For purposes of calculating share ownership levels required by these guidelines, we include both vested and unvested restricted stock and restricted stock units, but we do not include unexercised stock options, cash-based performance units , SARs, or jointly-held stock. Stock ownership levels are calculated at year-end using the 12-month volume weighted average price of the Company’s common stock.

PROPOSAL 1—ELECTION OF DIRECTORS

Our Board is divided into three classes. One class is elected each year and members of each class hold office for three-year terms. Our bylaws provide that the number of directors constituting the Board will be determined by resolution of the Board. The Board has set the number of directors at eleven; however, the number of directors will be reduced to ten immediately prior to the election of directors at the annual meeting. There are presently four Class I directors, four Class II directors and three Class III directors. At the annual meeting, the terms of our Class II directors will expire. The Class II directors elected at this year’s annual meeting will serve three-year terms expiring at the annual meeting in 2017, until their successors are elected and qualified, or the earlier of their death, resignation or removal. The Class III and Class I directors will serve until the annual meetings of stockholders to be held in 2015 and 2016, respectively, until their respective successors are elected and qualified, or the earlier of their death, resignation or removal.

The current Class II directors are William D. Fertig, Robert K. Reeves, Mark H. Rosenberg and J. Robinson West. Each of Mr. Fertig, Mr. Reeves and Mr. Rosenberg has been nominated by the Board pursuant to the recommendation of the Corporate Governance and Nominating (“CGN”) Committee to be elected by the holders of our common stock to serve a three-year term as a Class II director. Mr. West has elected not to stand for re-election and his term will expire at the annual meeting. If you execute and return the enclosed proxy card, the proxies named therein will vote to elect as Class II directors William D. Fertig, Robert K. Reeves and Mark H. Rosenberg, unless you indicate on your proxy card that your shares should be voted against one or more of the nominees or to abstain from voting in the election of one or more of the nominees. Each of the nominees is currently a member of the Board and was previously elected to the Board at the annual meeting of stockholders held in 2011, except for Mr. Rosenberg who was elected to a new position on the Board on May 23, 2013. Our Board has determined that each of Mr. Fertig, Mr. Reeves and Mr. Rosenberg is independent under the rules of the New York Stock Exchange, or the NYSE and the definition of “independent director” as established by the Board.

Each of the nominees has indicated his or her willingness to serve, if elected. However, if any nominee should be unable to serve, the shares of common stock represented by proxies may be voted for a substitute nominee designated by the Board.

There are no family relationships between or among any of our officers and our directors, except that the son-in-law of Robert K. Reeves, a Class II director, is a non-officer employee of the Company. Robert K. Reeves is an executive officer of one of our customers. For additional information regarding these relationships, see the discussion below under the heading “Certain Relationships and Related Party Transactions” under “Corporate Governance.”

Director nominees are elected by a relative majority vote in uncontested director elections. Under this voting standard, in order to be elected in an uncontested election, our bylaws require that a director nominee must receive more votes cast “for” such nominee’s election than votes cast “against” such nominee’s election. Under our Corporate Governance Guidelines, as a condition to being nominated, each incumbent director is required to submit an irrevocable letter of resignation that will become effective if stockholders do not re-elect the director and the Board determines to accept the resignation. If an incumbent director is not re-elected in an uncontested election, our CGN Committee will recommend to the Board the action to be taken with respect to such director’s resignation. The Board will act on the CGN Committee’s recommendation, and publicly disclose its decision and the rationale behind its decision, within 90 days after the date the election results are certified. Pending the determination of the Board and the CGN Committee, the director may remain active and engaged in Board activities, other than with respect to any deliberations or voting regarding whether to accept or reject his or her resignation.

Below are the names, ages and certain other information of each nominee for election as a Class II director and each continuing member of our Board, including information each director has given us about all positions he or she holds, his or her principal occupation and business experience for the past five years and the names of other

publicly held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each director’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our directors exhibit high standards of integrity, honesty and ethical values. Information with respect to the number of shares of common stock beneficially owned by each director as of March 3, 2014 respectively, until their respective successors are elected and qualified, or the earlier of their death, resignation or removal.

If you execute and return the enclosed proxy card, the proxies named therein will vote to elect as Class III directors Richard J. Alario, Ralph S. Michael, III and Arlene M. Yocum, unless you indicate on your proxy card that your shares should be voted against one or more of the nominees or abstain from voting in the election of one or more of the nominees. Our Corporate Governance and Nominating (“CGN”) Committee has recommended, and the Board has nominated, each of the nominees for election as Class III directors. Each of the nominees is currently a member of the Board and was previously elected to the Board at the annual meeting of stockholders held in 2009.

Each of the nominees has indicated his or her willingness to serve, if elected. However, if any nominee should be unable to serve, the shares of common stock represented by proxies may be voted for a substitute nominee designated by the Board.

There are no family relationships between or among any of our officers and our directors. Ralph S. Michael, III, a Class III director, serves on the advisory board of a firm that provided consulting services to us during 2011. Robert K. Reeves, a Class II director, is an executive officer of one of our customers. For additional information regarding these relationships, see the discussion below under the heading “Certain Relationships and Related Party Transactions” under “Corporate Governance.”

Previously, directors nominees were elected by a plurality vote in uncontested elections, meaning that the director nominees to receive the highest number of votes “for” election would be elected as directors. On February 22, 2012, the Board amended and restated our bylaws to provide for a relative majority voting standard in uncontested director elections. Under this standard, in order to be elected in an uncontested election, our bylaws now require that a director nominee must receive more votes cast “for” such nominee’s election than votes cast “against” such nominee’s election. Under our Corporate Governance Guidelines, each director submits an irrevocable letter of resignation that the Board may accept if stockholders do not re-elect the director. If an incumbent director is not re-elected, our CGN Committee shall recommend to the Board the action to be taken with respect to such director’s resignation. The Board shall act on the CGN Committee’s recommendation, and publicly disclose its decision and the rationale behind its decision, within 90 days after the date the election results are certified.

Below are the names, ages and certain other information of each nominee for election as a Class III director and each other member of our Board, including information each director has given us about all positions he or she holds, his or her principal occupation and business experience for the past five years and the names of other publicly held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each director’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our directors exhibit high standards of integrity, honesty and ethical values. Information with respect to the number of shares of common stock beneficially owned by each director as of March 12, 2012 appears above under the heading “Stock Ownership of Certain Beneficial Owners and Management.”

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Nominees for Term Expiring in 2014 (Class II Directors)

William D. Fertig, age 57, has been a member of the Board since April 2000. He has been Co-Chairman and Chief Investment Officer of Context Capital Management, an investment advisory firm, since 2002. He serves as trustee for ProFunds and ProShares. From 1990 through April 2002, Mr. Fertig was a Principal and a Senior Managing Director of McMahan Securities, a broker dealer firm specializing in convertible, high-yield and derivative securities. Mr. Fertig previously served in various senior capacities at Drexel Burnham Lambert and Credit Suisse First Boston from 1980 through 1990. He holds a BS from Allegheny College and an MBA from the Stern Business School of New York University. We believe Mr. Fertig’s qualifications to serve on our Board include his investment and market expertise.

Robert K. Reeves, age 56, has been a member of the Board since October 2007. He is Executive Vice President, General Counsel and Chief Administrative Officer of Anadarko Petroleum Corporation, an independent oil and gas exploration and production company. From 2004 to February 2007, Mr. Reeves served as Senior Vice President, Corporate Affairs & Law and Chief Governance Officer of Anadarko. Prior to joining Anadarko, he served as Executive Vice President, Administration and General Counsel of North Sea New Ventures from 2003 to 2004, and as Executive Vice President, General Counsel and Secretary of Ocean Energy, Inc. and its predecessor companies from 1997 to 2003, both energy exploration and production companies. Since 2008, Mr. Reeves has served as a director of Western Gas Holdings, LLC, a subsidiary of Anadarko and general partner of Western Gas Partners, LP. Since 2012, Mr. Reeves has also served as a director of Western Gas Equity Holdings, LLC, a subsidiary of Anadarko and general partner of Western Gas Equity Partners, LP. He holds a BA and JD from Louisiana State University. We believe Mr. Reeves’ qualifications to serve on our Board include his experience in both legal and business matters as well as his upstream exploration and production experience.

Mark H. Rosenberg, age 52, has been a member of the Board since May 2013. Since 2002, he has been a Principal and Chief Operating Officer with MHR Fund Management LLC, an owner of greater than 10% of the Company’s common stock. From 2000 to 2001, Mr. Rosenberg was Vice President with CRT Capital Group LLC in Greenwich, CT. From 1991 to 2000, Mr. Rosenberg was President of Rosemark Management, Inc., manager of a portfolio of investments and operating businesses. Mr. Rosenberg serves as a director and a member of the Audit Committee and Compensation Committee of Northern Offshore Ltd. Previously, Mr. Rosenberg served on the boards of Ben Arnold Beverage Company of South Carolina until 2012 and Medical Nutrition USA, Inc. until its sale in 2010. Mr. Rosenberg graduated from the Wharton School, University of Pennsylvania and holds a BS in Economics. We believe Mr. Rosenberg’s qualifications to serve on our Board include his investment and market expertise.

