Agreement is hereby amended and restated as follows:

4.1           Financial
Condition.  The unaudited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at December 31, 2005, and the related consolidated statements of income and of
cash flows for the fiscal years ended on such dates, present fairly in all
material respects the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidated results of its
operations and its consolidated cash flows for the respective fiscal years then
ended, subject to any write downs, write offs, charges and adjustments required
as a result of the Restatements.  The
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at September 30, 2006, and the related unaudited consolidated
statements of income and cash flows for the nine-month period ended on such
date, present fairly in all material respects the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such date,
and the consolidated results of its operations and its consolidated cash flows
for the nine-month period then ended (subject to normal year-end audit adjustments
and absence of footnotes and subject to any write downs, write offs, charges
and adjustments, required as a result of the Restatements).  The Borrower and its Subsidiaries do not have
any material Guarantee Obligations, contingent liabilities and liabilities for
taxes, or any material long-term leases or unusual forward or long-term
commitments, including, without limitation, any interest rate or foreign
currency swap or exchange transaction or other obligation in respect of
derivatives, that are not reflected in the most recent financial statements
referred to in this paragraph (other than contingent liabilities arising in the
ordinary course of business or as disclosed on Schedule 4.1(b)-1 or as
heretofore disclosed by the Borrower in the 2003 Financial and Information
Report filed with the SEC on October 26, 2006). 
Except as set forth on Schedule 4.1(b)-2, during the period from
December 31, 2004 to and including the date hereof there has been no
Disposition by the Borrower or its consolidated Subsidiaries of any material
part of its business or Property.

(x)            Section 6.1(b)(ii)
of the Credit Agreement is hereby amended by deleting “; and” at the end of
such Section and by substituting a “.” in place thereof, and Section
6.1(b)(iii) of the Credit Agreement is hereby deleted in its entirety.

(y)           Section 6.14(a) is
hereby amended to amend and restate clause (ii) thereof as follows:

(ii)           complete
the audited financial statements for the Borrower’s 2004 and 2005 fiscal years
and unaudited financial statements for each fiscal quarter ended subsequent to
fiscal year end 2004 but prior to December 31, 2006, in each case, meeting the
requirements of Regulation S-X for a Form S-1 registration statement under the
Securities Act of 1933, as amended, other than any such requirement that would
require the inclusion of financial information as of or for the period ended
December 31, 2003 or any prior date or period (such financial statements, the “Prior
Financial Statements”).

(z)            Section 7.6(d) of
the Credit Agreement is hereby amended and restated as follows:

 6
 

 

(d)           the Borrower may repurchase its
common stock at market prices in an aggregate amount not to exceed $250,000,000
in the aggregate during the term of this Agreement so long as (i) (x) if such
repurchase is prior to the Financial Reporting Compliance Date, the Borrower’s
Consolidated Leverage Ratio (based on the most recent twelve-month period for
which financial statements are available) is not greater than 1.75 to 1.00 or (y)
if the repurchase is after the Financial Reporting Compliance Date, the
Borrower’s Consolidated Leverage Ratio (based on the most recent twelve month
period for which financial statements are available) is not greater than 2.50
to 1.00 and (ii) no Default or Event of Default exists and is continuing, or
would result therefrom; and

(aa)         Section
7.7 of the Credit Agreement is hereby amended (i) to replace the amount “$150,000,000”
in clause (a) thereof with the following language: “$225,000,000 per annum for
each fiscal year through fiscal year 2009 and $150,000,000 per annum thereafter”,
and (ii) to replace the amount “$25,000,000” in clause (i) of the proviso to
Section 7.7(a) with the amount “$50,000,000”.

(bb)         Section
7.8(g)(v) of the Credit Agreement is hereby amended and restated in its
entirety as follows:

(v)           the consideration for such Permitted
Acquisition (other than consideration consisting of Capital Stock of the
Borrower) shall not exceed $100,000,000, plus any cash proceeds of Excluded
Equity Issuances; and

(cc)         Annex
A to the Credit Agreement is hereby amended by replacing the words “Tranche B”
with the words “Tranche C”

2.             Tranche C Term Loans and the
Funded Letter of Credit Facility.

(a)           The
“Tranche C Term Loan Commitment” of (i) any Continuing Lender shall be
the aggregate principal amount of its then outstanding Tranche B Term Loans or
such lesser amount as is determined by the Administrative Agent and notified to
such Lender prior to the Amendment Effective Date and (ii) any Additional
Lender shall be the amount of such commitment set forth in the Lender Addendum
delivered by such Lender or such lesser amount as is allocated to it by the
Administrative Agent and notified to it prior to the Amendment Effective
Date.  The aggregate amount of Tranche C
Term Loan Commitments shall equal the aggregate principal amount of the Tranche
B Term Loans outstanding immediately prior to the Amendment Effective Date.

