Document:

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                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

         This Employment Agreement, including the attached Exhibit A (together,
the "Agreement"), is entered into between Sierra Well Service, Inc., a Delaware
corporation (the "Company"), and Ronald T. McClung ("Employee") effective as of
March 1, 2000 (the "Effective Date").

                                   WITNESSETH:

         WHEREAS, the Company desires to employ Employee pursuant to the terms
and conditions set forth in this Agreement, and Employee desires to be employed
by the Company pursuant to such terms and conditions;

         NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, the Company and Employee agree as
follows:

ARTICLE I:  EMPLOYMENT AND DUTIES

         1.1 The Company agrees to employ Employee and Employee agrees to be
employed by the Company subject to the terms and conditions of this Agreement,
beginning as of the Effective Date and continuing until the date set forth on
Exhibit A (the "Term"). If Employee's employment with the Company continues
after the end of the Term, Employee shall be an "at-will" employee.

         1.2 Employee shall be employed in the position set forth on Exhibit A
and shall have the normal authorities, responsibilities and duties of such
position. However, the Company may assign Employee such additional or different
duties from time to time as may be reasonably appropriate in the good faith
opinion of the Company, including duties with an affiliate. Employee shall at
all times comply with the policies and procedures of the Company as in effect
from time to time.

ARTICLE II: COMPENSATION AND BENEFITS

         2.1 During the Term the Company shall pay Employee a Monthly Base
Salary as set forth on Exhibit A, which shall be paid in accordance with the
Company's standard payroll practice. Such Monthly Base Salary may be increased
from time-to-time by the Board of Directors of the Company (the "Board"), but
may not be decreased unless a similar decrease is made to the base salaries of
the officers of the Company.

         2.2 Employee shall be eligible to participate in the Company's cash
bonus and employee stock option plans as may be approved from time to time by
the Board.
<PAGE>   2

         2.3 The Company may withhold from any compensation, benefits, or
amounts payable to Employee all taxes as may be required pursuant to any
applicable law.

         2.4 Employee shall be reimbursed by the Company for reasonable travel,
lodging, meals, customer entertainment and other expenses incurred by him in
connection with performing his duties hereunder in accordance with the Company's
policies in effect from time to time.

ARTICLE III:  TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF
SUCH TERMINATION

         3.1 The Company shall have the right to terminate Employee's employment
at any time prior to the expiration of the Term:

             (i)    for "Cause", upon the determination by the Board that
                    "Cause" exists for termination of Employee's employment (a
                    "Termination for Cause"). As used herein, the term "Cause"
                    means (a) Employee's gross negligence or willful misconduct
                    in the performance of Employee's duties; (b) Employee has
                    been convicted of a felony; (c) Employee has willfully
                    refused without proper legal reason to perform the duties
                    and responsibilities required of Employee under this
                    Agreement; (d) Employee's material breach of any material
                    provision of this Agreement which remains uncorrected for 10
                    business days following written notice by the Company to
                    Employee of such breach; or (e) chronic alcohol abuse or
                    illegal drug use by Employee that is determined by the Board
                    to materially impair Employee's ability to perform his
                    duties and responsibilities hereunder;

             (ii)   for any reason other than Cause (an "Involuntary
                    Termination"); or

             (iii)  if Employee becomes entitled to benefits under the Company's
                    (or an affiliate's) long-term disability plan or, if
                    Employee is not covered by any such plan, upon Employee
                    becoming unable to perform substantially, with reasonable
                    accommodation, Employee's duties as a result of a physical
                    or mental impairment as determined by a physician selected
                    or approved by the Company (a "Disability Termination").

         3.2 Employee shall have the right to terminate Employee's employment at
any time prior to the expiration of the Term:

             (i)    for a material breach by the Company of a material provision
                    of this Agreement which remains uncorrected for 10 business
                    days following written notice of such breach by Employee to
                    the Company (a "Good Reason Termination"); or

                                       -2-
<PAGE>   3

             (ii)   for any other reason 30 days following written notice to the
                    Company, unless such notice period is waived by the Company
                    (a "Voluntary Termination").

         3.3 Upon a Voluntary Termination, a Termination for Cause, a Disability
Termination, or a termination due to Employee's death, Employee (or Employee's
spouse or, if none, Employee's estate) shall be paid the pro rata Monthly Base
Salary earned through the date of such termination; however, Employee shall not
be entitled any future compensation or benefits which would otherwise have been
provided pursuant to this Agreement had the Term continued following such
termination of employment, including, without limitation, any bonuses, incentive
compensation, stock option or other equity based award that is not vested or
payable pursuant to its terms at the date of such termination of employment.

         3.4 Upon an Involuntary Termination or a Good Reason Termination,
Employee shall be paid, as soon as reasonably practical following such
termination, a lump sum amount equal to six months' Monthly Base Salary
(however, if such termination occurs on or following a Change of Control (as
defined in the Company's 2000 Stock Incentive Plan), "18 months'" shall be
substituted for "six months'"); however, Employee shall not be entitled to
receive any severance payment pursuant to this Section 3.4 unless Employee has
executed (and not revoked) a general release of all claims Employee may have
against the Company and its affiliates relating to Employee's employment
hereunder in a form of such release reasonably acceptable to the Company.
Employee shall not be entitled to any future compensation or benefits which
would otherwise have been provided pursuant to this Agreement had the Term
continued following such termination of employment, including, without
limitation, any bonuses, incentive compensation, stock option or other equity
based award that is not vested or payable pursuant to its terms at the date of
such termination of employment.