Continuing Directors

Biographical and other information with respect to all members of the Board of Directors whose current terms will continue after the annual meeting is set forth below:

Directors Whose Term Expires in 2015 (Class III Directors)

Richard J. Alario, age 57,59, has been a member of the Board since May 2004. Mr. Alario joined Key as President and Chief Operating Officer effective January 1, 2004. On May 1, 2004, he was promoted to Chief Executive Officer and appointed to the Board. He was elected Chairman of the Board on August 25, 2004. Prior

to joining Key, Mr. Alario was employed by BJ Services Company, an oilfield services company, where he served as Vice President from May 2002 after OSCA, Inc. was acquired by BJ Services. Prior to joining BJ Services, Mr. Alario had over 21 years of service in various capacities with OSCA, an oilfield services company, most recently having served as its Executive Vice President. He currently serves as vice chairman, chairman elect, director and executive committee member of the National Ocean Industries Association. He is also a director of Kirby Corporation and serves on its Audit Committee. He is a member of the Louisiana State University Forever LSU Foundation, a member of the Petroleum Equipment Suppliers Association, and a member of the American Association of Drilling Engineers. Mr. Alario was also a director of Seahawk Drilling, Inc., serving as Chair of its Compensation Committee and as a member of its Corporate Governance Committee from August 2009 until February 2011. Mr. Alario holds a BA from Louisiana State University. We believe Mr. Alario’s qualifications to serve on our Board include his extensive experience of over 30 years in the oilfield services business, including his service as Key’s President and Chief Executive Officer.

Ralph S. Michael, III, age 57,59, has been a member of the Board since March 2003. He has served as President and Chief Executive Officer of Fifth Third Bank, Cincinnati Region, since December 2010. Mr. Michael was President and Chief Operating Officer of the Ohio Casualty Insurance Company from July 2005 until its sale in August 2007. From 2004 through July 2005, Mr. Michael served as Executive Vice President and Manager of West Commercial Banking for U.S. Bank, National Association and then as Executive Vice President and Manager of Private Asset Management for U.S. Bank. He also served as President of U.S. Bank Oregon from 2003 to 2005. From 2001 to 2002, he served as Executive Vice President and Group Executive of PNC Financial Services Group, with responsibility for PNC Advisors, PNC Capital Markets and PNC Leasing. He is a director of AK Steel Corporation; FBR & Co.;Corporation, Arlington Asset Investment Corporation;Corporation, Cincinnati Bengals, Inc.;, CSAA Insurance Group and Xavier University. Previously, he served as a director for Integrated Alarm Services Group, Inc. from 2003 to 2007, and for Ohio Casualty Corporation from 2002 to 2005.2005 and FBR & Co. from 2010 until 2013. He holds a BA from Stanford University and an MBA from the Graduate School of Management of the University of California Los Angeles. We believe Mr. Michael’s qualifications to serve on our Board include the broad business and finance background obtained through his more than 30 years experience working in financial services, much of which has been in executive management positions, as well as his extensive experience as a corporate board member, including his service on our and other companies’ audit committees, all of which have designated himled to his designation as an “audit committee financial expert.”

Arlene M. Yocum, age 54,56, has been a member of the Board since October 2007. Ms. Yocum has been Executive Vice President, Managing Executive of Client ServiceSales and DistributionService for PNC’s Asset Management Group since 2003. Prior to that, she served as an Executive Vice President of PNC’s Institutional Investment Group from 2000 to 2003. Ms. Yocum was a director of Protection One, Inc until 2010. She holds a BA from Dickinson College and a JD from Villanova School of Law and a BA from Dickinson College.Law. We believe Ms. Yocum’s qualifications to serve on our Board include her extensive business experience, including her investment and finance expertise and her designation as an “audit committee financial expert,” as well as her knowledge of legal matters being a trainedby virtue of her training as an attorney.

Directors Whose Term Expires in 2014 (Class II Directors)

William D. Fertig, age 55, has been a member of the Board since April 2000. He has been Co-Chairman and Chief Investment Officer of Context Capital Management, an investment advisory firm, since 2002. He serves as trustee for ProFunds and ProShares. From 1990 through April 2002, Mr. Fertig was a Principal and a Senior Managing Director of McMahan Securities, a broker dealer firm specializing in convertible securities, high-yield and derivative securities. Mr. Fertig previously served in various senior capacities at Drexel Burnham Lambert and Credit Suisse First Boston from 1980 through 1990. He holds a BS from Allegheny College and an MBA from the Stern Business School of New York University. We believe Mr. Fertig’s qualifications to serve on our Board include his investment and market expertise.

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Robert K. Reeves, age 54, has been a member of the Board since October 2007. He is Senior Vice President, General Counsel and Chief Administrative Officer of Anadarko Petroleum Corporation, an independent oil and gas exploration and production company. From 2004 to February 2007, Mr. Reeves served as Senior Vice President, Corporate Affairs & Law and Chief Governance Officer of Anadarko. Prior to joining Anadarko, he served as Executive Vice President, Administration and General Counsel of North Sea New Ventures from 2003 to 2004, and as Executive Vice President, General Counsel and Secretary of Ocean Energy, Inc. and its predecessor companies from 1997 to 2003, both energy exploration and production companies. Since 2008, Mr. Reeves has served as a director of Western Gas Holdings, LLC, a subsidiary of Anadarko and general partner of Western Gas Partners, LP. He holds a BA and JD from Louisiana State University. We believe Mr. Reeves’ qualifications to serve on our Board include his experience in both legal and business matters as well as his upstream exploration and production experience.

J. Robinson West, age 65, has been a member of the Board since November 2001. He is the founder and CEO, and since 1984 has served as Chairman, of PFC Energy, strategic advisers to international oil and gas companies, national oil companies, and petroleum ministries. Previously, Mr. West served as U.S. Assistant Secretary of the Interior with responsibility for offshore oil leasing policy from 1981 through 1983. He was Deputy Assistant Secretary of Defense for International Economic Affairs from 1976 through 1977 and a member of the White House Staff from 1974 through 1976. He is currently a member of the Council on Foreign Relations and the National Petroleum Council, and serves as Chairman of the Board of the United States Institute of Peace. Mr. West is also a director of Magellan Petroleum Corporation and Stewart & Stevenson LLC. He holds a BA from the University of North Carolina at Chapel Hill and a JD from Temple University Law School. We believe Mr. West’s qualifications to serve on our Board include his extensive industry knowledge as well as his knowledge of legal matters being a trained attorney.

Directors Whose Term Expires in 20132016 (Class I Directors)

Lynn R. Coleman, age 72,74, has been a member of the Board since October 2007. As a partner in the firm of Skadden, Arps, Slate, Meagher and Flom LLP, Mr. Coleman founded and led the firm’s energy practice for 20 years. He retired from the Skadden partnership in 2007. Prior to joining Skadden, Mr. Coleman served as the General Counsel of the U.S. Department of Energy and later as Deputy Secretary. From March 2008 through April 2010, Mr. Coleman served on the Supervisory Board of Lyondell Basell Industries, a large chemical company with operations in the U.S. and internationally.abroad. In May 2008, he also was appointed to the board of directors (non-executive Chair) of Total Holdings USA, Inc., a U.S. subsidiary of a large international oil company. In June 2010, Mr. Coleman was appointed to the board of directors of Defense Group Inc., a privately-owned corporation involved in defense and national security contracts, headquartered in Washington, D.C.Vienna, Virginia. In December 2012, Mr. Coleman was appointed to the board of directors of Standard Solar, Inc., a privately held corporation involved in development and installation of solar systems at the residential, commercial and municipal level. In

2007 and 2008, he was a lecturer at the University of Virginia School of Law, offering a seminar on energy and environmental law. He has also been appointed adjunct professor at the University of Texas School of Law offering a similar seminar. He holds an LLB degree from the University of Texas and a BA from Abilene Christian College. We believe Mr. Coleman’s qualifications to serve on our Board include his extensive experience practicing law in the energy industry, including his 20 years as a senior partner and leader of the energy practice at a prominent global law firm. He has wide ranging experience with energy transactions, litigation, government policy and regulation, in the U.S. and other countries. He has also served as managing partner and in similar management positions over other large groups of attorneys. His responsibilities in this capacity included decisions concerning strategic planning, hiring, partnership advancement, attorney evaluations, direction of work of other attorneys and management of client relationships.

Kevin P. Collins, age 61,63, has been a member of the Board since March 1996. He has been Managing Member of The Old Hill Company LLC since 1997, a company he founded that provides corporate finance and management consulting services. From 1979 until 1992, he worked for various financial institutions; from 1992 to 1997, he served as a principal of JHP Enterprises, Ltd.,; and from 1985 to 1992, as Senior Vice President of DG Investment Bank, Ltd., both of which were engaged in providing corporate finance and advisory services. Mr. Collins was a director of WellTech, Inc. from January 1994 until March 1996, when WellTech was merged into Key. From 2000 until 2010, Mr. Collins served as a director of the Penn Traffic Company. Mr. Collins was also a director of Applied Natural Gas Fuels, Inc. from November 2008 until October 2012. Mr. Collins was also a director of Antioch LLC from January 2009 until November 2013. Mr. Collins is also a director of PowerSecure International, Inc., Antioch Company LLC and Applied Natural Gas Fuels, Inc. He holds BS and MBA degrees from the

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University of Minnesota. Mr. Collins is a CFA Charterholder. We believe Mr. Collins’ qualifications to serve on our Board include his extensive knowledge of Key and our industry, his analytical business background, (he holds an MBA and is a Chartered Financial Analyst), his experience working on strategic transactions, as well as his lending and advisory experience with large financial institutions and his extensive experience serving on boards of directors, including his service on our and other companies’ audit committees.

