Key Energy Services (KEGX) Risk Analysis

Certain provisions in our certificate of incorporation, bylaws and debt agreements may have the effect of deterring transactions involving a change in control, including transactions in which stockholders might receive a premium for their shares. Our amended and restated certificate of incorporation provides for the issuance of up to 50,000,000 shares of preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors. The authorization of preferred shares empowers our board, without further stockholder approval, to issue preferred shares with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of the common stock. If issued, the preferred stock could also dilute the holders of our common stock and could be used to discourage, delay or prevent a change of control. Furthermore, our debt agreements contain provisions pursuant to which an event of default or mandatory prepayment offer may result if certain "persons" or "groups" become the beneficial owner of more than 50.1% of our common stock. This could deter certain parties from seeking to acquire us, and if any "person" or "group" were to become the beneficial owner of more than 50.1% of our common stock, we may not be able to repay our indebtedness. While we are currently not subject to Section 203 of the Delaware General Corporation Law (the "DGCL"), we will become subject to Section 203 at such point as the Supporting Term Lenders and their Permitted Transferees (as defined in the Stockholders Agreement) collectively hold 50% or less of our common stock. In general, Section 203 of the DGCL prevents an "interested stockholder" (as defined in the DGCL) from engaging in a "business combination" (as defined in the DGCL) with us for three years following the date that person becomes an interested stockholder unless one or more of the following occurs: - Before that person became an interested stockholder, our board of directors approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination;- Upon consummation of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding stock held by certain directors and employee stock plans; or - Following the transaction in which that person became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least 66 2/3% of our outstanding voting stock not owned by the interested stockholder. The DGCL generally defines "interested stockholder" as any person who, together with affiliates and associates, is the owner of 15% or more of our outstanding voting stock or is our affiliate or associate and was the owner of 15% or more of our outstanding voting stock at any time within the three-year period immediately before the date of determination. Furthermore, while stockholders may currently take action by written consent and holders of a majority of our outstanding common stock may call a special meeting of the stockholders, once Supporting Term Lenders and their Permitted Transferees collectively hold 50% or less of the outstanding common stock our stockholders will not be able to call a special meeting or take action by written consent. The inability of our stockholders to take action by written consent or call a special meeting may have an anti-takeover effect in that a person seeking to change the composition of the Board to include directors supportive of an acquisition of the Company or to implement other changes to our amended and restated certificate of incorporation conducive to an acquisition of the Company may be required to wait until our next annual meeting before presenting such action to our stockholders. All of these factors could materially adversely affect the price of our common stock.