(b)           The
“Funded Letter of Credit Commitment” of (i) any Continuing Lender shall
be the aggregate principal amount of its then outstanding Funded Letter of
Credit Percentage of the Existing Credit Linked Deposit or such lesser amount
as is determined by the Administrative Agent and notified to such Lender prior
to the Amendment Effective Date and (ii) any Additional Lender shall be the
amount of such commitment set forth in the Lender Addendum delivered by such
Lender or such lesser amount as is allocated to it by the Administrative Agent
and notified to it prior to the Amendment Effective Date.  The aggregate amount of Funded Letter of
Credit Commitments shall equal the aggregate principal amount of the Credit
Linked Deposit outstanding immediately prior to the Amendment Effective Date.

(c)           The
Borrower shall give the Administrative Agent irrevocable notice of borrowing
(which notice must be received by the Administrative Agent prior to 12:00 noon,
New York City time, one Business Day prior to the anticipated Amendment
Effective Date) requesting that the Tranche C Term Loan Lenders (as defined in
Section 1(a)) make the Tranche C Term Loans (as defined in Section 1(a)) and
that the Funded L/C Participants make a deposit with the Revolving
Administrative Agent in an amount equal to such Funded L/C Participant’s Funded
Letter of Credit Commitment on the Amendment

 7
 

 

Effective Date
and specifying the amount to be borrowed or deposited, as the case may be.  Upon receipt of such notice the
Administrative Agent shall promptly notify each Tranche C Term Loan Lender and
Funded L/C Participant thereof.  Not
later than 12:00 noon, New York City time, on the Amendment Effective Date each
Tranche C Term Loan Lender shall make available to the Administrative Agent at
the Funding Office an amount in immediately available funds equal to the
Tranche C Term Loan to be made by such Lender (or provide the Administrative
Agent with a Conversion Notice with respect to its Tranche B Term Loans in lieu
of such funding requirement).  The
Administrative Agent shall make available to the Borrower the aggregate of
amounts made available to the Administrative Agent by the Tranche C Term Loan
Lenders in like funds.  Tranche C Term
Loan Commitments in existence on the Amendment Effective Date and not requested
to be funded (including by way of conversion) on such date will terminate on
such date.  To the extent that Tranche B
Term Loans are repaid with proceeds of Tranche C Term Loans, such Tranche B
Term Loans shall be deemed to have been assigned and transferred to the Tranche
C Term Loan Lenders (to be allocated amongst such Lenders at the Administrative
Agent’s discretion notwithstanding Section 2.18 of the Credit Agreement) and
thereafter shall be outstanding as Tranche C Term Loans held by the Tranche C
Term Loan Lenders subject to and in accordance with all terms, conditions and
provisions of this Amendment and the Credit Agreement (as amended hereby) applicable
to the Tranche C Term Loans.   In addition, not later than 12:00 noon, New
York City time on the Amendment Effective Date each Funded L/C Participant that
is a Continuing Lending or an Additional Lender shall make a deposit with the
Revolving Administrative Agent (including by way of conversion) in an amount
equal to such Funded L/C Participant’s Funded Letter of Credit Commitment.

(d)           All Tranche C Term
Loans made on the Amendment Effective Date will have the same Types (in the
same amounts) as applicable at such time to the Tranche B Term Loans and will
have initial Interest Periods ending on the same dates as the Interest Periods
applicable at such time to the Tranche B Term Loans, and the Eurodollar Rate
applicable to such Tranche C Term Loans during such initial Interest Periods
will be the same as that applicable at such time to the Tranche B Term Loans
being refinanced.  No accrued interest on
the Tranche B Term Loans converted into Tranche C Term Loans shall be payable
on the Amendment Effective Date and no amounts under Section 2.21(c) of the
Credit Agreement shall be payable in connection with such conversion.