W. Phillip Marcum, age 68,70, has been a member of the Board since March 1996. He was a director of WellTech, Inc. from January 1994 until March 1996, when WellTech was merged into Key. From October 1995 until March 1996, Mr. Marcum was the non-executive Chairman of the Board of WellTech. Previously, from January 1991 until April 2007, when he retired, he was Chairman of the Board, President and Chief Executive Officer of PowerSecure International, Inc. (formerly known as Metretek Technologies, Inc., and prior to that, known as Marcum Natural Gas Services, Inc.). Mr. Marcum also serves as Chairman of the Board of ADA-ES,Advanced Emissions Solutions, Inc. (formerly known as ADA-ES), a Denver, Colorado based company, andcompany. From July 2007 until September 2013, Mr. Marcum served as Chairman of the Board of Applied Natural Gas Fuels, Inc. (formerly PNG Ventures, Inc.), a West Lake Village, California based company. Mr. Marcum has recently been elected tois Chairman of the Board and Chief Executive Officer of Directors ofLilis Energy, Inc. (formerly Recovery Energy, Inc.), a Denver, Colorado based exploration and production company. He is presently a principal in MG Advisors, LLC. He holds a BBA from Texas Tech University. We believe Mr. Marcum’s qualifications to serve on our Board include his experience serving on other public companies’ boards of directors and his extensive business knowledge working with other public companies in the energy industry, including his founding and running of Marcum Natural Gas Services, Inc., which has since grown into a public company known as PowerSecure International, Inc.

William F. Owens,, age 61,63, has been a member of the Board since January 2007. He served as Governor of Colorado from 1999 to 2007, as Colorado State Treasurer from 1995 to 1999, and, prior to that, as a Colorado State legislator. Before his public service, Mr. Owens was on the consulting staff at Touche Ross & Co. (now Deloitte & Touche, LLP) and served as Executive Director of the Colorado Petroleum Association, which represented more than 400 energy firms doing business in the Rocky Mountains region. Currently, he is a Managing Director of Renew Strategies LLC, a Denver-based land and water development firm. He is also currently a Senior Advisor for PCL Construction Enterprises, Inc. Mr. Owens serves on the boards of Cloud Peak Energy Inc., Federal Signal Corporation and Bill Barrett Corporation, and FESCO Transport Group (a Russian listed company which owns and operates ports, railroads and container ships). Previously, fromCorporation. From 2007 through 2009, he served on the board of Highlands Acquisition Corp.,; from 2007 through 2012, he served on the board of FESCO, a Russian company listed on the Moscow exchange; and from 2009 through 2011, he served on the board of Keating Capital, Inc. Mr. OwensHe holds a masters degree in Public AffairsBS from the University of Texas at Austin and earned his BS at Stephen F. Austin State University. He is also a

Senior Fellow at the University of Denver’s Institute for Public Policy Studies. We believe Mr. Owens’ qualifications to serve on our Board include his wide-ranging background and experience in business, public policy, management and energy.

Board Recommendation

The Board of Directors believes that approval of the election of Richard J. Alario, Ralph S. Michael, IIIWilliam D. Fertig, Robert K. Reeves and Arlene M. YocumMark H. Rosenberg to serve as Class IIIII directors is in ourthe best interests andof the best interestsCompany and of our stockholders and therefore recommends a vote FOR each of the nominees.

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CORPORATE GOVERNANCE

General

This section describes theour principal corporate governance guidelines and practices that we have adopted.practices. Complete copies of our Corporate Governance Guidelines, committee charters and codes of business conduct described below are available on our website atwww.keyenergy.com. Alternatively, you can request a copy of any of these documents by writing to: Investor Relations, Key Energy Services, Inc., 1301 McKinney Street, Suite 1800, Houston, Texas 77010. Our Board strongly believes that good corporate governance is important to ensure that Key is managed for the long-term benefit of our stockholders.

Corporate Governance Guidelines

Our Board has adopted Corporate Governance Guidelines that address significant issues of corporate governance and set forth the procedures by which the Board carries out its responsibilities. Among the areas addressed by the Corporate Governance Guidelines are director qualifications and responsibilities, Board committee responsibilities, policy regarding holdover directors, director compensation and tenure, director orientation and continuing education, access to management and independent advisors, succession planning and management development, and Board and committee performance evaluations. The CGN Committee is responsible for assessing and periodically reviewing the adequacy of these guidelines and recommending proposed changes to the Board, as appropriate. The Corporate Governance Guidelines are posted on our website atwww.keyenergy.com. We will provide these guidelines in print, free of charge, to stockholders who request them.

Director Independence

Under applicable rules of the New York Stock Exchange, or NYSE, a director will only qualify as “independent” if our Board affirmatively determines that he or she has no direct or indirect material relationship with Key. In addition, all members of the Audit Committee, Compensation Committee and CGN Committee are required to meet the applicable independence requirements set forth in the rules of the NYSE and the SEC.

The Board has determined that, except for Mr. Alario, who serves as our President and CEO, each of our current directors is independent within the meaning of the foregoing rules. Further, theThe Board considered Mr. Reeves’ position as an executive officer with one of our customers, Anadarko Petroleum Corporation, and determined that the relationship between Anadarko and Key does not affect Mr. Reeves’ independence. The Board also considered the employment by Key of Mr. Michael’s role on the United States Advisory Board of Alexander Proudfoot, a practice of Management Consulting Company PLC,Reeves’ son-in-law, West P. Gotcher, and determined that the relationship between ProudfootMr. Reeves’ son-in-law and Key does not affect Mr. Michael’sReeves’ independence. The Board considered Mr. West’s position as director of one of our suppliers, Stewart & Stevenson LLC, and determined that the relationship between Stewart & Stevenson and Key does not affect Mr. West’s independence. As previously noted under the heading “Proposal 1—Election of Directors,” Mr. West is not standing for re-election to the Board. For additional information regarding thesethe relationships of Mr. Reeves, see the discussion below under the heading “Certain Relationships and Related Party Transactions.”

Board Leadership Structure

We operate under a leadership structure in which our CEO also serves as Chairman of the Board. Our Board consists of Mr. Alario, the CEO and Chairman of the Board, and ten other directors; however the number of other directors will be reduced to nine other directors.immediately prior to the election of the Class II directors at the annual meeting. Our Corporate Governance Guidelines provide that, unless the Chairman of the Board is an independent director, the Board will select a Lead Director from among the independent directors to act as a liaison between the non-managementnon-employee directors and management, chair the executive sessions of non-managementnon-employee directors and consult with the Chairman of the Board on agendas for Board meetings and other matters. The Board has selected Mr. Michael as Lead Director. Our Corporate Governance Guidelines also provide that non-managementnon-employee directors will meet in executive session on a regular basis without management present.

As described further below under “Board Committees,” we have five standing committees—the Audit Committee, the Compensation Committee, the Equity Award Committee, the CGN Committee and the Executive Committee. Other than the Executive Committee and the Equity Award Committee, on which Mr. Alario serves, each of the Board committees consists solely of independent directors, and each committee has a separate chair.

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We believe that we are well-served by this leadership structure, which is a configuration commonly utilized by other public companies in the United States. We have a single leader for Key who sets the tone and has primary responsibility for our operations. We believe this structure provides clear leadership, not only for Key, but for our Board. General oversight of the business operations is provided by experienced independent directors with an independent Lead Director and separate committee chairs. We believe that having a combined Chairman / CEO, independent chairs for each of our Board committees (other than the Equity Award Committee and the Executive Committee) and an independent Lead Director provides the right form of leadership for Key and our stockholders.

However,Nevertheless, our Board believes that no single organizational model will provide the most effective leadership structure in all circumstances. Accordingly, the Board may periodically consider whether the offices of CEO and Chairman should continue to be combined and who should serve in such capacities, and it retains the authority to separate the positions of CEO and Chairman if it deems appropriate in the future.

Director Nomination Process

In considering whether to recommend anya particular candidate for inclusion in the Board’s slate of recommended director nominees, our CGN Committee applies the criteria set forth in the guidelines contained in the Selection Process for New Director Candidates, which are available in the “Corporate Governance” section of our website,www.keyenergy.com. These criteria include the candidate’s integrity, business acumen, a commitment to understand our business and industry, experience, conflicts of interest and the ability to act in the interests of all stockholders. The CGN Committee does not assign specific weights to particular criteria, and no particular criterion is a prerequisite for each prospective nominee. Any director nominee made by the CGN Committee must be highly qualified with respect to some or all of these criteria.

Our Board believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow it to fulfill its responsibilities. TheAlthough there is no formal diversity policy, the Selection Process for New Director Candidates tasks the CGN Committee with recommending director candidates who will assist in achieving this mix of Board members having diverse professional backgrounds and a broad spectrum of knowledge, experience and capability. At least once a year, the CGN Committee reviews the size and structure of the Board and its committees, including recommendations on Board committee structure and responsibilities.

In accordance with NYSE requirements, the CGN Committee also oversees an annual performance evaluation process for the Board, the Audit Committee, the Compensation Committee and the CGN Committee. In this process, anonymous responses from directors on a number of topics, including matters related to experience of Board and committee members, are discussed in executive sessions at Board and committee meetings. Although the effectiveness of the policy to consider diversity of director nominees has not been separately assessed, it is within the general subject matter covered in the CGN Committee’s annual assessment and review of Board and committee structure and responsibilities, as well as within the Board and committee annual performance evaluation process.

Any stockholder entitled to vote for the election of directors may propose candidates for consideration for nomination for election to the Board. The CGN Committee will evaluate candidates proposed by stockholders in compliance with the guidelines contained in the Selection Process for New Director Candidates in the same manner as other candidates. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or herthe candidate’s name will be included inon our proxy card for the next annual

meeting. Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the CGN Committee or the Board, by following the procedures set forth under the heading “Stockholder Proposals for the 20132015 Annual Meeting” below. Candidates nominated by stockholders in accordance with procedures set forth in theour bylaws will not be included inon our proxy card for the next annual meeting.