         3.5 In all cases, the compensation payable to Employee under this
Agreement upon termination of the employment relationship shall be offset
against any amounts to which Employee may otherwise be entitled under any and
all severance plans and policies of the Company or its affiliates.

         3.6 Termination of the employment relationship pursuant to this
Agreement shall not terminate those obligations imposed by this Agreement which
are continuing obligations, including, without limitation, Employee's
obligations under Articles IV and V.

ARTICLE IV:  OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS

         4.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by the Company which relate to the Company's business,
products or services shall be disclosed to the Company by Employee and are and
shall be the sole and exclusive property of the Company.

                                       -3-
<PAGE>   4

         4.2 Employee acknowledges that the business of the Company and its
affiliates is highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets ("Confidential Information")
which are valuable, special, and unique assets which the Company or its
affiliates use in their business to obtain a competitive advantage over their
competitors. Employee further acknowledges that protection of such Confidential
Information against unauthorized disclosure and use is of critical importance to
the Company and its affiliates in maintaining their competitive position.
Employee hereby agrees that Employee will not, at any time during or after
Employee's termination of employment with the Company, make any unauthorized
disclosure of any Confidential Information, or make any use thereof, except in
the carrying out of Employee's employment responsibilities hereunder. The
affiliates of the Company shall be third party beneficiaries of Employee's
obligations under this Section. As a result of Employee's employment by the
Company, Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of the Company
and its affiliates. Employee also agrees to preserve and protect the
confidentiality of such third party confidential business information and trade
secrets. Employee acknowledges that money damages would not be sufficient remedy
for any breach of this Article IV by Employee, and the Company shall be entitled
to enforce the provisions of this Article IV by terminating any payments then
owing to Employee under this Agreement and/or to specific performance and
injunctive relief as remedies for such breach or any threatened breach. Such
remedies shall not be deemed the exclusive remedies for a breach of this Article
IV, but shall be in addition to all remedies available at law or in equity to
the Company, including the recovery of damages from Employee and his or her
agents involved in such breach.

         4.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during Employee's employment by the
Company which contain or disclose Confidential Information shall be and remain
the sole property of the Company and its affiliates, as the case may be. Upon
termination of Employee's employment by the Company, for any reason, Employee
promptly shall deliver the same, and all copies thereof, to the Company.

         4.4 If, during Employee's employment with the Company, Employee creates
any original work of authorship fixed in any tangible medium of expression which
is the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures, or the like) relating to the Company's business,
products, or services, whether such work is created solely by Employee or
jointly with others (whether during business hours or otherwise and whether on
the Company's premises or otherwise), Employee shall disclose such work to the
Company. The Company shall be deemed the author of such work if the work is
prepared by Employee within the scope of his or her employment but is specially
ordered by the Company as a contribution to a collective work, as a part of a
motion picture or other audiovisual work, as a translation, as a supplementary
work, as a compilation, or as an instructional text, then the work shall be
considered to be work made for hire and the Company

                                       -4-
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shall be the author of the work. If such work is neither prepared by the
Employee within the scope of his or her employment nor a work specially ordered
and is deemed to be a work made for hire, then Employee hereby agrees to assign,
and by these presents does assign, to the Company all of Employee's worldwide
right, title, and interest in and to such work and all rights of copyright
therein.

ARTICLE V:  NON-COMPETITION OBLIGATIONS

         5.1 As part of the consideration for the compensation and benefits to
be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary,
in order to protect the Company's interests in the Confidential Information that
the Company will furnish and make available to Employee in the performance of
his duties with the Company, and as an additional incentive for the Company to
enter into this Agreement, the Company and Employee agree to the non-competition
provisions of this Article V. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others (as a principal, agent, owner, employee,
consultant or otherwise), in any geographic area or market where the Company or
any of its affiliated companies is conducting any business as of the date of
termination of the employment relationship or have during the previous twelve
months conducted any business (the "Territory"):

             (i)    engage in any business competitive with the business
                    conducted by the Company or its affiliates;

             (ii)   render advice or services to, or otherwise assist, any other
                    person, association, or entity who is engaged, directly or
                    indirectly, in any business competitive with the business
                    conducted by the Company or its affiliates;

             (iii)  induce any employee of the Company or any of its affiliates
                    to terminate his or her employment with the Company or its
                    affiliates, or hire or assist in the hiring of any such
                    employee by a person, association, or entity not affiliated
                    with the Company;

             (iv)   call upon any person or entity which is, at that time, or
                    which has been, within one year prior to that time, a
                    customer of the Company within the Territory for the purpose
                    of soliciting customers, orders or contracts for any
                    business competitive with the Company or its affiliates
                    within the Territory; or

             (v)    testify as an expert witness in matters related to the
                    Company's business for an adverse party to the Company in
                    litigation; provided, that nothing contained herein shall
                    interfere with Employee's duty to testify as a witness if
                    required by law.

                                       -5-
<PAGE>   6

These non-competition obligations shall apply during Employee's employment with
the Company and its affiliates and shall extend until six months after
Employee's termination of the employment with the Company and its affiliates.
Notwithstanding the foregoing, these non-competition obligations shall not apply
if Employee's employment is terminated on or following a Change of Control. In
addition, the foregoing restrictions shall not prohibit Employee from owning
less than 2% of any class of securities of any public company that is engaged in
competition with the Company or an affiliate.