(e)           The Required Lenders
hereby waive the requirements of Section 2.11(a) of the Credit Agreement solely
to the extent that such Section requires any notice of prepayment to be given
in respect of the Tranche B Term Loans to be prepaid on the Amendment Effective
Date and the requirements of Section 2.10(b) solely to the extent that such
Section requires any notice of termination on the Amendment Effective Date of
the Existing Funded L/C Facility.  In
addition, the Required Lenders and the Issuing Lender hereby waive the
requirements of the proviso contained of Section 2.10(b) to permit the termination
in full of the Existing Funded Letter of Credit Facility on the Amendment
Effective Date and the establishment of the Funded Letter of Credit Facility
contemplated by the Second Amendment, notwithstanding the outstanding amount of
the Total Funded Letter of Credit Exposure.

(f)            Notwithstanding
that the Tranche B Term Loans shall be refinanced in full and the Existing
Funded L/C Facility terminated on the Amendment Effective Date, except as
expressly set forth in this Section 2, the provisions of the Credit Agreement
with respect to indemnification, reimbursement of costs and expenses, increased
costs and break funding payments will continue in full force and effect with
respect to, and for the benefit of, each Existing Tranche B Term Loan Lender and
each Existing Funded L/C Participant in respect of such Lender’s Tranche B Term
Loans and Funded Letter of Credit Commitments existing under the Credit
Agreement prior to the Amendment Effective Date.

3.             Additional Amendments.  Subject to the satisfaction of the conditions
set forth in Sections 4
and 5 hereof,

 8
 

 

(a)           The definition of “Applicable
Margin” set forth in Section 1.1 of the Credit Agreement is hereby further amended
and restated as follows (and such amendment shall supersede the amendment set
forth in Section 1(c) of this Amendment):

“Applicable Margin”:  for
each Type of Loan under each Facility, the rate per annum set forth opposite
such Facility under the relevant column heading below:

	
  

  	
   

  	
  Eurodollar 

  Loans

  	
   

  	
  Base Rate

  Loans

  	
   

  
	
  Revolving Credit
  Facility

  	
   

  	
  2.50

  	
  %

  	
  1.50

  	
  %

  
	
  Swing Line Loans

  	
   

  	
  —

  	
   

  	
  1.50

  	
  %

  
	
  Tranche C Term Loan
  Facility

  	
   

  	
  2.50

  	
  %

  	
  1.50

  	
  %

  

 

provided,
that on and after the first date on which the Facilities are rated by both
S&P and Moody’s, the Applicable Margins will be determined pursuant to the
Pricing Grid.

(b)           The
definition of “Commitment Fee Rate” set forth in Section 1.1 of the Credit
Agreement is amended to replace the percentage “0.50%” therein with the percentage
“0.375%”.

4.             Conditions to Effectiveness.  The effectiveness of all the amendments
contained in Sections 1 and 3 of this Amendment are conditioned upon
satisfaction of the following conditions precedent (the date on which all such
conditions precedent have been satisfied being referred to herein as the “Amendment
Effective Date”):

(a)           the
Administrative Agent shall have received signed, written authorization from the
Required Lenders and the Majority Facility Lenders with respect to the Existing
Funded L/C Facility and the Tranche B Term Facility to execute this Amendment,
and shall have received counterparts of this Amendment signed by each of the
Borrower, the Guarantors and the Administrative Agent;

(b)           each
of the representations and warranties contained in Section 6 below shall be
true and correct in all material respects on and as of the Amendment Effective
Date;

(c)           the
Administrative Agent shall have received (i) commitments from banks and other
financial institutions with respect to the Tranche C Term Loans in an aggregate
principal amount equal to $397,000,000, (ii) commitments from banks and other
financial institutions with respect to the Funded Letter of Credit Commitments
in an aggregate principal amount equal to $82,500,000 and (iii) as applicable,
(x) a fully executed Lender Addendum with respect to each such bank or other
financial institution committing to fund such Tranche C Term Loans or to make a
deposit with respect to its Funded Letter of Credit Commitments (and pursuant
to which, on the Amendment Effective Date, such bank or other financial
institution shall become a Tranche C Term Loan Lender or a Funded L/C
Participant, as applicable, for all purposes under the Credit Agreement) or (y)
a fully executed Conversion Notice with respect to each Existing Lender
electing to convert its Tranche B Term Loans into Tranche C Term Loans and each
Existing Funded L/C Participant electing to convert its reversionary interest
in the Existing Credit Linked Deposit into a reversionary interest in the
Credit Linked Deposit established by the Revolving Administrative Agent on the
Amendment Effective Date (the “Second Amendment Credit Linked Deposit”) (and
pursuant to which on the Amendment Effective Date all of the outstanding
principal amount of Tranche B Term Loans held by such Lender shall convert into
Tranche C Term Loans, and Existing Credit Linked Deposit shall convert into the
Second Amendment Credit Linked Deposit, as applicable); it being agreed and
understood that delivery of a fully executed Conversion