Board Role in Risk Oversight

The Board’s role in the risk oversight process includes receiving regular reports from members of senior management on areas of material risk to Key, including operational, financial, legal and regulatory, and strategic and reputational risks. The full Board (or the appropriate committee in the case of risks that are under the

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purview of a particular committee) receives these reports from the appropriate “risk owner” within the organization to enable it to understand our risk identification, risk management and risk mitigation strategies. When a committee receives the report, the chair of the relevant committee reports on the discussion to the full Board during the committee reports portion of the next Board meeting. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. In addition, as part of its charter, the Audit Committee regularly reviews and discusses with management, our internal auditors and our independent registered public accounting firm, Key’s policies relating to risk assessment and risk management. The Compensation Committee also specifically reviews and discusses risks that relate to compensation policies and practices. During 2012,2013, we continued to engage in a comprehensive enterprise risk management process by evaluating our existing and emerging risk exposures and then implementing appropriate design plans to manage such risks. ThisThe Board reviews this process is reviewed with the Boardmanagement on a quarterly basis.

Board Meetings and Attendance

The Board held seven meetings, either in person or by teleconference, during 2011.2013. During that year, each of our directors attended at least 75% of the aggregate number of Board meetings and meetings held by all committees on which he or she then served.

Director Attendance at Annual Meeting of Stockholders

Our Corporate Governance Guidelines provide that directors are expected to attend the annual meeting of stockholders. All of our directors attended the 20112013 annual meeting, and we expect substantially all of our directors to attend the 20122014 annual meeting.

Board Committees

The Board has established five standing committees—Audit Committee, Compensation Committee, Equity Award Committee, CGN Committee and Executive Committee. Current copies of the charters of each of the Audit, Compensation and CGN Committees are posted on the “Corporate Governance” section of our website,www.keyenergy.com.

The Board has determined that all of the members of each of the Board’s standing committees, other than the Executive Committee and Equity Award Committee, are independent under the NYSE rules, including, in the case of all members of the Audit Committee, the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

Audit Committee

The responsibilities of the Audit Committee include the following:

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The current members of our Audit Committee are Ms. Yocum and Messrs. Collins, Michael and Owens and Ms. Yocum.Owens. Ms. Yocum is the chair of the Audit Committee. All members of the Audit Committee meet the financial literacy standard required by the NYSE rules and at least one member qualifies as having accounting or related financial management expertise under the NYSE rules. In addition, as required by theSarbanes-Oxley Act of 2002, the SEC adopted rules requiring that each public company disclose whether or not its audit committee has an “audit committee financial expert” as a member. An “audit committee financial expert” is defined as a person who, based on his or her experience, satisfies all of the following attributes:

The Board has determined that Ms. Yocum and Mr. Michael satisfy the definition of “audit committee financial expert,” and designated each of Ms. Yocum and Mr. Michael as an “audit committee financial expert.” In addition, the Board has determined that all members of the Audit Committee are independent under the listing standards of the NYSE and the rules of the SEC.

The Audit Committee held thirteentwelve meetings in 2011.2013. In addition, members of the Audit Committee speak regularly with our independent registered public accounting firm and separately with the members of management to discuss any matters that the Audit Committee or these individuals believe should be discussed, including any significant issues or disagreements concerning our accounting practices or financial statements. For further information, see “Report of the Audit Committee” below.

The Audit Committee has the authority to retain legal, accounting or other experts that it determines to be necessary or appropriate to carry out its duties. We will provide the appropriate funding, as determined by the Audit Committee, for the payment of compensation to our independent registered public accounting firm and to

any legal, accounting or other experts retained by the Audit Committee and for the payment of the Audit Committee’s ordinary administrative expenses necessary and appropriate for carrying out the duties of the Audit Committee.

The Audit Committee charter provides that no member of the Audit Committee shallmay simultaneously serve on the audit committees of more than three public companies (including our Audit Committee) unless the Board has determined that such simultaneous service would not impair his or her ability to effectively serve on our Audit Committee. Previously, Mr. Michael served on ourCurrently, no member of the Audit Committee and the audit committees of the following other three public companies: AK Steel Corporation; Arlington Asset Investment Corporation; and FBR & Co. The Board determined, prior to his becoming a member of FBR’s audit committee, that Mr. Michael’s simultaneous serviceserves on the audit committees of more than three other public companies would not impair his ability to effectively serve on our Audit Committee. Effective March 15, 2012, Mr. Michael resigned from FBR’s audit committee and currently serves on the audit committee of two other public companies.

The charter of our Audit Committee can be accessed on the “Corporate Governance” section of our website,www.keyenergy.com.

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Compensation Committee

The Compensation Committee has responsibility for establishing, implementing and continually monitoring adherence with our compensation philosophy. The responsibilities of the Compensation Committee include the following:

The current members of the Compensation Committee are Messrs. Reeves, Fertig, Marcum Reeves and West, all of whom are independent, non-managementnon-employee members of the Board. Mr. Reeves is the chair of the Compensation Committee. No Compensation Committee member participates in any of our employee compensation programs

other than the Key Energy Services, Inc. 2009 Equity and Cash Incentive Plan and the Key Energy Services, Inc. 2012 Equity and Cash Incentive Plan, and if approved, the Key Energy Services, Inc. 2014 Equity and Cash Incentive Plan, and prior grants under the Key Energy Services, Inc. 2007 Equity and Cash Incentive Plan and the Key Energy Group, Inc. 1997 Incentive Plan. The Compensation Committee held fivesix meetings in 2011.2013. Mr. West is not standing for re-election to the Board and will not be a member of the Compensation Committee after the date of the annual meeting.

The Compensation Committee has the sole authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts or consultants, as it deems appropriate in order to carry out its responsibilities, without seeking approval of the Board or management. With respect to compensation consultants retained to assist in the evaluation of director, CEO or executive officer compensation, this authority is vested solely in the Compensation Committee.

The charter of our Compensation Committee can be accessed on the “Corporate Governance” section of our website,www.keyenergy.com.

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Equity Award Committee

Mr. Alario is the chair and sole member of the Equity Award Committee. Subject to certain exceptions and limitations, the Compensation Committee has delegated to the Equity Award Committee the ability to grant equity awards under our equity incentive plans to those employees who are not executive officers, usually in connection with new hires and promotions. During 2011,2013, the Compensation Committee authorized the Equity Award Committee to make grants up to an aggregate of 150,000 stock options and/or shares of restricted stock to eligible employees under the annual approval authority for twelve months starting on January 27, 2011,21, 2013, but no more than 20,000 per grant or in the aggregate to any single employee during a twelve-month period. For 2012,2014, the Compensation Committee reset this authority for a twelve-month period starting on January 16, 2012.30, 2014. In addition, on that same date, the Compensation Committee approved restricted stock, restricted stock units and performance unit grants to non-executive officer employees up to an aggregate amount, and authorized the Equity Award Committee to determine the individual grant amounts to each employee in its reasonable discretion in consultation with management. Reports of equity grants made by the Equity Award Committee are included in the materials presented at the Compensation Committee’s regularly scheduled meetings.

Corporate Governance and Nominating Committee

The responsibilities of the CGN Committee include the following:

The CGN Committee consists entirely of independent directors, as that term is defined by applicable NYSE rules. The current members of the CGN Committee are Messrs. Fertig, Coleman, Marcum and West. Mr. Fertig is the chair of the CGN Committee. The CGN Committee held five meetings in 2011.2013. Mr. West is not standing for re-election to the Board and will not be a member of the CGN Committee after the date of the annual meeting.

The CGN Committee has the authority and funding to retain counsel and other experts or consultants, including the sole authority to select, retain and terminate any search firm to be used to identify director candidates and to approve the search firm’s fees and other retention terms.

The charter of our CGN Committee can be accessed on the “Corporate Governance” section of our website,www.keyenergy.com.

Executive Committee

The Executive Committee’s membership consists of the CEO and Chairman of the Board, the Lead Director and the chair of each of the Audit Committee, Compensation Committee and CGN Committee. The Executive Committee only acts in place of the Board in situations where it may be impracticable to assemble the full Board to consider a matter on a timely basis. Any action by the Executive Committee will be promptly reported to the full Board. Currently, Messrs. Alario, Fertig, Michael and Reeves and Ms. Yocum serve on the Executive Committee. The Executive Committee held no meetingsone meeting in 2011.2013.

Code of Business Conduct and Code of Business Conduct for Members of the Board of Directors

Our Code of Business Conduct applies to all of our employees, including our CEO, CFO and senior financial and accounting officers. In addition, we have a Code of Business Conduct for Members of the Board of Directors. Among other matters, the Code of Business Conduct and the Code of Business Conduct for Members of the Board of Directors establish policies to deter wrongdoing and to promote both honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest, compliance with applicable laws, rules and regulations, full, fair, accurate, timely and understandable disclosure in public communications and prompt

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internal reporting of violations of the CodeCodes of Business Conduct. We also have an Ethics Committee, composed of members of management, which administers our ethics and compliance program with respect to our employees. In addition, we provide an ethics line for reporting any violations on a confidential basis. Copies of our Code of Business Conduct and the Code of Business Conduct for Members of the Board of Directors are available on the “Governance” section of our website atwww.keyenergy.com. We will post on our website all waivers to or amendments of our Code of Business Conduct and the Code of Business Conduct for Members of the Board of Directors that are required to be disclosed by applicable law and the NYSE listing standards.

Report of the Audit Committee

The Audit Committee has reviewed the Company’s audited financial statements for the fiscal year ended December 31, 20112013 and has discussed these financial statements with the Company’s management and independent registered public accounting firm.

The Audit Committee has also received from, and discussed with, Grant Thornton LLP, the Company’s independent registered public accounting firm, various communications that the Company’s independent registered public accounting firm is required to provide to the Audit Committee, including the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees).(AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

The Company’s independent registered public accounting firm also provided the Audit Committee with the written disclosures required by Public Company Accounting Oversight Board Rule 3526 (Communication with Audit Committees Concerning Independence). The Audit Committee has discussed with the independent registered public accounting firm their independence from Key.