         5.2 Employee understands that the foregoing restrictions may limit
Employee's ability to engage in certain businesses during the period provided
for above, but acknowledges that Employee will receive sufficiently high
remuneration and other benefits under this Agreement to justify such
restriction. Employee acknowledges that money damages would not be sufficient
remedy for any breach of this Article V by Employee, and the Company shall be
entitled to enforce the provisions of this Article V by terminating any payments
then owing to Employee under this Agreement and/or to specific performance and
injunctive relief as remedies for such breach or any threatened breach. Such
remedies shall not be deemed the exclusive remedies for a breach of this Article
V, but shall be in addition to all remedies available at law or in equity to the
Company, including, without limitation, the recovery of damages from Employee
and his or her agents involved in such breach. Employee further agrees to waive
any requirement for the Company's securing or posting of any bond in connection
with such remedies.

         5.3 It is expressly understood and agreed that the Company and Employee
consider the restrictions contained in this Article V to be reasonable and
necessary to protect the proprietary information of the Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.

         5.4 The covenants in this Article V are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.

         5.5 All of the covenants in this Article V shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of six months following termination of employment, during
which the agreements and covenants of Employee made herein shall be effective,
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of this Article V.

                                       -6-
<PAGE>   7

ARTICLE VI:  MISCELLANEOUS

         6.1 For purposes of this Agreement, all notices and other
communications shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

         If to the Company:

                  Sierra Well Service, Inc.
                  406 N. Big Spring Street
                  Midland, Texas 79701
                  Attention: Corporate Secretary

         If to Employee, to the address last shown on the Company's records.

Either the Company or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.

         6.2 This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of the Agreement to the laws of another state or country.

         6.3 No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.

         6.4 It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term, provision,
covenant, or remedy of this Agreement or the application thereof to any person,
association, or entity or circumstances shall, to any extent, be construed to be
invalid or unenforceable in whole or in part, then such term, provision,
covenant, or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person, association, or entity or circumstances other than those
to which they have been held invalid or unenforceable, shall remain in full
force and effect.

         6.5 This Agreement shall be binding upon and inure to the benefit of
the Company and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of the
Company by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. Employee's rights and obligations under Agreement
hereof are personal and such rights, benefits, and obligations of Employee shall
not be voluntarily or

                                       -7-
<PAGE>   8

involuntarily assigned, alienated, or transferred, whether by operation of law
or otherwise, without the prior written consent of the Company.

         6.6 This Agreement replaces in full all previous agreements and
discussions pertaining to the following subject matters covered herein: the
nature of Employee's employment relationship with the Company and the term and
termination of such relationship. This Agreement constitutes the entire
agreement of the parties with regard to such subject matters, and contains all
of the covenants, promises, representations, warranties, and agreements between
the parties with respect such subject matters. Each party to this Agreement
acknowledges that no representation, inducement, promise, or agreement, oral or
written, has been made by either party with respect to such subject matters,
which is not embodied herein, and that no agreement, statement, or promise
relating to the employment of Employee by the Company that is not contained in
this Agreement shall be valid or binding. Any modification of this Agreement
will be effective only if it is writing and signed by each party whose rights
hereunder are affected thereby, provided that any such modification must be
authorized or approved by the Board.

ARTICLE VII: DISPUTE RESOLUTION

         7.1 Except with respect to injunctive relief as provided in Section 5.2
above, any dispute or controversy about the validity, interpretation, effect or
alleged violation of this Agreement (an "Arbitrable Dispute") must be submitted
to confidential arbitration in Midland, Texas. Arbitration shall take place
before an experienced employment arbitrator licensed to practice law in such
state and selected in accordance with the Model Employment Arbitration
Procedures of the American Arbitration Association. Arbitration shall be the
exclusive remedy of any Arbitrable Dispute. Judgement may be entered on the
arbitrator's award in any court having jurisdiction. The parties hereby agree
that the arbitrator shall be empowered to enter an equitable decree mandating
specific enforcement of the terms of this Agreement. All costs and expenses,
including attorneys' fees, shall be awarded as determined by the arbitrator.
Should any party to this Agreement pursue any Arbitrable Dispute by any method
other than arbitration, the other party shall be entitled to recover from the
party initiating the use of such method all damages, costs, expenses and
attorneys' fees incurred as a result of the use of such method. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall purport to
waive or in any way limit the right of any party to seek to enforce any judgment
or decision on an Arbitrable Dispute in a court of competent jurisdiction.

                                       -8-
<PAGE>   9

         IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement in multiple originals, effective for all purposes as of the Effective
Date.

                                                   SIERRA WELL SERVICE, INC.

                                                   By:  /s/ Kenneth V. Huseman
                                                       -------------------------
                                                   Name: Kenneth V. Huseman
                                                   Title: President and CEO

                                                   EMPLOYEE

                                                   /s/ Ronald T. McClung
                                                   -----------------------------
                                                   Ronald T. McClung

                                       -9-
<PAGE>   10

                                 EXHIBIT "A" TO
                              EMPLOYMENT AGREEMENT
             BETWEEN SIERRA WELL SERVICE, INC. AND RONALD T. MCCLUNG
             -------------------------------------------------------

Term Ending Date:           February 28, 2003 or, if earlier, the date
                            Employee's employment is terminated for any reason

Position:                   Chief Financial Officer

Monthly Base Salary:        $7,500.00

                                       A-1<PAGE>   1
                                                                   EXHIBIT 10.16

                             SUBSCRIPTION AGREEMENT

                                     BETWEEN

                           ENRON NORTH AMERICA CORP.,

                                       AND

                           BASIC ENERGY SERVICE, INC.