 9
 

 

Notice by a
Lender shall be deemed to constitute an authorization by such Lender directing
the Administrative Agent to execute this Amendment;

(d)           each of the Funded
L/C Participants that is a Continuing Lender or an Additional Lender shall have
complied with its obligation to deposit cash in an amount equivalent to such
Funded L/C Participant’s Funded Letter of Credit Commitment (including by way
of conversion) with the Revolving Administrative Agent as provided in Section
2(c) hereof;

(e)           the Administrative
Agent shall have received all fees and other amounts due and payable on or
prior to the Amendment Effective Date, including, to the extent invoiced,
reimbursement or other payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder or any other Loan Document;

(f)            the Borrower shall
have provided irrevocable notice of the termination of the Existing Funded L/C
Facility immediately prior to the effectiveness of this Amendment; and

(g)           the Administrative
Agent shall have received such other documents, instruments, certificates and
approvals as it may reasonably request.

5.             Additional Conditions.  The effectiveness of all the amendments
contained in Section 3 of this Amendment are further conditioned upon the
Administrative Agent’s receipt of signed, written authorization from each of
the Revolving Credit Lenders to execute this Amendment.

6.             Representations and Warranties.  The Borrower represents and warrants to the
Administrative Agent and the Lenders as follows:

(a)           Authority.  The Borrower has the corporate power and
authority, and the legal right, to make, deliver and perform this Amendment and
to perform its obligations hereunder and under the Loan Documents (as amended
hereby).  Each of the Guarantors has the
corporate or other organizational power and authority, and the legal right, to
make, deliver and perform this Amendment. 
The execution, delivery and performance by the Borrower and Guarantors
of this Amendment and the Loan Documents (as amended hereby) and the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate or other organizational action of such Person.  No material consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Amendment.

(b)           Enforceability.  This Amendment has been duly executed and
delivered on behalf of each Loan Party that is party thereto.  Each of this Amendment and each Loan Document
as amended hereby (i) constitutes a legal, valid and binding obligation of each
Loan Party hereto, enforceable against each such Loan Party in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) and (ii) is in full
force and effect.  Neither the execution,
delivery or performance of this Amendment or the performance of the Loan
Documents (as amended hereby), nor the performance of the transactions
contemplated hereby or thereby, will adversely affect the validity, perfection
or priority of the Collateral Agent’s Lien on any of the Collateral or its
ability to realize thereon.  This
Amendment is effective to amend the Credit Agreement as provided herein.

(c)           Guaranty
Obligations.  Each of the signatories
hereto who have executed this Amendment under the caption “Guarantors” is a
Guarantor of the Obligations of the Borrower under the

 10
 

 

Credit
Agreement and hereby (i) acknowledges that notwithstanding the execution
and delivery of this Amendment, the obligations of each of the undersigned Guarantors
are not impaired or affected and all guaranties given to the holders of
Obligations and all Liens granted as security for the Obligations continue in
full force and effect, and (ii) confirms and ratifies its obligations
under the Guarantee and Collateral Agreement and each other Loan Document
executed by it.

(d)           Representations
and Warranties.  After giving effect
to this Amendment, the representations and warranties contained in the Credit
Agreement and the other Loan Documents (other than any such representations and
warranties that, by their terms, are specifically made as of an earlier date)
are true and correct in all material respects on and as of the date hereof as
though made on and as of the date hereof.

(e)           No Conflicts.  Neither the execution, delivery and
performance of this Amendment, nor the performance of and compliance with the
terms and provisions hereof or of the Loan Documents (as amended hereby) by any
Loan Party will, at the time of such performance, (i) violate any Requirement of
Law or any material Contractual Obligation of any Loan Party or (ii) result in,
or require, the creation or imposition of any Lien (other than Liens created by
the Loan Documents) on any of their respective properties or revenues pursuant
to any Requirement of Law or any such Contractual Obligation.