Based on its discussions with management and the independent registered public accounting firm, and its review of the representations and information provided by management and the independent registered public accounting firm, the Audit Committee recommended to the Board of Directors of the Company that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.2013.

By the Audit Committee of the Board of Directors

Arlene M. Yocum, Chair

Kevin P. Collins

Ralph S. Michael, III

William F. Owens

Executive Officers

Below are the names, ages and certain other information on each of our current executive officers, other than Mr. Alario, whose information is provided above.

Newton W. “Trey” Wilson III, age 61,63, Executive Vice President and Chief Operating Officer. Mr. Wilson was appointed Executive Vice President and Chief Operating Officer on June 25, 2008. He joined Key as Senior Vice President, and General Counsel on January 24, 2005 and was later appointed Secretary effectiveon January 24, 2005. Previously, Mr. Wilson served as Senior Vice President, General Counsel and Secretary of Forest Oil Corporation, an oil and gas exploration company which he joined in November 2000. Prior to joining Forest Oil, Mr. Wilson was a consultant to the oil industry as well as an executive for two oil and gas companies, Union Texas Petroleum and Transco Energy Company. He also serves as a director for OOO Geostream Services Group and AlMansoori-Key Energy Services, LLC, both international oilfield services joint venture entities of Key based in the Russian Federation and the United Arab Emirates, respectively. Mr. Wilson received a BBA from Southern Methodist University and a JD from the University of Texas.

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T. M. “Trey” Whichard IIIJ. Marshall Dodson, age 53,43, Senior Vice President and Chief Financial Officer. Mr. Whichard joined Key as itsDodson was appointed Senior Vice President and Chief Financial Officer on March 26, 2009.25, 2013. Mr. Whichard was retired prior to joining Key. Prior to his retirement in early 2006, he wasDodson joined Key as Vice President and Chief Accounting Officer on August 22, 2005 and served in that capacity until being appointed Vice President and Treasurer on June 8, 2009. From February 6, 2009 until Mr. Whichard’s election as Key’s new Chief Financial Officer for BJ Services Company.on March 26, 2009, Mr. WhichardDodson served in the additional capacity as interim principal financial officer. Prior to joining Key, Mr. Dodson served in various financial capacities at BJ ServicesDynegy, Inc., an electric energy production and services company, from 1989 until2002 to August 2005, most recently serving as Managing Director and Controller, Dynegy Generation since 2003. Mr. Dodson started his retirementcareer with Arthur Andersen LLP in 2006, including Vice President, Treasurer and Tax Director. HeHouston, Texas in 1993, serving most recently as a senior manager prior to joining Dynegy, Inc. Mr. Dodson received a BBA from the University of Texas at Austin in Accounting from Sam Houston State University.1993.

Kim B. Clarke, age 56,58, Senior Vice President, Administration and Chief People Officer. Ms. Clarke joined Key on November 22, 2004 as Vice President and Chief People Officer. She was elected as an executive officer in January 2005 and, since January 1, 2006, she has served as our Senior Vice President and Chief People Officer (as of March 25, 2009, her title was changed to Senior Vice President, Administration and Chief People Officer). Her responsibilities include Human Resources, Health, Safety and Environmental, Continuous Improvement, Operational Administration and Information Technology. Previously, from 1999 to 2004, Ms. Clarke served as Vice President of Human Resources for GC Services, a teleservicing and collection services company. Prior to that, she served in a number of senior level human resource roles for Browning Ferris Industries (BFI), a waste management company, from 1988 to 1997, and as BFI’s Vice President Human Resources from 1997 to 1999. She also currently serves as a director of ADES, Inc. Ms. Clarke’s 30 years of work experience also includes industry experience with Baker Service Tools and National Oilwell. Ms. Clarke holds a BS degree from the University of Houston.

Kimberly R. Frye,age 43,45, Senior Vice President, General Counsel and Secretary. Ms. Frye joined Key in October 2002 as Associate General Counsel and was promoted to her current position as Senior Vice President, General Counsel and Secretary in July 2008. Prior to joining Key, Ms. Frye was an attorney with Porter & Hedges L.L.P.LLP where her practice focused principally on corporate and securities law. Prior to attending law school,

Ms. Frye worked as a federal bank examiner for the Federal Deposit Insurance Corporation. Ms. Frye received her BS in Corporate Finance and Investment Management from the University of Alabama in 1991 and her JD from the University of Houston in 1997.

J. Marshall Dodson, age 41, Vice President and Treasurer. Mr. Dodson joined Key as Vice President and Chief Accounting Officer on August 22, 2005 and served in that capacity until being appointed Vice President and Treasurer on June 8, 2009. From February 6, 2009 until Mr. Whichard’s election as Key’s new Chief Financial Officer on March 26, 2009, Mr. Dodson served in the additional capacity as interim principal financial officer. Prior to joining Key, Mr. Dodson served in various capacities at Dynegy, Inc., an electric energy production and services company, from 2002 to August 2005, most recently serving as Managing Director and Controller, Dynegy Generation since 2003. Mr. Dodson started his career with Arthur Andersen LLP in Houston, Texas in 1993, serving most recently as a senior manager prior to joining Dynegy, Inc. He also currently serves as a director of OOO Geostream Services Group, an oilfield services company in the Russian Federation in which Key holds a 50% interest. Mr. Dodson received a BBA from the University of Texas at Austin in 1993.

Don D. Weinheimer, age 53, Senior Vice President, Strategy, Markets and Technology. Mr. Weinheimer joined Key on October 2, 2006 as Senior Vice President of Business Development, Technology and Strategic Planning. On October 1, 2008, his role and title changed to Senior Vice President of Product Development, Strategic Planning and Quality, on November 1, 2009, he was promoted to Senior Vice President, Production Services, and in August 2010 his role changed to Senior Vice President, Strategy, Marketplace Development and Technology. He currently serves as Senior Vice President, Strategy, Markets and Technology effective February 2, 2011. Prior to joining Key, Mr. Weinheimer was with Halliburton Company, a global energy services company, serving as Vice President of Technology Globalization within its Energy Services Group from July 2006 to October 2006 and as Vice President of Innovation and Marketing in its Production Optimization Division from July 2004 to June 2006. Prior to that, Mr. Weinheimer served in various capacities within Halliburton and divisions of Halliburton since 1981. Mr. Weinheimer has over 28 years of industry experience, including international operational and business development experience in both the Middle East and Algeria. Mr. Weinheimer also currently serves as a director of OOO Geostream Services Group and AlMansoori-Key Energy Services, LLC, both international oilfield services joint venture entities of Key based in the Russian Federation and the United Arab Emirates, respectively. Mr. Weinheimer earned his BS degree in Agricultural Engineering from Texas A&M University.

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Dennis C. Douglas, age 58, Senior Vice President, Fluid Management Services. Mr. Douglas joined Key as Operations Manager for the L.A. Basin in California in February 1997 in connection with Key’s acquisition of Dawson Production Services, Inc. He was promoted to Sales Manager for Key’s California Division in May 1998 and served in that capacity until he was promoted to Division Manager for California in October 2000. In June 2008, he was promoted to Group Vice President of Key’s Western Division until his promotion to Senior Vice President of Key’s U.S. Marketplace in October 2008. Mr. Douglas served in that capacity until he was promoted to Senior Vice President, Fluid Management Services on November 1, 2009. Prior to joining Key, Mr. Douglas worked during 1997 at Dawson Production Services, Inc. as Operations Manager. From 1993 to 1997, he worked at Nabors Well Service as Rig Supervisor. Prior to that, Mr. Douglas managed Homco’s rental and fishing tool division in California from 1989 until Homco merged with Weatherford International in 1993.

Guillermo A. Capacho, age 50, Senior Vice President, International Operations and Technology. Mr. Capacho joined Key as Vice President, International Operations, Western Hemisphere in January 2010. Mr. Capacho’s role changed to Senior Vice President, International Operations in August of 2010, and on January 27, 2011, his position changed to Senior Vice President, International. He currently serves as Senior Vice President, International Operations and Technology effective March 15, 2011. Mr. Capacho brings over 24 years of industry experience and international operations knowledge, working previously with Halliburton where he held a variety of positions, most recent positions such as: Senior Global Business Development and Commercialization Manager, Global Drilling Technology Manager, Country Vice President for Halliburton of Mexico, Regional Operations Manager for Latin America and Business Development Manager for Latin America in multiple product service lines, like Directional Drilling, Wireline and Perforating, and Security Drilling Bits. Mr. Capacho received a BA in Petroleum Engineering from University Industrial of Santander Colombia and a MBA from PLEP Halliburton/Texas A&M, College Station/Houston, TX.

Mark A. Cox, age 52,54, Vice President and Controller. Mr. Cox was appointed as Vice President and Controller on March 20, 2012, and serves as principal accounting officer. Mr. Cox joined Key as Vice President, Tax in October 2009. Prior to joining Key, he served from December 2008 to September 2009 as Chief Financial Officer for Recon International, a privately-held company providing construction services to Western military and private organizations in Afghanistan, the Middle East and North Africa.Afghanistan. From August 1990 through November 2008, Mr. Cox held a variety of positions with BJ Services Company, including Director of Tax, Middle East Region Controller and Assistant Corporate Controller. He also worked in the tax practice of Arthur Andersen LLP from 1986 to 1990. Mr. Cox is a CPA and received a Bachelor of Accountancy degree from Houston Baptist University in 1986.