                            DATED AS OF JUNE 1, 2000

                            SERIES D PREFERRED STOCK

<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>               <C>
ARTICLE 1         DEFINITIONS.....................................................................................1
         1.01     Defined Terms...................................................................................1
         1.02     Terminology.....................................................................................1
ARTICLE 2         PURCHASE AND SALE OF PREFERRED STOCK; TERMS OF ISSUE............................................2
         2.01     Authorization; Certificate of Designations......................................................2
         2.02     Purchase and Sale of Series D Preferred Stock...................................................2
         2.03     Delivery........................................................................................2
         2.04     Closing.........................................................................................2
         2.05     Limitation on Indebtedness......................................................................2
ARTICLE 3         REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................3
         3.01     Organization and Good Standing; Foreign Qualifications; Licenses and Permits....................3
         3.02     Ownership and Capitalization of the Company.....................................................3
         3.03     Authority; Authorization of Agreement...........................................................3
ARTICLE 4         REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................................................4
         4.01     Organization and Good Standing..................................................................4
         4.02     Authority; Authorization of Agreement...........................................................4
         4.03     Brokerage Agreements............................................................................4
         4.04     Consents and Approvals..........................................................................5
         4.05     Additional Representations of Purchaser.........................................................5
ARTICLE 5         ADDITIONAL AGREEMENTS AND COVENANTS.............................................................6
         5.01     Disclaimer......................................................................................6
         5.02     Regulatory Covenant.............................................................................6
ARTICLE 6         MISCELLANEOUS...................................................................................6
         6.01     Arbitration.....................................................................................6
         6.02     Expenses........................................................................................7
         6.03     Entire Agreement................................................................................7
         6.04     Choice of Law; Headings.........................................................................8
         6.05     Amendments......................................................................................8
         6.06     Further Assurances..............................................................................8
         6.07     Successors and Assigns..........................................................................8
         6.08     Severability....................................................................................8
         6.09     Counterparts....................................................................................8
         6.10     Notices.........................................................................................8
         6.11     Survival.......................................................................................10
</TABLE>

                                      -i-
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LIST OF ATTACHMENTS, EXHIBITS AND SCHEDULES:

Attachment I      -    Definitions
Schedule 3.02     -    Ownership and Capitalization of the Company
Exhibit A         -    Certificate of Designations of Series D Preferred Stock

                                      -ii-
<PAGE>   4
                             SUBSCRIPTION AGREEMENT

         This SUBSCRIPTION AGREEMENT (this "Agreement") is made and entered into
as of this 1st day of June, 2000, by and among Enron North America Corp., a
Texas corporation (the "Purchaser"), and Basic Energy Service, Inc. (the
"Company").

                                    RECITALS

         WHEREAS, in the event the aggregate offering price of shares sold in
the Company's initial public offering of common stock (the "IPO") is less than
$55,000,000 but greater than $45,000,000, Purchaser desires to subscribe for,
and the Company desires to issue to Purchaser, certain equity interests in the
Company, in accordance with and subject to the terms and conditions set forth in
this Agreement.

                                   AGREEMENTS

         NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         1.01 DEFINED TERMS. Any capitalized term used herein shall have the
meaning given such term in Attachment I hereto, which is incorporated herein by
reference and shall be deemed to be a part of this Agreement for all purposes.

         1.02 TERMINOLOGY. All article, section, subsection, schedule and
exhibit references used in this Agreement are to this Agreement unless otherwise
specified. All schedules and exhibits attached to this Agreement constitute a
part of this Agreement and are incorporated herein. Unless the context of this
Agreement clearly requires otherwise, (a) the singular shall include the plural
and the plural shall include the singular wherever and as often as may be
appropriate; (b) references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute referred
to; (c) references to "writing" include printing, typing, lithography and other
means of reproducing words in a tangible visible form; (d) the words "include,"
"includes" or "including" shall be deemed to be followed by the words "without
limitation"; (e) the words "hereof," "herein," "hereunder," and similar terms in
this Agreement shall refer to this Agreement as a whole and not any particular
section or article in which such words appear; (f) references to Persons
includes their respective permitted successors and assigns and, in the case of a
Government Authority, Persons succeeding to the respective functions and
capacities of such Government Authority; and (g) when reference is being made to
a date or time, the word "from" shall mean "from and including" and the word
"to" shall mean "to but not including." Currency amounts referenced herein are
in United States Dollars.

<PAGE>   5
                                    ARTICLE 2
                   AUTHORIZATION AND SALE OF PREFERRED STOCK;
                                 TERMS OF ISSUE

         2.01 AUTHORIZATION; CERTIFICATE OF DESIGNATIONS. The Company has
authorized the issuance and sale pursuant to the terms and conditions hereof of
up to 500 shares of its Series D Preferred Stock, having the rights,
restrictions, privileges and preferences as set forth in the form of the
Company's Certificate of Designations, Preference and Rights of Series D
Cumulative Preferred Stock (the "Certificate"), attached hereto as Exhibit A,
which Certificate the Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing Date (as defined in Section
2.04 herein).

         2.02 PURCHASE AND SALE OF SERIES D PREFERRED STOCK. Subject to the
terms and conditions set forth herein, in the event the aggregate offering price
of shares sold in the IPO is less than $55,000,000 but greater than $45,000,000,
on the Closing Date (as defined in Section 2.04 herein) (a) Purchaser hereby
subscribes for and agrees to purchase, and the Company agrees to issue to
Purchaser, up to 500 shares of cumulative preferred stock, $10,000 par value per
share (the "Series D Preferred Stock"), of the Company (the "Issue") and (b)
Purchaser, in turn, agrees to pay the Company $10,000 for each share of the
Issue (the "Initial Purchase Price"), with the actual number of shares of the
Issue and the aggregate Initial Purchase Price of all shares of the Issue
determined as the difference of $55,000,000 less the aggregate offering price of
shares sold in the IPO.