(f)            No Default.  After giving effect to this Amendment, no
event has occurred and is continuing that constitutes a Default or Event of
Default.

7.             Reference to and Effect on Credit Agreement.

(a)           Upon and after the
effectiveness of this Amendment, each reference in the Credit Agreement to “this
Agreement”, “hereunder”, “hereof” or words of like import referring to the
Credit Agreement, and each reference in the other Loan Documents to “the Credit
Agreement”, “thereunder”, “thereof” or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby.  This Amendment is a Loan
Document.

(b)           Except as
specifically amended above, the Credit Agreement and the other Loan Documents
are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed.  Without
limiting the generality of the foregoing, the Security Documents and all of the
Collateral described therein do and shall continue to secure the payment of all
Obligations under and as defined therein.

(c)           The execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of any
Secured Party under any of the Loan Documents, nor, except as expressly
provided herein, constitute a waiver or amendment of any provision of any of
the Loan Documents.

8.             Counterparts. 
This Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. 
Delivery of an executed counterpart of a signature page to this
Amendment by facsimile shall be effective as delivery of a manually executed
counterpart of this Amendment.

9.             Severability. 
Any provision of this Amendment that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or

 11
 

 

unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

10.           Governing Law.  This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.

[Signature
pages follow]

 12

 

IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be executed by their
respective officers thereunto duly authorized, as of the date first written
above.

	
  

  	
  ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

  
	
   

  	
   

  
	
   

  	
  LEHMAN COMMERCIAL PAPER INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
                /s/
  Maria M. Lund

  
	
   

  	
   

  	
  Name:

  	
  Maria M. Lund

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  REVOLVING ADMINISTRATIVE AGENT AND ISSUING
  LENDER:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
               /s/
  Kristy S. Loucks

  
	
   

  	
   

  	
  Name:

  	
  Kristy S. Loucks

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  KEY ENERGY SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
                /s/
  William M. Austin

  
	
   

  	
   

  	
  Name:

  	
  William M. Austin

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  

 

[Signature
Page to Second Amendment]|

 

 

	
  

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  BROOKS WELL SERVICING, INC.

  
	
   

  	
  DAWSON PRODUCTION MANAGEMENT, INC.

  
	
   

  	
  KALKASKA OILFIELD SERVICES, INC.

  
	
   

  	
  KEY ENERGY DRILLING, INC.

  
	
   

  	
  KEY ENERGY SERVICES-CALIFORNIA, INC.

  
	
   

  	
  KEY ENERGY SERVICES-SOUTH TEXAS, INC.

  
	
   

  	
  KEY ROCKY MOUNTAIN, INC.

  
	
   

  	
  Q SERVICES, INC.

  
	
   

  	
  Q.V. SERVICES, INC.

  
	
   

  	
  UNITRAK SERVICES HOLDING, INC.

  
	
   

  	
  WATSON OILFIELD SERVICE & SUPPLY, INC.

  
	
   

  	
  WELL-CO OIL SERVICE, INC.

  
	
   

  	
  WELLTECH EASTERN, INC.

  
	
   

  	
  WELLTECH MID-CONTINENT, INC.

  
	
   

  	
  YALE E. KEY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Austin

  	
   

  
	
   

  	
   

  	
  Name:  William
  M. Austin

  
	
   

  	
   

  	
  Title:    Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DAWSON PRODUCTION TAYLOR, INC.

  
	
   

  	
  DAWSON PRODUCTION ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Austin

  	
   

  
	
   

  	
   

  	
  Name:  William
  M. Austin

  
	
   

  	
   

  	
  Title:    Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MISR. KEY ENERGY SERVICES, LLC

  
	
   

  	
  MISR. KEY ENERGY INVESTMENTS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Austin

  	
   

  
	
   

  	
   

  	
  Name:  William
  M. Austin

  
	
   

  	
   

  	
  Title:    Vice
  President

  
					

 

[Signature
Page to Second Amendment]|

 

 

	
  

  	
  GUARANTORS (continued):

  
	
   

  	
   

  
	
   

  	
  BROOKS WELL SERVICING BENEFICIAL, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Brooks Well Servicing,
  Inc.

  
	
   

  	
  DAWSON PRODUCTION PARTNERS, L.P.

  
	
   

  	
  by the sole general
  partner

  
	
   

  	
  Dawson Production
  Management, Inc.

  
	
   

  	
  KEY ENERGY DRILLING BENEFICIAL, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Key Energy Drilling,
  Inc.

  
	
   

  	
  Q.V. SERVICES BENEFICIAL, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Q.V. Services, Inc.

  
	
   

  	
  UNITRAK SERVICES, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  UniTrak Services
  Holding, Inc.

  
	
   

  	
  WELLTECH MID-CONTINENT BENEFICIAL, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  WellTech Mid-Continent,
  Inc.

  
	
   

  	
  YALE E. KEY BENEFICIAL, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Yale E. Key, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Austin

  	
   

  
	
   

  	
   

  	
  Name:  William
  M. Austin

  
	
   

  	
   

  	
  Title:    Vice
  President

  
					

 

[Signature
Page to Second Amendment]|

 

 

	
  

  	
  GUARANTORS (continued):

  
	
   

  	
   

  
	
   

  	
  KEY ENERGY PRESSURE PUMPING SERVICES, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Q Oil & Gas
  Services, LLC

  
	
   

  	
  Q PRODUCTION SERVICES, L.P.

  
	
   

  	
  by the sole general partner,

  
	
   

  	
  Q Oil & Gas
  Services, LLC

  
	
   

  	
  QUALITY OIL FIELD SERVICES, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Q Oil & Gas
  Services, LLC

  
	
   

  	
  KEY ENERGY FISHING & RENTAL SERVICES, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Q Oil & Gas
  Services, LLC

  
	
   

  	
  Q.V. SERVICES OF TEXAS, L.P.

  
	
   

  	
  by the sole general
  partner,

  
	
   

  	
  Q Oil & Gas
  Services, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Austin

  	
   

  
	
   

  	
   

  	
  Name:  William
  M. Austin

  
	
   

  	
   

  	
  Title:    Vice
  President

  
					

 

[Signature
Page to Second Amendment]|

 

 

	
  

  	
  GUARANTORS (continued):

  
	
   

  	
   

  
	
   

  	
  BROOKS WELL SERVICING, LLC

  
	
   

  	
  KEY ENERGY DRILLING, LLC

  
	
   

  	
  Q ENERGY SERVICES, L.L.C.

  
	
   

  	
  Q OIL & GAS SERVICES, LLC

  
	
   

  	
  Q.V. SERVICES, LLC

  
	
   

  	
  UNITRAK SERVICES, LLC

  
	
   

  	
  YALE E. KEY, LLC

  
	
   

  	
  WELLTECH MID-CONTINENT, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Austin

  	
   

  
	
   

  	
   

  	
  Name:  William
  M. Austin

  
	
   

  	
   

  	
  Title:    Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KEY ENERGY SHARED SERVICES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Austin

  	
   

  
	
   

  	
   

  	
  Name:  William
  M. Austin

  
	
   

  	
   

  	
  Title:    Vice
  President

  
					

 

[Signature Page to Second Amendment]|

 

Exhibit
A

CONVERSION NOTICE

[TO BE
COMPLETED FOR EACH FUND]

Reference is made to the Second Amendment (the “Second
Amendment”), dated as of November 21, 2006 to the Credit Agreement, dated
as of July 29, 2005 (as amended from time to time prior to the date hereof, the
“Credit Agreement”), among Key Energy Services, Inc., the banks and
other financial institutions and entities from time to time party thereto (the “Lenders”),
Wells Fargo Foothill, Inc., as revolving administrative agent, and Lehman
Commercial Paper Inc., as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”) and as Collateral Agent for the
Lenders and other Secured Parties (in such capacity, the “Collateral Agent”).  Capitalized terms used but not otherwise
defined herein are used with the meanings attributed thereto in the Credit
Agreement.

[The undersigned Lender hereby irrevocably and
unconditionally elects to convert $[                                ]
of the outstanding principal amount of the Tranche B Term Loan held by such
Lender into a Tranche C Term Loan (as defined in the Second Amendment) in a
principal amount equal to the amount of the Tranche B Term Loan converted
hereby, effective only if, and only as and when the Second Amendment becomes
effective in accordance with its terms.]

[The undersigned Lender hereby irrevocably and
unconditionally elects to convert $[                            ]
of the outstanding principal amount of Credit Linked Deposit Account applicable
to such Lender (its “Credit Linked Deposit Amount”) into a cash deposit
for the Credit Linked Deposit Account established in connection with the Second
Amendment in an amount equal to the amount of the Credit Linked Deposit Amount
converted hereby, effective only if, and only as and when the Second Amendment
becomes effective in accordance with its terms.]

This Conversion Notice shall be governed by, and
construed and interpreted in accordance with, the laws of the state of New York.

This Conversion Notice may be executed by the parties
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.  Delivery of an executed signature page hereof
by facsimile transmission shall be effective as delivery of a manually executed counterpart
hereof.

By executing this Conversion
Notice, the undersigned Lender hereby irrevocably and unconditionally consents
to the Second Amendment and authorizes the Administrative Agent to execute the
Second Amendment on its behalf.

[remainder of page intentionally
left blank]

 

IN WITNESS WHEREOF, the parties hereto have caused the
Conversion Notice to be duly executed and delivered by their proper and duly
authorized officers as of this        day of
November, 2006.

	
   

  	
  [INSERT NAME OF LENDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[Signature Page to Conversion Notice]|

 

 

	
  ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

  
	
   

  
	
  LEHMAN COMMERCIAL PAPER INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

[Signature
Page to Conversion Notice]|

 

Exhibit B

FORM OF LENDER ADDENDUM

LENDER ADDENDUM, dated as of                            
       , 200     (this “Lender
Addendum”), to the Credit Agreement, dated as of July 29, 2005 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Key Energy Services, Inc., the banks and other financial institutions and
entities from time to time party thereto (the “Lenders”), Wells Fargo
Foothill, Inc., as revolving administrative agent, and Lehman Commercial Paper
Inc., as administrative agent for the Lenders (in such capacity, the “Administrative
Agent”) and as Collateral Agent for the Lenders and other Secured Parties
(in such capacity, the “Collateral Agent”).  Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement.

W I T N E S S E T H :

WHEREAS, the Credit Agreement provides that any bank,
financial institution or other entity may become a party to the Credit
Agreement with the consent of the Borrower and the Administrative Agent (which
consent, in the case of the Administrative Agent, shall not be unreasonably
withheld) by executing and delivering to the Borrower and the Administrative
Agent a supplement to the Credit Agreement in substantially the form of this
Lender Addendum; and

WHEREAS, the undersigned now desires to become a party
to the Credit Agreement as a Lender thereunder;

NOW, THEREFORE, the undersigned hereby agrees as
follows:

1.             The undersigned agrees to be bound by
the provisions of the Credit Agreement, and agrees that it shall, on the date
this Lender Addendum is accepted by the Borrower and the Administrative Agent,
become a Lender for all purposes of the Credit Agreement to the same extent as
if originally a party thereto, with [a commitment under the Tranche C Term Loan
Facility of $[                           ]][a
Funded Letter of Credit Commitment of  $[                           ]].

2.             The undersigned (a) represents and
warrants that it is legally authorized to enter into this Lender Addendum; (b)
confirms that it has received a copy of the Credit Agreement and each other
Loan Document existing as of the date of this Lender Addendum, together with
copies of the financial statements referred to in Section 6.1 of the Credit
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Lender
Addendum; (c) agrees that it has made and will, independently and without
reliance upon the Administrative Agent, any other agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement or any instrument or document furnished pursuant
hereto or thereto; (d) appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement or any instrument or document furnished pursuant
hereto or thereto as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are incidental thereto; and (e) agrees
that it will be bound by the provisions of the Credit Agreement and each of the
other Loan Documents and will perform in accordance with their terms all the
obligations which by the terms of the Credit Agreement or the other Loan
Documents are required to be performed by it as a Lender including, without
limitation, if it is organized under the laws of a jurisdiction outside the
United States, its obligations pursuant to Section 2.20 of the Credit
Agreement.

 

3.             The undersigned’s address for notices
for the purposes of the Credit Agreement is as follows:

	
  Name of Lender:

  	
   

  	
   

  
	
  Notice Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
   

  

 

[remainder of page intentionally
left blank]

 

IN WITNESS WHEREOF, the undersigned has caused this
Lender Addendum to be executed and delivered by a duly authorized officer on
the date first above written.

	
   

  	
  [INSERT NAME OF LENDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

[Signature Page to Lender Addendum]

 

Accepted this      
day of

                                     ,
200  

	
  KEY ENERGY SERVICES, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

  
	
   

  
	
  LEHMAN COMMERCIAL PAPER INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

[Signature
Page to Lender Addendum]

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