Barry B. Ekstrand,age 56, Senior Vice President, CTS, FRS and Edge. Mr. Ekstrand joined Key as its Vice President, Coiled Tubing Services on May 7, 2012. Effective January 21, 2013, he was appointed Senior Vice President, CTS, FRS and Edge. Prior to joining Key, he served as President of CRS Proppants since May 5, 2010. Mr. Ekstrand also has served in various capacities at Weatherford International from 2002 to 2010, including Global Vice President of Reservoir Stimulation & Pressure Pumping. Prior to joining Weatherford, he served 22 years at Halliburton Energy Services, including positions in technology, operations, planning, business development and engineering. He received his BS in Chemical Engineering from California State Polytechnic University at Pomona and his MBA from California State University at Bakersfield.

Jeffrey S. Skelly, age 54,56, Senior Vice President, Rig Services.Services, Fluid Management Services and Operations Support. Mr. Skelly joined Key as its Senior Vice President, Rig Services effective on June 21, 2010. He currently serves as Senior Vice President, Rig Services and Operations Support. Mr. Skelly’s previous role was that of Chief Operating Officer at GEODynamics, a technology company focused on perforating systems and solutions, from November 2007 to January 2010. Previously, he was President for Expro Group’s Western Hemisphere Operations from January 2005 to June 2007. JeffMr. Skelly has also served in several roles at Halliburton including Global Manufacturing Operations Manager, Global Product Manager for Logging and Perforating, and Regional Manager of Wireline and Testing for the Middle East. JeffMr. Skelly began his career in the oil and gas services business after earning a B.S. Degrees in Civil Engineering and Ocean Engineering from Florida Institute of Technology. After college, he joined Schlumberger and held various positions at Schlumberger over the next 15 years including Field Engineer, Technical Manager, Field Service Manager, District Manager, Area Operations Manager, and Sales Manager.

Ike C. Smith, age 37, Vice President. Mr. Smith joined Key on January 2, 2008 and through January 2, 2009, he served as Vice President of Finance, Internal Controls. From January 2009 to June 2009, Mr. Smith served as Vice President of Audit Services, overseeing Key’s internal audit function. In June 2009, Mr. Smith became Vice President and Controller and served as Key’s principal accounting officer until submitting his resignation effective March 20, 2012. Mr. Smith will continue to serve as a Vice President in our accounting department until April 13, 2012. Before joining Key, he worked for Horizon Offshore, Inc., a marine construction company providing pipeline installation and platform assembly and salvage to the oil and gas

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industry, where he served as Corporate Controller from August 2004 through December 2007 and as SEC Reporting Manager from June 2002 through August 2004. He also worked at Arthur Andersen LLP from 1998 until 2002 in the assurance and business advisory practice. Mr. Smith is a CPA and received a BBA in Accounting from Sam Houston State University in 1998.

Patrick N. Williamson, age 50, Vice President, Fishing and Rental Services. Mr. Williamson was appointed Vice President of Fishing and Rental Services on June 5, 2010. Prior to joining Key, he served as the Global Productline Manager of Drilling Products for International Tubular Services, Aberdeen, Scotland. During his tenure, he assisted in the design and commercialization of a Single Trip Casing Exit System, currently being utilized in the global drilling market. In 2006, Mr. Williamson joined Smith International as the leader of the account management team, Houston, Texas. Prior to joining Smith International, he served for 24 years in various positions with Weatherford, International. During his tenure at Weatherford, Mr. Williamson received the BP Technical Achievement Award 1998 for the successful design and installation of a Multi-lateral System in Southern England, Wytch Farm. In March 2000, his team was granted a U.S. patent for a component designed to be used in the implementation of Multi-laterals systems. In his remaining years at Weatherford, Mr. Williamson served as the BP Account Manager for the North America Business Unit, providing leadership across multiple product lines.

Fees of Independent Registered Public Accounting Firm

Audit Fees

Effective December 1, 2006, Grant Thornton LLP was engaged as our independent registered public accounting firm. The following table sets forth the fees for the fiscal period to which the fees relate:relate. The Audit Committee approved all such fees in accordance with the Audit and Non-Audit Services Pre-Approval Policy described below.

(2)

Includes fees of $29,139$44,238 for the 20102012 statutory audit of our Canadian subsidiaries, fees of $93,342 for the 2012 statutory audit of our Argentina subsidiaryMexican subsidiaries, and fees of $65,650$5,455 for the 2012 statutory 2010 audit of our Mexico subsidiaries. The Audit-related fees of $161,619 represent the audits of the pressure pumping and wireline businesses sold in 2010.Oman operations.

Audit fees consist of professional services rendered for the audit of our annual financial statements, the audit of the effectiveness of our internal control over financial reporting and the reviews of the quarterly financial statements. This category also includes fees for issuance of comfort letters, consents, assistance with and review of documents filed with the SEC, statutory audit fees, work done by tax professionals in connection with the audit and quarterly reviews and accounting consultations and research work necessary to comply with the standards of the Public Company Accounting Oversight Board. Fees are generally presented in the period to which they relate as opposed to the period in which they were billed. Other services performed include certain advisory services and do not include any fees for financial information systems design and implementation.

Policy for ApprovalPre-Approval of Audit and Non-Audit Fees

The Audit Committee has an Audit and Non-Audit Services Pre-Approval Policy. The policy requires the Audit Committee to pre-approve the audit and non-audit services performed by our independent registered public accounting firm. Under the policy, the Audit Committee establishes the audit,audit-related, tax and all other

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services that have the approval of the Audit Committee. The term of any such pre-approval is twelve months from the date of pre-approval, unless the Audit Committee adopts a shorter period and so states. The Audit Committee will periodically review the list of pre-approved services and will add to or subtract from the list of pre-approved services from time to time. The Audit Committee will also establish annually pre-approval fee levels or budgeted amounts for all services to be provided by the independent registered public accounting firm. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee.

The Audit Committee has delegated to its chair the authority to pre-approve services, not previously pre-approved by the Audit Committee, that involve aggregate payments (with respect to each such service or group of related services) of $50,000 or less. The chair will report any such pre-approval to the Audit Committee at its next scheduled meeting.

The policy contains procedures for a determination by the CFO that proposed services are included within the list of services that have received pre-approval of the Audit Committee. Proposed services that require specific approval by the Audit Committee must be submitted jointly by the independent registered public accounting firm and the CFO and must include backup statements and documentation regarding the proposed services and whether the proposed services are consistent with SEC and NYSE rules on auditor independence.

Certain Relationships and Related Party Transactions

We have anOur Affiliate Transaction Policy which requires advance review and approval of any proposed transactions (other than employee or director compensation) between Key and an affiliate of Key. For this purpose, affiliates include major stockholders, directors and executive officers and members of their immediate family (including in-laws), nominees for director, and affiliates of the foregoing persons, as determined in accordance with SEC rules. In determining whether to approve an affiliate transaction, the Board will use such processes it deems reasonable in light of the circumstances, such as the nature of the transaction and the affiliate involved, which may include an analysis of any auction process involved, an analysis of market comparables, use of an appraisal, obtaining an investment banking opinion or a review by independent counsel. The policy requires the Board to determine that, under all of the circumstances, the covered transaction is in, or not inconsistent with, the best interests of Key, and requires approval of covered transactions by a majority of the Board (excluding any interested directors). The Board, in its discretion, may delegate this authority to the CGN Committee or another committee comprised solely of independent directors, as appropriate.

In addition, we require on an annual basis thateach of our directors and executive officers eachto complete aan annual Directors and Officers Questionnaire to describe certain information and relationships (including those involving their immediate family members) that may be required to be disclosed in our Form 10-K, annual proxy statement and other filings with the SEC. Director nominees and newly appointed executive officers must complete the questionnaire at or before the time they are nominated or appointed. If a change occurs in certain information required to be disclosed in the questionnaire after it is completed, the director orDirectors and executive officerofficers must immediately report this to Key any changes to the information reported in their questionnaires arising throughout the year, including changes in relationships between immediate family members and Key, compensation paid from third parties for services rendered to Key not otherwise disclosed, interests in certain transactions and other facts that could affect director independence. Directors are required to disclose in the questionnaire, among other things, any transaction that the director or any immediate family member has entered into with Key or relationships that a director or an immediate family member has with Key, whether direct or indirect. This information is provided to our legal department for review and, if required, submitted to the Board for the process of determining independence.

Board Member RelationshipsTransactions with Other CompaniesRelated Persons

Mr. Reeves joined our Board in October 2007 and is currently an executive officer with Anadarko, one of our customers. During the fiscal year ended December 31, 2011,2013, Anadarko purchased services from us for approximately $37.2$41.2 million, which is less than 1% of Anadarko’s revenue for 2013. In addition, Mr. Reeves’ son-in-law, West P. Gotcher, who had been an employee of Edge Oilfield Services, LLC, joined the Company as a non-officer employee upon our acquisition of Edge in August 2011. This relationshipMr. Gotcher’s total compensation received from the Company in 2013 was

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approximately $133,000. Both relationships were reviewed and approved under the Affiliate Transaction Policy. The Board doeshas determined that our relationships with such related parties do not consider this amount to be material,affect the independence of Mr. Reeves and that Mr. Reeves qualifies as “independent” in accordance with NYSE listing standards.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This section of the relationship between Anadarkoproxy statement describes and Key does not otherwise affect Mr. Reeves’ independence.

Mr. Michael joinedanalyzes our Boardexecutive compensation philosophy and program in March 2003 and currently provides advice regarding the banking and financial services industries tocontext of the United States Advisory Board of Proudfoot. Proudfoot provided advisory services to us during 2011 relatedcompensation paid to our strategic general and administrative cost restructuring initiative. During the fiscal year ended December 31, 2011, payments to Proudfoot were $4.1 million. This relationship was reviewed and approved under the Affiliate Transaction Policy. The Board does not consider this amount to be material, and determined that the relationship between Proudfoot and Key does not affect Mr. Michael’s independence. Mr. Michael does not act in any other capacityNamed Executive Officers for Proudfoot, such as a principal, partner or employee.