         2.03 DELIVERY. On the Closing Date, the Company shall deliver to
Purchaser one certificate representing the Issue, registered in Purchaser's
name, against cash payment in immediately available funds of the full amount of
the Initial Purchase Price by the Purchaser. On the Closing Date,
contemporaneously with the closing of the IPO the Company will also pay to ECT
Securities Limited Partnership a fee in an amount equal to five percent (5.0%)
of the Initial Purchase Price.

         2.04 CLOSING. The closing of the purchase and sale of the Series D
Preferred Stock (the "Closing") shall take place (a) at the same place and time
as the closing of the IPO, or (b) at such time and place as the Company and the
Purchaser may agree (either, the "Closing Date"), subject to Section 2.06 below.

         2.05 LIMITATION ON INDEBTEDNESS. The Company shall not incur total
Indebtedness in excess of $40,000,000, excluding Capitalized Lease Obligations
outstanding on the date of this Agreement, without the consent of Purchaser
which shall be in the sole discretion of Purchaser unless such Indebtedness is
used to repay the Issue in full including all accrued and unpaid dividends.

         2.06 CONDITION TO CLOSING. The Closing shall be conditioned on the
representations and warranties of the Company contained in Article 3 remaining
true and correct as of the Closing Date, and the delivery of a certificate of
the President of the Company stating that the representations and warranties of
the Company contained in Article 3 of this Agreement remain true and correct as
of the Closing Date.

                                       2
<PAGE>   6
                                    ARTICLE 3
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants to Purchaser as follows:

         3.01 ORGANIZATION AND GOOD STANDING; FOREIGN QUALIFICATIONS; LICENSES
              AND PERMITS.

         (a) The Company is a corporation that is validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own and lease the properties it currently owns and leases
and to carry on its business as such business is currently conducted.

         (b) The Company is duly licensed, registered and qualified to do
business, as a foreign corporation, and is in good standing in all jurisdictions
in which the ownership, leasing or operation of its assets or the conduct of its
business as currently conducted requires such qualification, except where the
failure to be so licensed, registered or qualified has not had and is not
reasonably likely to have a material adverse effect on the assets, liabilities,
results of operations, financial condition or business of the Company ("Material
Adverse Effect").

         (c) Except for any Licenses that are ministerial in nature and are
routinely issued or granted by the applicable issuing or granting authority in
the ordinary course of business, the Company has all material licenses required
to own its assets and conduct its business as it is currently conducted.

         3.02 OWNERSHIP AND CAPITALIZATION OF THE COMPANY. Except as
contemplated by this Agreement or as described on Schedule 3.02, there are no
outstanding commitments or agreements to which the Company is a party, or by
which the Company is bound, that obligate the Company to issue to any Person any
equity interest in the Company. Except as described in Schedule 3.02, the
Company does not own, directly or indirectly, or hold rights to acquire, any
outstanding equity or other ownership interest (or securities, rights or other
interest convertible into equity interests) of any Entity.

         3.03 AUTHORITY; AUTHORIZATION OF AGREEMENT.

         (a) The Company has full corporate power and authority to (i) execute
and deliver this Agreement and (ii) consummate the transactions contemplated
hereby and perform all the terms and conditions hereof required to be performed
by it. The execution, delivery and performance by the Company of this Agreement
have been duly authorized by all requisite corporate action with respect to the
Company.

         (b)      This Agreement constitutes the legal, valid and binding
                  obligation of the Company, enforceable against the Company in
                  accordance with its terms, except as such enforceability may
                  be limited by Creditors' Rights.

                                       3
<PAGE>   7
         3.04 INFORMATION CONTAINED IN THE REGISTRATION STATEMENT. A
registration statement on Form S-1 (File No. 333-33108) (the "Registration
Statement") with respect to the issuance of shares of common stock and preferred
share purchase rights of the Company, including a prospectus subject to
completion (the "Prospectus"), has been filed by the Company with the Commission
under the Securities Act, and one or more amendments to the Registration
Statement will be filed. The Prospectus contained in the Registration Statement,
as amended or supplemented as of the date hereof and at any time hereafter did
not or will not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

                                    ARTICLE 4
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

         Purchaser hereby represents and warrants to the Company as follows:

         4.01 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation that is
validly existing and in good standing under the laws of the State of Texas and
has all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as such business is
currently conducted.

         4.02 AUTHORITY; AUTHORIZATION OF AGREEMENT.

         (a) Purchaser has full corporate power and authority to (i) execute and
deliver this Agreement and (ii) consummate the transactions contemplated hereby
and thereby and perform all the terms and conditions hereof and thereof required
to be performed by it. The execution, delivery and performance by Purchaser of
this Agreement has been duly authorized by all requisite corporate action with
respect to Purchaser. In addition, this Agreement has been duly executed and
delivered by Purchaser.

         (b) This Agreement constitutes the legal, valid and binding obligations
of Purchaser, enforceable against Purchaser in accordance with its respective
terms, except as such enforceability may be limited by Creditors' Rights.

         4.03 BROKERAGE AGREEMENTS. Neither Purchaser nor any of its Affiliates
have entered into any agreement with any Person that provides for the payment of
any commission, brokerage or "finder's" fee arising out of the transactions
contemplated by this Agreement for which the Company might have any liability or
obligation provided, the fee payable to Enron North America Corp. in connection
with the amendment to the loan agreement is not in connection with the
transactions contemplated by this Agreement.

         4.04 CONSENTS AND APPROVALS. Except for consents, waivers, approvals or
authorizations that have already been obtained, no consent, waiver, approval or
authorization of, or declaration, designation, filing, registration or
qualification with, any Governmental Authority, or any other

                                       4
<PAGE>   8
Person or Entity, is required to be made or obtained by Purchaser in connection
with its execution, delivery and performance of this Agreement.

         4.05 ADDITIONAL REPRESENTATIONS OF PURCHASER.

         (a) Purchaser is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or an "investment advisor" within the meaning of the
Investment Advisers Act of 1940, as amended.

         (b) Purchaser (i) acknowledges that it has had access to certain
financial and other information, and has been afforded the opportunity to ask
questions of representatives of the Company and to receive answers thereto in
connection with its evaluation of the risks and merits of consummating the
transactions contemplated hereby, (ii) is financially capable of owning, and
bearing the risks of ownership of, the Issue to be acquired by Purchaser and
(iii) is an "Accredited Investor" within the meaning of Rule 501 of Regulation D
under the Securities Act.

         (c) Purchaser is acquiring the Issue for its own account and not with a
view to the resale or distribution of all or any part thereof in violation of
applicable securities laws; Purchaser understands that the Series D Preferred
Stock being acquired by it has not been registered under the Securities Act or
applicable state securities laws and, therefore, it will be necessary for it to
continue to hold the Series D Preferred Stock being acquired by it and continue
to bear the economic risk of the investment therein unless and until the
offering and sale of the Series D Preferred Stock by it are registered under
such Securities Act and applicable state securities laws or an opinion of
counsel that exemption from registration is available.

         (d) Purchaser is not (i) an "employee benefit plan" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), that is subject to ERISA, a plan (as defined in Section
4975(e) of the Code), a trustee of any such plan acting on behalf of such plan,
an entity whose underlying assets include plan assets by reason of a plan's
investment in the entity, in each case other than a governmental plan (as
defined in Section 3(32) of ERISA or Section 414(d) of the Code) or (ii) a
governmental plan that treats itself as subject to the Department of Labor
Regulations Section 2510.3-101 or interprets applicable state law as
incorporating similar rules. The acquisition and holding of the Series D
Preferred Stock by Purchaser will not cause the Company, any Shareholder of the
Company (other than the Purchaser) or any officer or director of the Company to
be subject to any law, rule or regulation relating to employee benefit plans to
which Purchaser may be subject.

                                    ARTICLE 5
                       ADDITIONAL AGREEMENTS AND COVENANTS

         5.01 DISCLAIMER.  Purchaser acknowledges and agrees as follows:

                  (a) The Company and its representatives have provided
         Purchaser with certain information relating to the Company and the
         business to be conducted by the Company

                                       5
<PAGE>   9
         and/or the Company Subsidiaries in an effort to assist Purchaser with
         its due diligence investigation of the Company;

                  (b) Such information is not intended to constitute the sole
         basis for any decision by Purchaser to invest in the Company;

                  (c) Purchaser has performed its owned independent
         investigation and evaluation of the Company (which includes the review
         of the information described in clause (a) above) and is basing its
         decision to invest in the Company solely on (i) such independent
         investigation (which includes the review of the information described
         in clause (a) above) and (ii) the representations, warranties and
         covenants of the Company set forth herein;

                  (d) Neither the Company nor its Affiliates, officers,
         employees, representatives or agents shall have any liability resulting
         from the use by Purchaser of any information delivered or made
         available to Purchaser by or on behalf of the Company other than
         information contained in the Prospectus; and

                  (e) Neither the Company nor any of its Affiliates, officers,
         employees, representatives or agents makes any representations or
         warranties of any kind whatsoever to Purchaser, whether express or
         implied, by contract or otherwise, except as expressly set forth
         herein.

         5.02 REGULATORY COVENANT. Purchaser agrees that for so long as
Purchaser owns an interest in the Company, Purchaser will not take or fail to
take any action, if the effect thereof would be to cause the representations and
warranties set forth in Sections 4.05(a) and (d) above to cease to be true and
correct with respect to Purchaser.

                                    ARTICLE 6
                                  MISCELLANEOUS

         6.01 ARBITRATION.

         (a) Binding Arbitration. On the request of either Company or Purchaser,
(whether made before or after the institution of any legal proceeding), any
action, dispute, claim or controversy of any kind now existing or hereafter
arising between any of the parties hereto in any way arising out of, pertaining
to or in connection with this Agreement (a "Dispute") shall be resolved by
binding arbitration in accordance with the terms hereof. Either Company or
Purchaser may, by summary proceedings, bring an action in court to compel
arbitration of any Dispute.

         (b) Governing Rules. Any arbitration shall be administered by the
American Arbitration Association (the "AAA") in accordance with the terms of
this Section, the Commercial Arbitration Rules of the AAA, and, to the maximum
extent applicable, the Federal Arbitration Act. Judgment on any award rendered
by an arbitrator may be entered in any court having jurisdiction.

                                       6
<PAGE>   10
         (c) Arbitrators. Arbitration hereunder shall be before a three-person
panel of neutral arbitrators, consisting of one person from each of the
following categories: (1) an attorney who has practiced in the area of
commercial law for at least 10 years or a retired judge at the Texas or United
States District Court or an appellate court level: (2) a person with at least 10
years experience in commercial lending: and (3) a person with at least 10 years
experience in the petroleum industry. The AAA shall submit a list of persons
meeting the criteria outlined above for each category of arbitrator, and the
parties shall select one person from each category in the manner established by
the AAA. If the parties cannot agree on an arbitrator within 30 days after the
request for an arbitration, then any party may request the AAA to select an
arbitrator. The arbitrators may engage engineers, accountants or other
consultants that the arbitrator deems necessary to render a conclusion in the
arbitration proceeding.

         (d) Conduct of Arbitration. To the maximum extent practicable, an
arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings shall be conducted
in Houston, Texas. Arbitrators shall be empowered to impose sanctions and to
take such other actions as the arbitrators deem necessary to the same extent a
judge could impose sanctions or take such other actions pursuant to the Federal
Rules of Civil Procedure and applicable law. At the conclusion of any
arbitration proceeding, the arbitrator shall make specific written findings of
fact and conclusions of law. The arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. Company and Purchaser
each agrees to keep all Disputes and arbitration proceedings strictly
confidential except for disclosure of information required by applicable law.

         (e) Costs of Arbitration. All fees of the arbitrators and any engineer,
accountant or other consultant engaged by the arbitrators, shall be paid by
Company and Purchaser equally unless otherwise awarded by the arbitrators.

         6.02 EXPENSES. All legal and other costs and expenses incurred in
connection with the negotiation, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby shall be paid by the
party that incurred such costs and expenses.

         6.03 ENTIRE AGREEMENT. This Agreement (together with the other
agreements referred to herein) set forth the entire agreement and understanding
of the parties in respect of the transactions contemplated by this Agreement and
supersede all prior agreements, arrangements and undertakings (oral or written)
relating to the transactions contemplated by this Agreement.

         6.04 CHOICE OF LAW; HEADINGS. THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

         6.05 AMENDMENTS. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or, in the case of a waiver, by or on behalf of the party
waiving compliance. The failure of any party at any time or times to require

                                       7
<PAGE>   11
performance of any provisions hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by any party of any condition, or of
any breach of any term, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition or of any breach of any other term, covenant, representation or
warranty.

         6.06 FURTHER ASSURANCES. Each party agrees to execute such further
instruments or documents as any other party may from time to time reasonably
request in order to confirm or carry out the transactions contemplated in this
Agreement; provided that no such instrument or document shall expand a party's
obligations or liabilities beyond that contemplated in this Agreement.

         6.07 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder shall not be assignable by any party hereto prior to the
Closing without the prior written consent of the other parties hereto; provided,
any assignment by Purchaser to any entity controlling, controlled by or under
common control with Purchaser shall be permitted unless otherwise prohibited by
law.

         6.08 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect.

         6.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute but one and the same agreement.

         6.10 NOTICES. Any notice, request or demand provided or permitted to be
given under this Agreement shall be in writing, and may be served by personal
delivery, by telecopy or by depositing same in the mail, addressed to the party
to be notified, postage prepaid, and registered or certified with a return
receipt requested. Any such notice, request or demand deposited in the mail in
the manner hereinabove described shall be deemed to have been given and received
on the date of the delivery as shown on the return receipt. Any notice, request
or demand served in any other manner shall be deemed to have been given and
received only if and when actually received by the relevant party hereto (except
that notice given by telecopier shall be deemed given and received upon receipt
only if received during normal business hours and if received other than during
normal business hours shall be deemed received as of the opening of business on
the next Business Day). For purposes of any such notices, requests or demands,
the addresses and telecopy numbers of the parties shall be as follows:

                  (a)      If to the Company, to:

                           Basic Energy Service, Inc.
                           406 North Big Spring
                           Midland, Texas 79701
                           Attention:  Kenneth V. Huseman, President
                           Telecopier:  (915) 570-0487

                                       8
<PAGE>   12
                           with a copy to:

                           Andrews & Kurth L.L.P.
                           600 Travis, Suite 4200
                           Houston, Texas 77002
                           Attention:  Robert V. Jewell
                           Telecopier:  (713) 220-4285

                  (b)      If to Purchaser, to:

                           Enron North America Corp.
                           1400 Smith Street
                           Houston, Texas 77002
                           Attention:  Jessee E. Neyman
                           Telecopier:  713 646-3393

                           With a copy to:

                           Enron North America Corp. - Legal Department
                           1400 Smith Street
                           Houston, Texas 77002
                           Attention:
                           Telecopier:

Each party shall have the right, upon giving 10 days' notice to the other in the
manner hereinabove provided, to change its address for purposes of any notices,
requests or demands.

         6.11 SURVIVAL. The obligations set forth under Section 2.05 shall
survive the Closing until the Issue has been repaid in full.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       9
<PAGE>   13
         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.

                                    BASIC ENERGY SERVICE, INC.

                                    By: /s/ Kenneth V. Huseman
                                       -----------------------------------------
                                    Name: Kenneth V. Huseman
                                         ---------------------------------------
                                    Title: President and CEO
                                          --------------------------------------

                                    ENRON NORTH AMERICA CORP.

                                    By: /s/ Jesse E. Neyman
                                       -----------------------------------------
                                    Name: Jesse E. Neyman
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------

                                       10
<PAGE>   14
                                  ATTACHMENT I

                                   DEFINITIONS

         Capitalized terms used in this Agreement shall have the meanings
ascribed to them in this Attachment I unless such terms are defined elsewhere in
this Agreement:

         AAA:  As defined in Section 6.01(b)

         AFFILIATE: With respect to any Person, any other Person that (a) owns
or controls the first Person, (b) is owned or controlled by the first Person or
(c) is under common ownership or control with the first Person, where "owned"
means direct or indirect ownership of more than 50% of the equity interests or
rights to distributions on account of equity of the Person and "control" means
the direct or indirect power to directly the management or policies of the
Person, whether through the ownership of voting securities, by contract or
otherwise; provided however, that when used with respect to the Company, the
term "Affiliate" shall only include any other Person that is owned or controlled
by the Company.

         AGREEMENT:  As defined in the introductory paragraph.

         BUSINESS DAY: Any day other than a Saturday, Sunday or bank holiday in
Texas.

         CAPITALIZED LEASE OBLIGATION: The amount of the liability under any
capital lease that, in accordance with GAAP, is required to be capitalized and
reflected as a liability on the balance sheet.

         CERTIFICATE:  As defined in Section 2.01.

         CLOSING: As defined in Section 2.04.

         CLOSING DATE:  As defined in Section 2.04.

         COMMISSION:  The U.S. Securities and Exchange Commission.

         COMPANY:  As defined in the introductory paragraph.

         CREDITORS' RIGHTS: Bankruptcy, insolvency or other laws relating to or
affecting generally the enforcement of creditors' rights and general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

         DAMAGES: Any and all claims, causes of action, arbitrations,
liabilities, damages, fines, penalties, deficiencies, losses, costs and expenses
(including without limitation reasonable attorneys' fees and expenses).

         DISPUTE:  As defined in Section 6.01(a).

                                      A-1
<PAGE>   15
         ENCUMBRANCE: Any mortgage, loan, security interest pledge, charge or
other encumbrance.

         ENTITY: A corporation, partnership, limited liability company, joint
venture, trust or unincorporated organization or association or other entity.

         ESTIMATED PRIVATE MARKET EQUITY VALUE: At any time the difference
between (a) the sum of (i) the combined Net Working Capital of the Company, and
(ii) the EBITDA of the Company, for the preceding four fiscal quarters most
recently ended multiplied by 6.0, and (b) the outstanding Indebtedness of the
Company.

         GOVERNMENTAL AUTHORITY(IES): The United States of America or any other
foreign country or jurisdiction, any state, commonwealth, territory or
possession thereof and any political subdivision of any of the foregoing,
including but not limited to courts, departments, commissions, boards, bureaus,
agencies or other instrumentalities.

         GUARANTEED DEBT: Of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services to be acquired by such debtor
irrespective of whether such property is received or such services are
rendered), (iv) to maintain working capital or equity capital of the debtor, or
otherwise to maintain the net worth, solvency or other financial condition of
the debtor, or (v) otherwise to assure a creditor against loss; provided that
the term "guarantee" shall not include endorsements for collection or deposit,
in either case in the ordinary course of business, or any obligation or
liability of such Person in respect of leasehold interests assigned by such
Person to any other Person.

         INDEBTEDNESS: With respect to any Person, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade accounts payable and other
accrued current liabilities incurred in the ordinary course of business other
than payables or liabilities 60 days past due, (ii) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments,
(iii) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
if the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business,
(iv) all Capitalized Lease Obligations of such Person, (v) all indebtedness
referred to in (but not excluded from) clause (i), (ii), (iii), or (iv) above of
other Persons, the payment of which is secured by (or for which the holder of
such indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such indebtedness, (vi) all Guaranteed

                                      A-2
<PAGE>   16
Debt of such Person, (vii) all Redeemable Capital Stock (other than the Series D
Preferred Stock) that has any redemptions, dividend payments, or other
obligations that are issued by such Person valued at the maximum redemption
price plus all accrued and unpaid dividends thereon plus the maximum value of
any other obligations thereunder and (viii) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (i) through (vii) above. For purposes hereof, the
"maximum redemption price" of any Redeemable Capital Stock that does not have a
fixed redemption price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
this Agreement, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital Stock, such fair market value to be determined
in good faith by the Board of Directors of the issuer of such Redeemable Capital
Stock based on the Estimated Private Market Equity Value.

         INITIAL PURCHASE PRICE:  As defined in Section 2.02.

         IPO:  As defined in the Recitals.

         ISSUE:  As defined in Section 2.02.

         LEGAL REQUIREMENTS: Any law, statute, ordinance, decree, requirement,
order, judgment, rule or regulation of, including the terms of any license or
permit issued by, any Governmental Authority.

         LICENSE:  License, permit, certificate, approval or authorization.

         LIEN: Any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement or other interest
in property designed to secure repayment of a liability whether arising by
agreement or under law, or otherwise means any mortgage, charge, pledge, lien,
security interest, or encumbrance of any kind.

         MATERIAL ADVERSE EFFECT:  As defined in Section 3.01(b).

         ORGANIZATIONAL DOCUMENTS: The charter, bylaws or other applicable
organizational documents of an Entity.

         PERSON: Any individual, corporation, limited liability company, limited
or general partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.

         PROSPECTUS: As defined in Section 3.04.

         PURCHASER:  As defined in the introductory paragraph.

                                      A-3
<PAGE>   17
         REDEEMABLE CAPITAL STOCK: Of any Person means any Capital Stock of such
Person that, either by its terms, by the terms of any Capital Stock or other
security into which it is convertible or exchangeable or otherwise, (i), is, or
upon the happening of an event or passage of time would be, required to be
redeemed, or (ii) is redeemable at the option of the holder thereof, or (iii) is
convertible into or exchangeable for debt securities.

         REGISTRATION STATEMENT: As defined in Section 3.04.

         SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

         SERIES D PREFERRED STOCK.  As defined in Section 2.02.

                                      A-4
<PAGE>   18
SCHEDULE 3.02

Subject to the closing of the initial public offering pursuant to the
Registration Statement, the Company will issue certain options, notes and
warrants that are exercisable or convertible into shares of Common Stock.

The Company will acquire interests in certain companies subject to the closing
of the initial public offering as described in the Registration Statement and
the Prospectus.

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