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On March 25, 2013, Mr. Whichard retired, effective immediately, as Senior Vice President and Chief Financial Officer. J. Marshall Dodson, who had been serving as our Vice President and Treasurer, was appointed to replace Mr. Whichard as Senior Vice President and Chief Financial Officer.

INFORMATION ABOUT EXECUTIVE AND DIRECTOR COMPENSATION

In this Compensation Discussion and Analysis, we first provide an executive summary of our actions and results from 2013 related to executive compensation. We next explain the factors affecting our compensation decisions, results from 2013 and changes for the 2014 executive compensation program. We will also explain our principles that guide our Compensation Committee’s executive compensation decisions, including the compensation philosophy. We encourage you to read the entirety of the executive compensation discussion.

Executive Summary

The following discussion addresses the compensation during 2011 ofPay for Performance Philosophy

We are committed to providing value to our named executive officers, or NEOs, who consist of the following:

shareholders. We believe that our executive compensation program fairly and appropriately compensates our executive officers. The core principle of our executive compensation philosophy is to pay for performance. Accordingly, our executive compensation program is alignedheavily weighted toward “at-risk” performance-based compensation. We have three principal elements of total direct compensation: base salary, annual incentive compensation and long-term incentive compensation. These elements provide our compensation committee with a platform to reinforce our pay-for-performance philosophy while addressing our business needs and goals with appropriate flexibility.

To illustrate our pay for performance philosophy, the following charts set forth each element as a proportion of the total direct compensation (“TDC”) that the CEO and the other NEOs were targeted to receive for 2013, of which 84% of our CEO’s TDC and, on average, 76% of our other NEO’s TDC was at-risk, performance based and not guaranteed.

Realized Compensation Reflects Alignment with Stockholders

At the Company, a substantial portion of the compensation should be competitive withgranted by the market, be driven by contributionCompensation Committee to the company,CEO and reward exceptionalreported in the Summary Compensation Table represents an incentive for future performance, not current cash compensation. This analysis demonstrates the link with performance compensation. The table below sets forth the difference between pay shown in the Summary Compensation Table (“Reported Compensation”) and the actual pay realized by the CEO for fiscal years 2013, 2012 and 2011:

Realized compensation is different than Reported compensation as disclosed in the Summary Compensation Table on page 39.

Reported Compensation—the total compensation based on the current reporting rules for the Summary Compensation Table to be disclosed by a Company. Specifically, Reported Compensation includes the “grant date fair value” of equity awards (i.e. restricted stock and performance shares), rather than actual shares vested or earned at the year end closing price.

Realized Compensation—the total compensation actually received by the executive during the fiscal year, including base salary, the current bonus cash payout, restricted stock that vested in the current year, and performance shares vested in the current year (assuming performance was achieved), at the year end closing stock price and all other compensation amounts realized in the current year. This excludes the value of newly awarded/unvested restricted stock and performance share grants, change in pension value, that will not actually be received until a future date depending upon performance. Our

A realized compensation programs are designedanalysis measures the value of long-term compensation as it is earned rather than the value at the time of the grant. The table below further illustrates the difference in realized pay versus reported pay for the calendar years 2011- 2013:

Note: The realized long-term incentive values which were determined within the Realized TDC for the chart above by the restricted stock shares and the performance shares vested in each of the years at the year end stock price.

As Key is ultimately focused on the interests of the shareholder, the executive team, namely the CEO, has their compensation they realize linked to challenge participantsthe performance of the Company’s total shareholder return and other performance metrics as well as reward them for superior performance for our company and our stockholders.described in the summary of compensation components below. As such, we have provided the chart below which details the performance of total shareholder return (“TSR”) over the past three years, in comparison toreported compensation and the compensation that was actuallyrealized by the CEO in order to illustrate the compensation plans are in alignment with shareholder return:

Note: The total shareholder return (“TSR”) is the value of the stock performance between January 1^st and year end. The realized long-term incentive values which were determined within the Realized TDC for the chart above by the restricted stock shares and the performance shares vested in each of the years at the year end closing stock price.

Executive Compensation Principles

As discussed in greater detail in this Compensation Discussion & Analysis, we believe that our program should:

We view our employees as an “investment” for the future, and not just an “expense” of our company. We invest in our people for the future opportunity to deliver more value to our stockholders and customers.

Our Compensation Discussion and Analysis will discuss in greater detail our compensation policies and practices, each element of compensation and the relevant basis for each. We believe that our compensation programs, policies and practices, disclosed in this report and in the tables that follow, demonstrate that our compensation philosophy and programs achieve our compensation goals, and that the total mix of compensation provided to our named executive officers is consistent with a philosophy of motivation and reward for achieving long-term stockholder value.

Oversight of Executive Compensation Program

As described above under “Corporate Governance—Board Committees—Compensation Committee,” the Compensation Committee of our Board has responsibility for establishing, implementing and continually monitoring adherence with our compensation philosophy. The Compensation Committee has the sole authority to engage independent compensation consultants, who report directly to the committee, to advise and consult on compensation issues.

Compensation Consultant

Longnecker & Associates has served as the Compensation Committee’s independent compensation consultant to advise it on all matters related to the senior executives’ compensation since May 2007. Longnecker assists the Compensation Committee by providing comparative market data for senior executives on compensation practices and programs based on an analysis of peer competitors. Longnecker also provides

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guidance on industry best practices. This information assists us in developing and implementing compensation programs generally competitive with those of other companies in our industry and other companies with which we generally compete for executive talent.

The Compensation Committee reviews salary ranges for all senior executive positions annually. The most recent senior executive compensation analysis was provided by Longnecker in January 2012. The review included total compensation for executives, including base salary, targeted total cash and actual total cash, long-term incentives, and targeted and actual total direct compensation. The review also assessedalign the competitiveness of each executive’s compensation as compared to a specific peer group and other pertinent published surveys. Specifically, Longnecker evaluated the total direct compensation of the senior executives, assessed the competitiveness of our executive compensation and analyzed other factors such as cost of management, pay versus total stockholder return performance, mix of pay, peer annual incentive targets and mix of peer long-term incentive awards.

The benchmarks used for the executive compensation comparisons included companies in our industry with similar revenue and companies that we considered to be competing for the same level of executive talent. The following companies fit one or both of those categories and were used in our most recent peer group analysis:

The recommendations of Longnecker, including the selection of the peer group, were reviewed with management and adjusted by the Compensation Committee as appropriate to provide the most relevant information to the Compensation Committee.

As a result of the changes within the companies that comprised last year’s peer group, the Compensation Committee approved the following eleven companies to use as the new peer group for future compensation comparative purposes, as well as for any performance based equity (see “Elements of Compensation—Long-Term Equity-Based Incentive Compensation—Performance Units” below):

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Longnecker also reviewed survey data as a reference point to compare the compensationinterest of our executives to thosethat of a broad rangeour stockholders to drive performance. An overview of companies. The following published surveys utilized by Longnecker were:the practices we have implemented to drive behavior and value are highlighted below.

We Pay for Performance.

We Follow Preferred Compensation Practices.

Based on its

ü

We prohibit hedging transactions and short sales by our executive officers and directors.

We Follow Best Governance Practices.

Business Highlights of 2013

Industry conditions are influenced by a number of factors, such as the compensation program, Longnecker recommended todomestic and international supply and demand for oil and natural gas, competition, domestic and international economic conditions, political instability in oil producing countries and merger, acquisition and divestiture activity among E&P companies.

Over the Compensation Committeecourse of 2013, U.S. customer demand remained at a relatively stable level despite historically high oil prices. In addition, while customer demand as measured by the Baker Hughes land drilling rig count was flat across 2013, competition was intense, as the oilfield services industry that we (i) maintainhad supported a higher demand level in 2012 competed for work. The influx of equipment into the practiceareas of aligning targeted total cash opportunity with the market median; (ii) maintain the use of restricted stockhigher demand drove competition for the senior executive team in addition to awarding performance units to align executive and stockholder interests; and (iii) continue aligning base salaries of the executive team with the market midpoint and, going forward, that we provide an overall pool increase of 4.0% for base salaries to remain competitive with the market.not only activity but people as well.

In May 2011, Longnecker conducted a formal review of Board compensation. The analysis indicated that Key should increase its fees paid to the Compensation Committee Chair and increase the value of its annual grant to all the members of the Board. As a result of the recommendations, we recommendedchange in market conditions, management made several changes in the U.S. business to position Key for success in a market of flat demand and intense competition. These changes included:

Management also made changes to ensure that the Board increaseCompany’s assets and infrastructure were aligned to improve cash flows from investments the Compensation Committee chair’s annual cash feeCompany has made. As a result of these changes, the Company’s U.S. business improved over the course of 2013.

Internationally, the Company’s largest customer, accounting for 12.1% of the Company’s consolidated revenues in 2012, informed management early in the second quarter of 2013 that it would be significantly reducing its activity in the North Region of Mexico and deferring payment on amounts it owed service providers due to $12,500an overspending of its 2012 budget. As a result, over the course of 2013, we reduced staffing in Mexico by 85% and accelerated our efforts to diversify the international business away from the North Region of Mexico to other customers and regions in Mexico, as well as expanding operations in Colombia and beginning a new operation in Ecuador. Profits were impacted by the overall lower activity in Mexico as well as cost inefficiencies due to activity declines and severance impacts. Profits were further impacted by the costs to relocate equipment and the annual equity grant to $175,000 for each non-management director. See “Director Compensation” below for additional information regarding director fees.start up cost inefficiencies in other markets.

The benchmarks used forDespite these volatile market factors, our management team delivered the Board compensation survey were the same companies usedfollowing financial and operational performance in the executive compensation review.

Advice and consulting for all other non-executive compensation is completed by third parties other than Longnecker.

Executive Compensation Risk Assessment

We do not believe that our compensation policies and practices encourage excessive or unnecessary risk-taking. In fact, we believe that our program is designed with an appropriate balance of annual and long-term incentives. Factors considered in this analysis include the following:2013:

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Role of Executives in Establishing Compensation

The Compensation Committee makes the final determination of all compensation paid toIn 2013, our NEOs effectively managed the execution of the Company’s business and is involvedmade strategic decisions that enabled achievement of the results noted above. We also made meaningful progress against our long-term strategy to improve our balance sheet and deploy capital and continue to drive favorable, long-term stockholder returns. In our International segment, we leveraged our existing infrastructure while faced with rapidly dropping activity. These results were significant given the unique oilfield services business cycle we witnessed in all compensation decisions affecting our chief executive officer. However, management also plays a role in the determination of executive compensation levels. The key members of management involved in the compensation process are the chief executive officer, the chief financial officer, the chief operating officer, the general counsel, and the administration and chief people officer. Management proposes certain corporate and executive performance objectives for executive management based on the following year’s financial business plan, which is approved by the Board each year. Management also participates in the discussion of peer companies to be used to benchmark NEO compensation, and recommends the overall funding level for cash bonuses and equity incentive awards. All management recommendations are reviewed by Longnecker, modified as necessary by the Compensation Committee, and approved by the Compensation Committee. The Compensation Committee meets regularly in executive session without management present.2013.

Compensation Philosophy

In order to recruit and retain the most qualified and competent individuals as senior executives, we strive to maintain a compensation program that is competitive in our market and with respect to the general profession of our executives. We remain committed to hiring and retaining qualified, motivated employees at all levels within the organization while ensuring that all forms of compensation are aligned with business needs. The purpose of our compensation program is to reward exceptional organizational and individual performance. Our compensation system is designed to support the successful attainment of our vision, values and business objectives.

The following compensation objectives are considered in setting the compensation components for our senior executives:

We want our executives to be motivated to achieve ourshort- and long-term goals, without sacrificing our financial and corporate integrity in trying to achieve those goals. While an executive’s overall compensation should be strongly influenced by the achievement of specific financial targets, we believe that an executive must be provided a degree of financial certainty and stability in his or her compensation. The design and operation of the compensation arrangements provide the executives with incentives to engage in business or other activities that would support the value of Key or its stockholders. One mechanism to achieve this arrangement is our stock ownership guidelines. See “Stock Ownership of Certain Beneficial Owners and Management—Stock Ownership Guidelines” above.

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The principal components of our executive compensation program are base salary, cash incentive bonuses and long-term incentive awards in the form of equity, including performance-based equity. We blend these elements in order to formulate compensation packages that provide competitive pay, reward the achievement of financial, operational and strategic objectives on ashort- and long-term basis, and align the interests of our executive officers and other senior personnel with those of our stockholders. To understand our compensation philosophy, it is important to note that we believe that compensation is not the only manner in which we attract people to Key. We strive to hire and retain talented people who are compatible with our corporate culture, committed to our core values, and who want to make a contribution to our mission. For additional information about employment agreements, see

2013 Executive Compensation Highlights

We achieved strong operational performance during 2013; however, our financial performance fell short of our goal. As a result:

More details regarding our 2013 performance and executive compensation can be found below. We encourage you to read this section in conjunction with the advisory (nonbinding) vote with respect to the compensation of our NEOs described below. See “Compensation of Executive Officers—Employment AgreementsSummary Compensation Table”” below.

Use of Employment Agreements

We have entered into multi-year employment agreements with each of our named executive officers. We believe that it is and other related compensation tables and narrative disclosure in the best interests of the Company to enter into multi-year employment agreements with our executive officers because the agreements foster long-term retention, while still allowing the Compensation Committee to exercise considerable discretion in designing incentive compensation programs.

Elements of Compensation

The total compensation and benefits program for our senior executives generally consists of the following components:

Base Salaries

We provide base salaries to compensate our senior executives and other employees for services performed during the fiscal year. This provides a level of financial certainty and stability in an industry with historical volatility and cyclicality. The base salaries are designed to reflect the experience, education, responsibilities and contribution of the individual executive officers. This form of compensation is eligible for annual merit increases, and is initially established for each executive through individual negotiation and is reflected in his or her employment agreement. Thereafter, salaries are reviewed annually, based on a number of factors, both quantitative, including detailed organizational and competitive analyses performed by an independent consultant engaged by the Compensation Committee, and qualitative, including the Compensation Committee’s perception of the executive’s experience, performance and contribution to our business objectives and corporate values.

In January 2011, the Compensation Committee increased Ms. Clarke’s and Ms. Frye’s base salaries by 19.7% and 9.1%, respectively. These increases were based on recommendations and market data presented by Longnecker to be more market competitive for incumbents of Ms. Clarke’s and Ms. Frye’s experience, performance and tenure, and to align their salaries with market competitive practices. None of the other NEOs received an increase in base salary during 2011.

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In consultation with Longnecker and its compensation analysis for the current year, the Compensation Committee approved, effective January 2012, the following annual base salary increases for each NEO, which represent an average salary increase of 4.9% for the NEOs overall:

Cash Bonus Incentive Plan

The cash bonus incentive plan provides variable cash compensation earned only when established performance goals are achieved. It is designed to reward the plan participants, including the NEOs, who have achieved certain corporate and executive performance objectives and have contributed to the achievement of certain objectives of Key. The cash bonus incentive plan is measured on an annual basis.

Under this cash compensation program, each executive has the opportunity to earn a cash incentive compensation bonus based on the achievement of pre-determined operating and financial performance measures and other performance objectives established by the Compensation Committee. The cash bonus incentive plan goals are as follows:

Cash Bonus Incentive Plan Measurements

Our financial performance target and safety target are determined using the Company’s budget and operating plan, respectively, for the subsequent year for which the bonuses are being paid. The operating budget is approved by the Board each year. The Compensation Committee then establishes a threshold and a target percentage of financial performance for the period. The threshold level of financial performance must be met in order to fund the incentive program. If the financial performance falls short of the threshold, then no incentive bonuses are awarded under the program regardless of goal achievement under the other non-financial measures.

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The cash bonus plan incentive also incorporates weightings with respect to each of the performance measurements. For the NEOs, the weightings are as follows:

The weighting of the targets under the cash bonus incentive plan reflects the continued emphasis to align our overall financial performance with the incentive compensation of each of the executives and to further emphasize the value of safety to the company.

The bonus opportunity under the cash bonus incentive plan for employees at vice-president level and above is calculated as an absolute percentage of base salary, and the percentage achieved is multiplied by the respective weighting of the performance targets. For each NEO, the bonus opportunity as a percentage of base salary for 2011 was as follows:

In connection with the review of the total cash compensation of the NEOs by Longnecker, the Compensation Committee revised the target bonus opportunities for each of Mr. Wilson and Mr. Whichard to 90% and 80%, respectively. Accordingly, the bonus opportunity for each of the NEOs for 2012 under the cash bonus incentive plan will be as follows:

An executive may receive an incremental bonus percentage once the financial performance threshold is achieved. For example, Mr. Alario would be entitled to a percentage of his salary between 50% and 124% depending on the level of PBT above threshold, but below target. At target financial performance, Mr. Alario would receive 125% of his salary. The same concept applies if we outperform target PBT. In that scenario, Mr. Alario would be entitled to a percentage of his salary between 126% and 300%, depending on the level above PBT target. The maximum payout for Mr. Alario would not exceed 300% (or 190% with respect to the other NEOs), even if the financial performance exceeds the PBT maximum target.

Financial performance, in turn, impacts all other measures. Therefore, each performance measure is factored depending on the level of financial performance. Factoring the payment to the financial performance achievement level is intended to further align financial performance and executive incentive compensation.

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The Compensation Committee reviews all performance goals at the beginning of the period and authorizes payment following the end of the period. Under our incentive compensation program, the Compensation Committee has discretion to adjust targets, as well as individual awards, either positively or negatively.

2011 Cash Bonus Incentive Plan Results

In February 2012, the Compensation Committee approved cash bonuses payable to our officers and employees under the 2011 cash bonus incentive plan. In evaluating the bonuses for 2011, the Compensation Committee reviewed the Company’s performance versus the performance measurements established at the beginning of 2011 under the cash bonus incentive plan. Key outperformed and reached the maximum under the financial target of the 2011 cash bonus incentive plan. However, the safety component was not achieved, and therefore no credit was provided in the calculation of the bonus payment for safety performance.

In calculating the bonus payout under the 2011 cash bonus incentive plan, each of the NEOs received their maximum bonus opportunity for the financial target and individual goals that were achieved. Specifically, Mr. Alario received 300% of his PBT goal (or 300% multiplied by 60% of base salary), and 300% of his individual goals (or 300% multiplied by 25% of base salary). Each of the other NEOs received 190% of their PBT goal (or 190% multiplied by 60% of base salary) and 190% of their individual goals (or 190% multiplied by 25% of base salary). No bonus was paid on safety.

The following tables sets forth the amounts paid to each NEO under the 2011 cash bonus incentive plan and are reflected in the “Non-equity Incentive Plan Compensation” column of the Summary Compensation Table under “Compensation of Executive Officers” below:section below.

Elements of Compensation

The annual compensation program for our senior executives consists principally of the following components: