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Exhibit 10.7  

 
 

SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT    
    

        This SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this "Agreement"), entered into as of April 2,
2004, is by and among Basic Energy Services, Inc. (formerly named BES Holding Co.), a Delaware corporation (the "Company"), DLJMB Funding
III, Inc., a Delaware corporation, DLJ ESC II, L.P., a Delaware limited partnership, and their Affiliates who are stockholders of the Company and party hereto (the "DLJ
Parties"), Southwest Royalties Holdings, Inc., a Delaware corporation, Southwest Partners II, L.P., a Delaware limited partnership, Southwest Partners III, L.P., a
Delaware limited partnership (individually, a "Southwest Party" and collectively, the "Southwest
Parties"), First Reserve Fund VIII, LP, a Delaware limited partnership, ("First Reserve"), Randy Spaur (a natural person), Peter
O. Kane (a natural person), Michael D. Schmid (a natural person), Jay R. Anderson (a natural person), William L. Hubbell (a natural person), Sterling Trust FBO William L. Hubbell, Donald C. Busha
Revocable Trust, Jay D. Hacklin (a natural person) (each, including First Reserve, a "FESCO Party" and collectively, the "FESCO
Parties"), Joey D. Fields (a natural person), Dub W. Harrison (a natural person), James J. Carter (a natural person), Charles W. Swift (a natural person), Kenneth V. Huseman (a
natural person), and each other holder of record of Common Stock (as defined below) who may hereafter duly and properly become bound by the terms hereof as required by  Section 8.5, each person
named above and each Person that hereafter may become a party hereto as contemplated hereby being referred to
individually as a "Party" and collectively as the "Parties". 

 
 

RECITALS    
    

        WHEREAS, the Parties are parties to that certain Amended and Restated Stockholders' Agreement entered into as of October 3, 2003 (the
"2003 Agreement"); and 

        WHEREAS,
the Parties desire to amend and restate the 2003 Agreement in the manner set forth herein. 

        NOW,
THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 

 
 

ARTICLE 1
  
    DEFINITIONS    
    

        1.1    Definitions.    In addition to the terms defined elsewhere herein, the following terms shall have the meanings
set forth below: 

        "2000 SPA" means that certain Securities Purchase Agreement dated as of December 21, 2000, by and between the DLJ Parties and
Basic, whereby, among other things, the DLJ Parties acquired Common Stock in the Company. 

        "2003 SPA" means that certain Securities Purchase Agreement dated October 3, 2003, by and among the Company, the FESCO Parties and
FESCO Holdings, Inc. (as amended to date), whereby, among other things, the FESCO Parties acquired Common Stock in the Company. 

        "Affiliate" means, with respect to any Person, any Person controlling, controlled by, or under common control with such Person. For the
purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise. 

        "Agreement" has the meaning specified in the preamble hereto. 

        "Allocated Stock" has the meaning specified in Section 4.9(c). 

 

        "Applicable Percentage" means with respect to each Party, a percentage equal to a fraction, the numerator of which is equal to the
aggregate number of shares of Fully-Diluted Common Stock requested to be included in the Piggyback Registration by such party and the denominator of which is equal to the number of shares of
Fully-Diluted Common Stock requested to be included in the Piggyback Registration by all such Parties. 

        "Basic" means Basic Energy Services, Inc., the predecessor in interest to the Company. 

        "Beneficial" ownership or "beneficially" owned, with respect to any shares of Common
Stock, shall have the same meaning as in Rule 13d-3 under the Securities Exchange Act of 1934, as amended. 

        "Board of Directors" means the board of directors of the Company or any committee or other body acting on behalf of, and possessing the
rights as may be delegated by, the board of directors of the Company. 

        "Bona Fide Offer" means any bona fide offer to acquire shares of Common Stock or Common Stock Equivalents (whether in the form of a
purchase of shares of Common Stock or Common Stock Equivalents, merger, business combination, recapitalization or otherwise) made by a Person which has the demonstrable financial ability to consummate
such a transaction. 

        "Business" means providing well site servicing to oil and gas drilling and producing Persons. 

        "Business Day" means any day other than a day on which banks in the State of Texas or New York are authorized by law to close. 

        "Capital Stock" means any and all shares of stock, interests, participations or other equivalents (however designated) of capital stock of
a corporation, any and all equivalent ownership interests in a Person (other than a corporation), and any and all warrants, options or other rights to purchase or acquire any of the foregoing,
including, without limitation, any Common Stock Equivalents. 

        "Cause" means (i) with respect to any Management Holder who is a party to a written employment agreement with the Company or any
Subsidiary, which agreement contains a definition of "cause" or
"for cause" (or words of like import) for purposes of termination of employment thereunder by the Company or any Subsidiary, "cause" or "for cause" (or words of like import) as defined in such
agreement, (ii) in all other cases, (1) any embezzlement or wrongful diversion of funds of the Company or any Subsidiary by a Management Holder, (2) gross malfeasance or gross
neglect by a Management Holder in the conduct of such Management Holder's duties (including, by example, the intentional or willful failure or failure due to bad faith to substantially perform his
employment duties or excessive absenteeism), (3) any misconduct that by such Management Holder that is significantly injurious to the Company or any Subsidiary or Affiliate of the Company,
(4) any material breach by a Management Holder of any covenant contained in any agreement or contract with the Company or any Subsidiary of the Company (including, without limitation, this
Agreement) or (5) conviction or the entry of a plea of nolo contendere or equivalent plea of a felony in a court of competent jurisdiction, or
any other crime or offense involving moral turpitude. 

        "Closing" has the meaning specified in Section 4.9. 

        "Commitment Agreement" means that certain Commitment Agreement, dated December 21, 2000, by and between the Company and the DLJ
Parties, pursuant to which the DLJ Parties have committed to purchase shares of Common Stock in order to fund certain acquisitions to be made by the Company. 

2

 

        "Common Stock Equivalents" means (without duplication with any other shares of Common Stock or Common Stock Equivalents) rights, warrants,
options, convertible securities, or exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, shares of Common Stock or
securities convertible or exchangeable into shares of Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of some future event. 

        "Common Stock" means the shares of common stock, par value US $0.01 per share, of the Company. 

        "Contractual Lock-Up Period" has the meaning specified in Section 4.1. 

        "Confidential Information" has the meaning specified in Section 8.8. 

        "Confidentiality Obligations" has the meaning specified in Section 8.8. 

        "Confidentiality Regulations" has the meaning specified in Section 8.8. 

        "Co-Sellers" has the meaning specified in Section 4.3. 

        "Co-Sellers' Stock" has the meaning specified in Section 4.3. 

        "Conversion Agreement" has the meaning specified in Section 8.8. 

        "Deceased Spouse" has the meaning specified in Section 4.9(c). 

        "Demand Period" has the meaning specified in Section 5.1. 

        "Demand Registration" has the meaning specified in Section 5.1. 

        "Demand Request" has the meaning specified in Section 5.1. 

        "DLJ Initial Position" has the meaning specified in Section 4.1. 

        "DLJ Parties" has the meaning specified in the preamble hereto. 

        "Divorced Spouse" has the meaning specified in Section 4.9(c). 

        "EBITDA Contingent Warrant" means that certain EBITDA Contingent Warrant issued as of December 21, 2000 to certain Holders,
pursuant to which such Holders may acquire additional shares of Common Stock, subject to the Company achieving certain earnings levels. 

        "Effective Date" means the date of this Agreement. 

        "Exchange Act" has the meaning specified in Section 5.4. 

        "Fair Market Value" shall mean: 

        (i)    Before
a Qualified IPO, the value of shares of Common Stock of the Company held by any Person as determined, whenever the terms and provisions hereof call for a
determination of the "Fair Market Value" of such shares (a "Subject Interest"), in good faith by the Board of Directors to be, as of any date, the fair
market value of such Subject Interests. 

        (ii)   After
a Qualified IPO, the value of a Subject Interest is the average of the daily Closing Prices of such Subject Interest for the twenty (20) consecutive
Trading Days prior to and including the date in question. "Closing Price" shall mean with respect to the Subject Interest: (A) the closing sale
price on such day on the principal stock exchange on which such security is then listed or admitted to trading, (B) if no such sale takes place on such day on such exchange, the average of the
reported closing bid and asked prices for such security, as officially reported on such exchange, (C) if such security is not listed or admitted to trading 

3

 

on
any such exchange, the average of the closing bid and asked prices of such security in the over-the-counter market on such day as reported by the National Association of
Securities Dealers Automated Quotation System, (D) if such firm is not engaged in the business of reporting such prices, as reported by a similarly generally accepted reporting service or
(E) if no such service is available, in such manner as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose.
"Trading Day" shall mean with respect to the Subject Interest: (A) if the applicable security is listed or admitted for trading on the New York
Stock Exchange or other national or international securities exchange, a day on which the New York Stock Exchange or such other national or international securities exchange is open for business,
(B) if the applicable security is quoted on the National Market System of the NASDAQ, a day on which trades may be made on such National Market System or (C) if the applicable security
is not otherwise listed, admitted for trading or quoted, any Business Day. 

        "FESCO Parties" has the meaning specified in the preamble hereto. 

        "FESCO Stockholder Agent" has the meaning set forth in Section 8.1. 

        "Fully-Diluted Common Stock" means, at any time, the then outstanding shares of Common Stock of the Company plus (without duplication) all
shares of Common Stock issuable, whether at such time or upon the passage of time or the occurrence of future events, upon the exercise (including, with respect
to all outstanding options, the "cashless-broker" exercise, if available, through procedures approved by the Company), conversion or exchange of all then-outstanding Common Stock
Equivalents. 

        "GAAP" means generally accepted accounting principles as applied in the United States of America. 

        "Good Reason" means (i) with respect to any Management Holder who is a party to a written employment agreement with the Company or
any Subsidiary, which agreement contains a definition of "good reason" for purposes of termination of employment thereunder by the Management Holder, "good reason" as defined in the most recent of
such agreements or (ii) with respect to any Management Holder who is not a party to a written employment agreement with the Company or any Subsidiary, the occurrence of one or more of the
following: (1) without such Management Holder's express written consent, the assignment to such Management Holder of any duties (other than a promotion), or any limitation of such Management
Holder's responsibilities, materially inconsistent with such Management Holder's duties and responsibilities with the Company or any Subsidiary as of the first to occur of the Effective Date or the
date that the Management Holder first becomes subject to and bound by this Agreement, and provided that such change has remained uncured for a period of at least thirty (30) days following
written notice from such Management Holder describing in reasonable detail the nature of such alleged change, (2) any failure by the Company or any Subsidiary to pay, or any reduction by the
Company or any Subsidiary of, such Management Holder's annual base salary for the preceding year that remains uncured for a period of at least thirty (30) days following written notice from
such Management Holder of the occurrence of such alleged failure, or (3) without such Management Holder's express written consent, the requirement by the Company or any Subsidiary that he
perform the duties required of him at a location other than that where such Management Holder primarily performs his duties as of the first to occur of the Effective Date or the date such Management
Holder first becomes subject to and bound by this Agreement (or such other location to which such Management Holder previously agreed to relocate), that is more than 50 miles from such original
location (or such other agreed upon location). 

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        "Group" means any Person and Affiliate(s) of that Person acting in concert for the purpose of acquiring, holding or disposing of equity
interests in the Company in other than a public offering of such equity interests. 

        "Holder" means any Person owning shares of Common Stock of the Company. 

        "Information" has the meaning set forth in Section 3.1(b). 

        "Lock-Up Expiration Date" has the meaning specified in Section 4.1. 

        "Management Holder" means any officer or director of the Company who owns shares of Common Stock and/or Common Stock Equivalent of the
Company. 

        "Management Holder Seller" has the meaning set forth in Section 4.9. 

        "Merger Agreement" has the meaning specified in Section 8.8. 

        "Non-Management Holder" means a Person who owns shares of Common Stock of the Company and is not a Management Holder, a DLJ
Party or First Reserve but is bound by this Agreement in their capacity as a stockholder of the Company. 

        "Non-Vested Stock" has the meaning specified in Section 4.9(c). 

        "Notice" has the meaning specified in Section 8.7. 

        "Notice Date" has the meaning specified in Section 4.3. 

        "Observer" has the meaning set forth in Section 3.1(b). 

        "Other Permitted Transferee" means (i) in the case of the Southwest Parties, any corporation, partnership or other entity which is
a controlled subsidiary of any of the Southwest Parties and (ii) in the case of the Non-Management Holders, (A) any corporation, partnership, trust or other entity which is
controlled by the applicable Non-Management Holder, (B) the applicable Non-Management Holder's heirs, executors, administrators, testamentary trustees, legatees or
beneficiaries (collectively, "Associates"), (C) any trust, the beneficiaries of which, or any corporation, limited liability company or
partnership, the stockholders, members or general or limited partners of which, include any of the respective Associates or their spouses or lineal descendants, (D) a voting trustee for one or
more of the respective subsidiaries or Associates under the terms of a voting trust as of the Effective Date. 

        "Permanent Disability" means (i) with respect to any non-director Management Holder (A) who is a party to a
written employment agreement with the Company or any Subsidiary, which agreement contains a definition of "disability" or "permanent disability" (or words of like import) for purposes of termination
of employment thereunder by the Company or any Subsidiary, "disability" or "permanent disability" as defined in the most recent of such agreements, or (B) in all other cases, if such Management
Holder, due to a disability of a permanent nature (determined to exist in the manner provided below), is unable to perform his duties and responsibilities to the Company or the applicable Subsidiary
for a period of not less than ninety (90) days during any one hundred eighty (180) consecutive day period; provided that "Permanent Disability" shall be deemed to occur upon the
expiration of such one hundred eighty (180) day period and a determination by the Board of Directors that there is no reasonable accommodation (within the meaning of the Americans with
Disabilities Act) which would enable such Management Holder to perform the essential functions of such Management Holder's position despite the existence of such disability, and the Board of
Directors, upon the advice of a qualified physician mutually agreeable to such Management Holder (or, if appropriate, such Management Holder's representative) and the Board of Directors, shall have
determined that such Management Holder is physically or mentally incapable (excluding infrequent and temporary absences due to ordinary 

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illness)
of performing such Management Holder's duties and responsibilities to the Company or the applicable Subsidiary. 

        "Permitted Management Holder Transferee" means (i) any corporation, limited liability company, trust, limited partnership or other
comparable entity established for the benefit of a Management Holder, the spouse and/or one or more of the lineal descendants of any Management Holder which is controlled by such Management Holder or
(ii) the spouse, parent, and/or one or more of the lineal descendants of any Management Holder. 

        "Permitted Transferee" is defined only with respect to any DLJ Party and First Reserve, and means respectively for each (i) any
Affiliate, (ii) any corporation, partnership or other entity which is an Affiliate of any DLJ Party or First Reserve, as the case may be (collectively, the "Private
Equity Affiliates"), (iii) any managing director, general partner, director, limited partner, officer or employee of First Reserve or any DLJ Party, as the case may be,
or a Private Equity Affiliate, or the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of any of the foregoing Persons referred to in this clause (iii)
(collectively, "Private Equity Associates"), (iv) any trust, the beneficiaries of which, or any corporation, limited liability company or
partnership, the stockholders, members or general or limited partners of which, include First Reserve or any DLJ Party, as the case may be, or any Private Equity Affiliates, Private Equity Associates,
their spouses or their lineal descendants and (v) a voting trustee for First Reserve or any DLJ Party, as the case may be, or for one or more Private Equity Affiliates or Private Equity
Associates under the terms of a voting trust. 

        "Person" means any natural person, corporation, limited liability company, limited partnership, general partnership, joint stock company,
joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government or agency or political subdivision
thereof. 

        "Piggyback Registration" has the meaning specified in Section 5.2. 

        "Piggyback Securities" has the meaning specified in Section 5.9. 

        "Post-Closing Management Stock" has the meaning specified in  Section 4.9. 

        "Promissory Note" has the meaning specified in Section 4.9. 

        "Purchaser" has the meaning specified in Section 4.9. 

        "Qualified IPO" means a consummated initial public offering of shares of Common Stock, which is underwritten on a firm commitment basis by
a nationally-recognized investment banking firm. 

        "Registrable Securities" means the Common Stock and any shares of Common Stock that are issuable upon the exercise of any right, including
pursuant to any option, warrant or security convertible into shares of Common Stock or similar right and any other securities issued or issuable with respect to such shares of Common Stock by way of a
stock dividend or stock split or in connection with a combination of stock, recapitalization, merger, consolidation or reorganization; provided, that
any Registrable Security will cease to be a Registrable Security when (i) a registration statement covering such Registrable Security has been declared effective by the SEC and it has been
disposed of pursuant to such effective registration statement, (ii) it is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then
in force) under the Securities Act are met or it is eligible for sale under Rule 144 without respect to any volume limitations, unless the Company fails, upon request of the Holder accompanied
by an opinion of counsel to the Holder, reasonably acceptable to the Company, to the effect that the Registrable Securities are eligible for resale under Rule 144(k), to remove all restrictive
legends on certificates representing such Registrable Security in connection with an 

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anticipated
transfer of such Common Stock that is otherwise permitted by this Agreement, or (iii) (A) it has been otherwise transferred and (B) the Company has delivered a new
certificate or other evidence of ownership for it not bearing any restrictive legend, other than the legend required pursuant to Section 8.6 of this Agreement, if applicable, and (C) it
may be resold without registration under the Securities Act. 

        "Registration Expenses" has the meaning specified in Section 6.2. 

        "Required Filing Date" has the meaning specified in Section 5.1(c). 

        "Required Sale" has the meaning specified in Section 4.3. 

        "Required Sale Notice" has the meaning specified in Section 4.3. 

        "Required Sale Date" has the meaning specified in Section 4.3. 

        "Restriction" has the meaning specified in Section 8.6. 

        "Retirement" means a termination of employment of a Management Holder, which is the result of (i) the expiration (including any
available extensions) of such Management Holder's most recent employment agreement with the Company or any Subsidiary, (ii) a Management Holder being an employee with the Company or any
Subsidiary for a certain number of years as determined by the Board of Directors, or (iii) the Management Holder obtaining the age of sixty (60) years old; provided that upon obtaining
such age, the Management Holder has been an employee of the Company or any Subsidiary for a continuous period of at least five (5) years. 

        "Sale Price" has the meaning specified in Section 4.3. 

        "Sale Stock" has the meaning specified in Section 4.3. 

        "SEC" means the United States Securities and Exchange Commission or any successor governmental agency. 

        "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. 

        "Seller" has the meaning specified in Section 4.3. 

        "Selling Holder" means a holder of Registrable Securities who is selling Registrable Securities pursuant to a registration statement under
the Securities Act. 

        "Southwest Parties" has the meaning specified in the preamble hereto. 

        "Subsequent Notice" has the meaning specified in Section 3.7. 

        "Subsequent Registration" has the meaning specified in Section 4.1. 

        "Subsequent Restricted Period" has the meaning specified in Section 4.1. 

        "Subsidiary" means (i) any corporation or other entity a majority of the Capital Stock or other equity securities of which having
ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is at the time owned, directly or indirectly, with power to vote, by the Company or
any direct or indirect Subsidiary of the Company, (ii) any limited liability company in which the Company or any direct or indirect Subsidiary is the sole managing member or (iii) any
partnership in which the Company or any direct or indirect Subsidiary is a general partner. 

        "Suspension Period" has the meaning specified in Section 6.3. 

        "Transferor" has the meaning specified in Section 4.2. 

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        "Transferor's Notice" has the meaning specified in Section 4.2. 

        "Third Party" has the meaning specified in Section 4.3. 

        "Underwriter" means a securities dealer that purchases any shares of Common Stock as principal and not as part of such dealer's
market-making activities. 

        1.2    References; Gender; Number; Certain Phrases.    References to this "Agreement" shall mean this Stockholders'
Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such
reference becomes operative. All references in this Agreement to an "Article," "Section," "Exhibit" or "Schedule" are to an Article, Section, Exhibit or Schedule of this Agreement, unless the context
requires otherwise. Unless the context requires otherwise, the words "this Agreement," "hereof," "hereunder," "herein," "hereby" or words of similar import refer to this Agreement as a whole and not
to a particular Article, Section, subsection, clause or other subdivision hereof. Whenever the context requires, the words used herein include the masculine, feminine and neuter gender, and the
singular and the plural. The words "include", "includes" and "including" shall mean "include, without limitation,", "includes, without limitation" and "including, without limitation,", respectively.
All references herein to "dollars" or "$" refer to currency of the United States of America. Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given in accordance with GAAP. 

 
 

ARTICLE 2
  
    REPRESENTATIONS AND WARRANTIES    
    

        2.1   Each
of the Southwest Parties, the DLJ Parties, each of the FESCO Parties that is not a natural person, and each other Party that is not a natural person (as to itself
only) hereby represents and warrants to the Company and the other Parties that: 

        (a)   it
is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, as the case may be, with full power and
authority under its certificate of incorporation and/or other organizational document(s) to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the
execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action; 

        (b)   this
Agreement has been duly and validly executed and delivered by it and, upon the Effective Date, constitutes the binding obligation enforceable against it in
accordance with its terms, except to the extent that enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect
relating to creditors' rights generally, to general principles of equity (including a court's discretionary authority with respect to granting specific performance) and to mandatory provisions of
public policy; and 

        (c)   the
execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby will not, with or without the giving
of notice or the lapse of time, or both, (A) violate any provision of law, statute, rule or regulation to which it is subject, (B) violate any order, judgment, or decree applicable to it
or (C) conflict with, or result in a breach or default under, any term or condition of its certificate of incorporation, by-laws or such other comparable organizational and
governing document(s), as the case may be, or any agreement or other instrument to which it is a party or by which it is bound. 

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        2.2   Each
Party who is a natural person, including both Management Holders and Non-Management Holders, hereby represents and warrants (as to himself or herself
only) to the Company and the other Parties that: 

        (a)   he
has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and
performance by him (or her) of this Agreement and the consummation by him (or her) of the transactions contemplated hereby have been duly authorized by all necessary action; 

        (b)   this
Agreement has been duly and validly executed and delivered by him (or her) and, upon the Effective Date, constitutes the binding obligation thereof enforceable
against him (or her) in accordance with its terms, except to the extent that enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally, to general principles of equity (including a court's discretionary authority with respect to granting specific performance) and to
mandatory provisions of public policy; and 

        (c)   the
execution, delivery and performance by him (or her) of this Agreement and the consummation by him (or her) of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, (A) violate any provision of law, statute, rule or regulation to which he (or she) is subject, (B) violate any order, judgment
or decree applicable to him (or her) or (C) conflict with, or result in a breach or default under, any term or condition of any agreement or other instrument to which he (or she) is a party or
by which he (or she) is bound. 

        2.3   The
Company hereby represents and warrants to each other Party that: 

        (a)   it
is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority under its
certificate of incorporation and other organizational documents to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and
performance by it of this Agreement
and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action; 

        (b)   this
Agreement has been duly and validly executed and delivered by the Company and, upon the Effective Date, constitutes the binding obligation thereof enforceable
against the Company in accordance with its terms, except to the extent that enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally, to general principles of equity (including a court's discretionary authority with respect to granting specific performance) and to
mandatory provisions of public policy; and 

        (c)   the
execution, delivery and, upon the Effective Date, performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or both, (A) violate any provision of law, statute, rule or regulation to which the Company is subject,
(B) violate any order, judgment or decree applicable to the Company or (C) conflict with, or result in a breach or default under, any term or condition of its certificate of
incorporation, bylaws or such other comparable organizational and governing document(s), as the case may be, or any agreement or other instrument to which the Company is a party or by which it is
bound. 

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ARTICLE 3    
    
    MANAGEMENT OF THE COMPANY;
  ACTIVITIES OF THE PARTIES    
    

        3.1    Board of Directors.    

        (a)   Generally. The Board of Directors of the Company shall manage the operation and affairs of the Company in accordance with
the Company's certificate of incorporation and bylaws and, in accordance therewith, shall select, appoint and remove the officers of the Company. The six (6) directors comprising the Board of
Directors as of the Effective Date shall meet the requirements of Sections 3.2 through 3.4. After the
effective date of the 2003 Agreement, the Board of Directors may consist of such numbers of
directors as in accordance with the provisions contained herein and in the Company's certificate of incorporation and bylaws. Following a Qualified IPO, 

	(i)
	the
rights in Section 3.1, including Observer rights in Section 3.1(b)
below, shall terminate and be of no further force an effect on the later of (i) the date 180 days following the effective date of the Qualified IPO and (ii) the date First Reserve
ceases to beneficially own 5% or more of the Company's outstanding Common Stock;

	(ii)
	the
rights set forth in Sections 3.2, 3.3 and 3.4 regarding the election of directors shall terminate and be of no further force or
effect effective as of the closing date of the Qualified IPO;

	(iii)
	the
preemptive rights set forth in Section 3.7 shall terminate and be of no further force or effect effective as of the
closing date of the Qualified IPO;

	(iv)
	the
obligations set forth in Section 3.8 shall be deemed satisfied by the Company by its filing of such financial statements
with the SEC. 

        (b)   Board Observer. The Company shall permit a representative of First Reserve (the
"Observer") to attend all meetings of the Board of Directors and all committees thereof to which the Observer is assigned by the Board of Directors
(whether in person, telephonic or other) in a non-voting, observer capacity and shall provide to First Reserve, the right (A) to receive all notices, reports and other
communications sent to directors, at the same time they are transmitted to directors, (B) to consult with and advise members of senior management of the Company, and (C) upon reasonable
notice, to have access to the books and records of the Company. The Observer may be excluded from any meeting or portion thereof and need not be provided such materials if a majority of the Board of
Directors reasonably believes that the Observer's attendance at such meeting or access to such information would: (i) adversely affect attorney-client privilege between the Company and its
counsel or (ii) involve a conflict of interest between the Company and First Reserve. First Reserve agrees and acknowledges that it and the Observer will be bound by the confidentiality
provisions of Section 8.8 of this Agreement. The Company acknowledges that First Reserve and the Observer may have, from time to time,
information ("Information") that may be of interest to the Company regarding a wide variety of matters including, by way of example only, current and
future investments First Reserve has made, may make, may consider or may become aware of with respect to other companies that may be competitive with the Company's. The Information may or may not be
known by the Observer. The Company agrees that First Reserve and the Observer shall have no duty to disclose any Information to the Company or permit the Company to participate in any investments
based on any Information, or to otherwise take advantage of any opportunity that may be of interest to the Company if it were aware of such Information, and hereby waives, to the extent permitted by
law, any claim based on the corporate opportunity doctrine or otherwise that could limit First Reserve's ability to pursue 

10

 

opportunities
based on such Information or that would require First Reserve or the Observer to disclose any such Information to the Company or offer any opportunity relating thereto to the Company.
First Reserve's initial Observer shall be Ben A. Guill. From time to time, First Reserve may, upon written notice to and approval by the Company, appoint a different Observer to replace Mr. Ben
A. Guill. 

        3.2    Election of Directors Designated by the DLJ Parties.    The Parties to this Agreement (and any successor(s) in
interest), shall take or cause to be taken all action within their power, including, but not limited to, the voting of shares of Capital Stock of the Company (to the extent that any such Person holds
shares of Capital Stock of the Company entitled to vote thereon), required to cause the Board of Directors to nominate and elect or appoint as directors four (4) directors designated by the DLJ
Parties on and after the Effective Date or, if on such date or at any time thereafter the aggregate number of directors exceeds six, such number of directors as most closely approximates
two-thirds (2/3) of the aggregate number of directors. 

        3.3    Election of a Director designated by the Southwest Parties.    For as long as the Southwest Parties and their
Affiliates in the aggregate own a percentage interest of the outstanding Common Stock that is equal to or greater than 50% of the percentage interest of the number of outstanding shares of Common
Stock owned by the Southwest Parties immediately following the closing of the 2000 SPA, the Parties to this Agreement (and any successor(s) in interest), shall take or cause to be taken all action
within their power, including, but not limited to, the voting of shares of Capital Stock of the Company (to the extent that any such Person holds shares of Capital Stock of the Company entitled to
vote
thereon), required to cause the Board of Directors to nominate and elect or appoint as a director one (1) director designated by the Southwest Parties. 

        3.4   Election of CEO as Director. The Parties to this Agreement (and any successor(s) in interest), shall take or cause to be
taken all action within their power, including, but not limited to, the voting of shares of Capital Stock of the Company (to the extent that any such Person holds shares of Capital Stock of the
Company entitled to vote thereon), required to cause the Board of Directors to nominate and elect or appoint as a director the chief executive officer of the Company as long as such officer is a party
to an employment agreement with the Company that requires such officer to receive a position on the Company's Board of Directors. In the event the chief executive officer of the Company is not a party
to an employment agreement that entitles such officer to be a director of the Company, the DLJ Parties shall be entitled to designate the director to fill such directorship. 

        3.5    Director Compensation.    Members of the Board of Directors who are non-employees and are not
Affiliates of any of the Parties shall receive compensation for their services as board members as determined by the other members of the Board of Directors. 

        3.6    Repurchase of Stock from Certain Executives.    Each Party hereto shall take all action within its power,
including but not limited to, the voting of shares of Capital Stock of the Company (to the extent that any such Person holds shares of Capital Stock of the Company entitled to vote thereon), required
to approve any resolution submitted to the stockholders of the Company for the approval of payments by the Company to executives, pursuant to employment agreements between such executives and the
Company or any of its subsidiaries, for the repurchase by the Company of shares of Capital Stock of the Company held by such executives. 

        3.7    Stockholders' Preemptive Rights.    If the Company proposes to sell any of its Capital Stock to any Person in a
transaction or transactions, as the case may be, other than (a) pursuant to a Qualified IPO or other public offering of any of its Capital Stock, (b) as consideration for the acquisition
of any other Person, assets or businesses, (c) equity securities offered to employees or directors of, or consultants or advisors to, the Company in accordance with the approval of the Board of
Directors, or (d) any equity securities (including convertible debt or warrants) issued as or in connection with a loan to or debt financing of the Company, each Party shall have the right to
purchase, at the same price per 

11

 

share
and upon substantially similar terms and conditions, up to a number of shares of such Capital Stock sufficient for it to maintain the same percentage ownership of outstanding securities of such
class of Capital Stock of the Company as it owned immediately prior to such issuance. In the event of a proposed transaction or transactions, as the case may be, that would give rise to preemptive
rights of a Party or Parties under this Section 3.7, the Company shall provide notice to such Party or Parties no later than thirty
(30) days prior to the expected consummation of such transaction or transactions. Each Party possessing preemptive rights hereunder shall provide notice of its election to exercise such rights
within ten (10) Business Days after delivery of such notice from the Company. If any Party having a right to purchase shares of the Company's Capital Stock under the preceding sentence shall
elect not to exercise such right, then the other Parties that have elected to exercise their rights with respect hereto shall have the right to purchase additional shares of such Capital Stock from
those upon which such right was not exercised, on a pro rata basis insofar as more than one such Party desires to so purchase additional shares of Capital Stock; provided,
however, that if, in connection with any proposed transaction or transactions giving rise to rights hereunder (including pursuant to a Subsequent Notice as described below),
any shares of Capital Stock remain from those that were available in the Parties pursuant to their rights hereunder, no Party shall have any preemptive rights under this Section and the proposed
transaction or transactions shall be consummated without any exercise of preemptive rights hereunder. In the event of a situation described in the preceding sentence in which a Party elects not to
exercise its preemptive rights with respect to a proposed transaction or transactions, the Company shall provide notice (the "Subsequent Notice") of
such fact within five (5) Business Days following the receipt of all of the notices concerning such elections from the Parties possessing such preemptive rights. Each Party possessing the right
to purchase the additional shares of Capital Stock upon which the preemptive rights were not exercised shall respond to this Subsequent Notice by sending a response notice with respect thereto within
five (5) Business Days after delivery of the Subsequent Notice. Failure of any Party to respond to such Subsequent Notice with a notice stating the election of such Party to purchase such
additional shares of Capital Stock shall be deemed to be an election not to purchase such shares of Capital Stock and the proposed transaction or transactions shall be consummated without any exercise
of preemptive rights hereunder. 

        3.8    Financial Statements.    

        (a)   As
soon as practicable following the end of each fiscal year of the Company (in no event later than one hundred twenty (120) days after the end of such fiscal
year), the Company shall cause its independent accounts to prepare and deliver to the DLJ Parties and the FESCO Stockholder Agent an audited consolidated balance sheet of the Company as of the end of
such fiscal year and the related audited consolidated statement of operations, changes in stockholders' equity and cash flows of the Company for such fiscal year (or similar statements if such
statements change as the result of changes in GAAP), together with the notes related thereto. Such financial statements shall be accompanied by a
report of the Company's independent accountants to the effect that such financial statements have been prepared in conformity with GAAP applied on a basis consistent with prior years (except as
otherwise specified in such report) and that the audit of such financial statements has been performed in accordance with GAAP. 

        (b)   As
soon as practicable following the end of the each fiscal quarter of the Company, including the final fiscal quarter (in no event later than sixty (60) days
after the end of any such fiscal quarter), the Company shall prepare and deliver to the DLJ Parties and the FESCO Stockholder Agent an unaudited consolidated balance sheet of the Company as of the end
of such fiscal quarter and the related unaudited consolidated statement of operations, changes in stockholders' equity and cash flows of the Company for such fiscal quarter and for the fiscal year to
date (or similar statements if such statements change as the result of changes in GAAP), in each case setting forth in comparative form the corresponding figures for the preceding fiscal 

12

 

quarter
and for the fiscal quarter of the prior fiscal year corresponding to the fiscal quarter just completed. 

        (c)   As
soon as practicable following the end of the each month (and in any event not later than thirty (30) days after the end of any such month), the Company shall
prepare and deliver to the DLJ Parties an unaudited consolidated balance sheet of the Company as of the end of such month and the related unaudited consolidated statement of operations and cash flows
of the Company for such month. 

 
 

ARTICLE 4
  
    TRANSFER OF SECURITIES    
    

        4.1    Transfer of Capital Stock.    

        (a)   No
Party may transfer any shares of Capital Stock of the Company prior to December 21, 2007, except as contemplated by Sections
4.2, 4.3, 4.7, 4.8 or  4.9 hereof or
pursuant to an offering of equity securities registered under the Securities Act by the Company. The terms and provisions of this  Article 4 (other than Section 4.9) shall terminate and be of no further force and effect
with respect to Capital Stock owned by any of the Parties at such time as: (i) prior to a Qualified IPO, the percentage ownership of the DLJ Parties, their Affiliates and their Permitted
Transferees, of the outstanding Common Stock of the Company is less than 25% of their percentage ownership of outstanding
Common Stock immediately following the purchase of Common Stock pursuant to both the 2000 SPA and the Commitment Agreement (the "DLJ Initial Position")
or (ii) after a Qualified IPO, (x) with respect to Section 4.9, the closing date of the Qualified IPO, and (y) with respect
to all other Sections under Article 4, the date that the "lock-up" period, as specified in lock-up letters required under  Section 5.12 or otherwise (the "Contractual
Lock-Up Period"), relating to the
Qualified IPO terminates (the "Lock-Up Expiration Date"); provided, however, that if between
the Lock-Up Expiration Date and the one year anniversary of the Qualified IPO the Company files a registration statement for which a Piggyback Registration under  Section 5.2 would be available (a
"Subsequent Registration"), then the terms and provisions of
this Article 4 shall be in effect from date of filing of such registration statement until the expiration of the Contractual Lock-Up Period relating to such Subsequent Registration
(a "Subsequent Restricted Period"); provided, further, that if such Subsequent Registration is filed
pursuant to Rule 415 under the Act, the Subsequent Restricted Period shall only be applicable during any Contractual Lock-Up Period relating to such Subsequent Registration that is
commenced within one year of the date of the Qualified IPO. 

        (b)   In
the event any of the Holders is given the opportunity to participate in a Piggyback Registration or is entitled to a right of Participation Transaction and
(i) such Holder declines to participate in the Piggyback Registration or Participation Transaction and (ii) the sale of securities in the offering related to such declined Piggyback
Registration or Participation Transaction is actually completed, then such Holder may, notwithstanding the provisions of this Article 4(but
subject to its obligations under any lock-up letter to which such Holder is subject pursuant to Section 5.12 or otherwise), transfer
a number of shares equal to the number of shares it would have been able to sell in connection with the applicable Piggyback Registration or Participation Transaction, subject to  Section 4.6 of
this Agreement. 

        (c)   Notwithstanding
the terms of this Section 4.1, after a Qualified IPO, the DLJ Parties, in their sole and absolute
discretion, may permit any of the other Holders to transfer shares of Capital Stock of the Company without the consent of the other Parties hereto. 

13

 

        4.2    Right of Participation.    

        (a)   If
one or more of the DLJ Parties, or any of its Permitted Transferees who have acquired Common Stock without the DLJ Parties making a Participation Offer under this  Section 4.2, proposes to sell
shares of Common Stock for value (any such DLJ Party and any Permitted Transferees being referred to herein as a
"Transferor") in one transaction or a series of related transactions (such transaction, the "Participation
Transaction"), but excluding (i) a sale pursuant to a Qualified IPO or other public offering, and (ii) any sale in which all of the Parties agree to participate,
then such Transferor shall offer (the "Participation Offer") to each stockholder Party to include in the proposed sale a number of shares of Common
Stock designated by any of the Parties, not to exceed, in respect of any such Party, that number of shares of Common Stock determined by application of the following formula: (A) the
number of all shares of Common Stock to be sold by the Transferors in the Participation Transaction multiplied by (B)(i) the number of
outstanding shares of Common Stock held by such Party divided by (ii) the number of outstanding shares of Common Stock held by all Parties. 

        (b)   The
Transferor shall give written notice to each Party of the Participation Offer (the "Transferor's Notice") at least
20 days prior to the proposed sale. The Transferor's Notice shall specify the proposed transferee, the number of shares of Common Stock to be sold to such transferee, the amount and type of
consideration to be received therefor, and the place and date on which the sale is to be consummated. Each Party who wishes to include shares of Common Stock in the proposed sale in accordance with
the terms of this Section 4.2 shall so notify the Transferor not more than 20 days after the date of the Transferor's Notice. The
Participation Offer shall be conditioned upon the Transferor's sale of shares of Common Stock pursuant to the transactions contemplated in the Transferor's Notice with the transferee named therein. If
any Party accepts the Participation Offer, the Transferor shall reduce to the extent necessary the number of shares of Common Stock it otherwise would have sold in the proposed sale so as to permit
other Parties who have accepted the Participation Offer to sell the number of shares of Common Stock that they are entitled to sell under this  Section 4.2, and the Transferor and such other Party
or Parties shall sell the number of shares of Common Stock specified in the Participation
Offer to the proposed transferee in accordance with the terms of such sale set forth in the Transferor's Notice. 

        (c)   For
purposes of this Section 4.2, the number of shares of Common Stock shall be deemed to include the shares of
Common Stock represented by Common Stock Equivalents. Notwithstanding the foregoing, no Common Stock Equivalents shall receive the benefits of this  Section 4.2 prior to the time such Common Stock
Equivalents are exercisable for or convertible or exchangeable into shares of Common Stock and,
in order to obtain the benefits of this Section 4.2, any such Common Stock Equivalents in the form of options, warrants or other securities
convertible or exchangeable into or exercisable for shares of Common Stock must be exercised or canceled prior to or simultaneously with the consummation of the sale pursuant to this  Section 4.2.

        (d)   Following
the consummation of a Qualified IPO, the provisions of Section 4.2 shall not apply to any sales of
shares of Common Stock by a Transferor, in one transaction or a series of related transactions, of less than 10% of all of the then-outstanding shares of Common Stock of the Company. 

14

  

        4.3    Drag-Along Rights.    

        (a)   Notwithstanding
any other provision in this Article 4, if any of the DLJ Parties or their Affiliates (such DLJ
Parties and/or their Affiliates being referred to in this Section 4.3 as the "Seller") propose to
sell shares of Common Stock and Common Stock Equivalents representing 50% or more of all of the Common Stock and Common Stock Equivalents held by the DLJ Parties and their Affiliates (the
"Sale Stock") at such time to a third party or parties that are not an Affiliate of the Seller (collectively, a "Third
Party") pursuant to a Bona Fide Offer, then Seller shall have the right, subject to the provisions of this Section 4.3,
to require all other Parties that are not the Seller (collectively, the "Co-Sellers") to include in such sale (a
"Required Sale") a portion of each such Party's shares of Common Stock and Common Stock Equivalents held by the Co-Sellers (the
"Co-Sellers' Stock"), by delivering notice (the "Required Sale Notice") to such other
Parties. The portion that each such Co-Seller shall be required to include in such sale shall equal the number derived by multiplying (x) the percentage of the Common Stock or
Common Stock Equivalents held by the Seller that it proposes to sell by (y) the number of shares of Common Stock and Common Stock Equivalents held by each such other Party. 

        (b)   The
Required Sale Notice shall set forth: (i) the date of such notice (the "Notice Date"); (ii) the name
and address of the Third Party; (iii) the proposed amount and type of consideration to be paid per share of Common Stock for the Sale Stock (the "Sale
Price"), and a description in reasonable detail of the terms and conditions of payment offered by the Third Party, together with written proposals or agreements, if any, with
respect thereto; (iv) the aggregate number of shares of Sale Stock; and (v) the proposed date of the Required Sale (the "Required Sale
Date"), which shall be not less than 30 nor more than 180 days after the Notice Date. 

        (c)   The
Co-Sellers shall cooperate in good faith with Seller in connection with consummating the Required Sale (including, without limitation, the giving of
consents and the voting of any shares of Common Stock of the Company held by the Co-Sellers to approve such Required Sale). On the Required Sale Date, each of the Co-Sellers
shall deliver, free and clear of all liens, claims or encumbrances, and on the same terms and conditions applicable to the Seller's sale of the Sale Stock, a certificate or certificates and/or other
instrument or instruments for all of its shares of Common Stock and Common Stock Equivalents, duly endorsed and in proper form for transfer, with the signature guaranteed, to such Third Party in the
manner and at the address indicated in the Required Sale Notice and Seller shall cause each Co-Seller's share of the purchase price to be paid to such Co-Seller. 

        (d)   In
the event of any Required Sale, all Co-Sellers that hold Common Stock Equivalents in the form of options, warrants or other securities convertible or
exchangeable into or
exercisable for shares of Common Stock must exercise or cancel all such options, warrants or conversion or other rights prior to or simultaneously with the consummation of the Required Sale. 

        (e)   The
terms, rights and obligations under this Section 4.3 shall terminate and be of no further force and effect on
such date that the number of outstanding shares of Common Stock held by the Parties to this Agreement is less than 30% of the then outstanding shares of Common Stock of the Company. 

        4.4    Prohibited Transfers.    Any purported transfer of shares of Common Stock or Common Stock Equivalents by a
Party that is not permitted by the provisions of Article 4, or which is in violation of such provisions, shall be void and of no force and effect
whatsoever. 

        4.5    Certain Events Not Deemed Transfers.    Except as contemplated by  Section 4.3 hereof, in no event shall any of the
following constitute a transfer of shares of Common Stock for purposes of  Sections 4.1, 4.2 or 4.3 or be
subject to the terms
hereof: (i) an exchange, reclassification or other conversion of shares of Common Stock into any cash, securities or other property pursuant to a 

15

 

merger,
consolidation or recapitalization of the Company or any Subsidiary with, or a sale or transfer by the Company or any Subsidiary of all or substantially all its assets to, any Person; or
(ii) an exercise or conversion of Common Stock Equivalents into shares of Common Stock in accordance with the terms thereof. 

        4.6    Transfers Subject to Compliance with Securities Act and Other Applicable Law.    No shares of Common Stock may
be transferred by a Party (other than pursuant to an effective registration statement under the Securities Act) unless such Party first delivers to the Company an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that such transfer is not required to be registered under the Securities Act and any other applicable law. 

        4.7    Permitted Transferees.    

        (a)   Notwithstanding
anything in this Agreement to the contrary (other than Section 4.6), any of the DLJ Parties or
First Reserve, or any Affiliate of any of the DLJ Parties or First Reserve, or any Permitted Transferee thereof may, without the consent of the Company or any of the Parties and without compliance
with Sections 4.1, 4.2 or 4.3, at any time transfer any
or all of its shares of Common Stock and Common Stock Equivalents to one or more Permitted Transferees, provided that (i) the transfer to such
Person is not in violation of applicable U.S. federal or state securities laws, or other similar laws, and (ii) such Person(s), by accepting such shares of Common Stock or Common Stock
Equivalents, shall be deemed to have agreed to be bound by the terms of this Agreement on the same terms as the transferring Party generally. In the event that any DLJ Party or First Reserve, or any
Affiliate of any of
the DLJ Parties or First Reserve, or any Permitted Transferee thereof transfers any shares of Common Stock or Common Stock Equivalents to any transferee in accordance with the terms of this Agreement,
other than to a Permitted Transferee or any Person that is a Party to this Agreement, such shares of Common Stock or Common Stock Equivalents, as the case may be, shall thereafter be free from the
restrictions set forth in this Agreement and no longer subject thereto and such transferee shall have no rights hereunder, and the definition of Party hereunder shall not include such transferee. 

        (b)   Notwithstanding
anything in this Agreement to the contrary (other than Section 4.6), any Southwest Party or any
Non-Management Holder, respectively, or any Other Permitted Transferees may, without the consent of the Company or any of the Parties and without compliance with  Sections 4.1, 4.2 or 4.3, at any time transfer any or
all of its shares of Common Stock and Common Stock Equivalents to one or more Other Permitted Transferees, provided that (i) the transfer to such Person is not in violation of applicable U.S.
federal or state securities laws, or other similar laws, (ii) such Person(s) shall execute and deliver to the Company a written acknowledgement, in form and substance satisfactory to the
Company, stating that such Person(s) agrees to be bound by the terms of this Agreement (on the same terms as such Southwest Party or such Non-Management Holder, respectively, and
(iii) if any such Other Permitted Transferee shall cease to qualify as an Other Permitted Transferee after such transfer, the Common Stock and Common Stock Equivalents of such Other Permitted
Transferee (A) shall continue to be subject to the terms and conditions of this Agreement and the acceptance of such shares of Common Stock or Common Stock Equivalents by such Person(s) shall
be deemed as agreement to be so bound and (B) shall be deemed to be owned by the Southwest Party or Non-Management Holder, as the case may be, that originally transferred such
shares pursuant to this Section 4.7(b) for the purpose of calculating such Southwest Party's or Non-Management Holder's percentage ownership of Common Stock and/or Common Stock
Equivalents as such calculation may be required under the terms hereof. In the event that any Southwest Party or any Non-Management Holder, respectively, or any Other Permitted Transferee
transfers any shares of Common Stock or Common Stock Equivalents to any transferee in accordance with the terms of this Agreement, other than to an Other Permitted Transferee or any Person that is a
Party to this Agreement, such shares of Common Stock or Common Stock Equivalents, as the case may be, shall thereafter be free from 

16

 

the
restrictions set forth in this Agreement and no longer subject thereto and such transferee shall have no rights hereunder, and the definition of Party hereunder shall not include such transferee. 

        (c)   Notwithstanding
anything in this Agreement to the contrary, upon the death of any Party who is a natural person, the transfer of any or all of such Party's shares of
Common Stock or Common Stock Equivalents to one or more of such Party's legatees, heirs or trustees of a testamentary trust, or to an executor or administrator of the estate of such deceased Party
incident to guardianship or probate proceedings involving such estate shall not require the consent of the Company or any of the Parties and shall not be subject to compliance with  Sections 4.1,
4.2, 4.3 or
4.4 so long as (i) such heir shall have agreed in writing to be bound by the terms of this Agreement and (ii) the transfer to such heir is
not in violation of applicable law. 

        4.8    Management Holder Transfers.    Notwithstanding anything in this Agreement to the contrary, any Management
Holder or Permitted Management Holder Transferee may, without the consent of the Company or any of the Parties and without compliance with Sections 4.1,  4.2 or 4.3, at any time transfer any or all of its shares of Common Stock and Common Stock Equivalents
to one or more Permitted Management Holder Transferees or Management Holders, provided that (i) the transfer to such Person is not in violation of applicable U.S. federal or state securities
laws, or other similar laws, and (ii) such Person(s) shall execute and deliver to the Company a written acknowledgement, in form and substance satisfactory to the Company, stating that such
Person(s) agrees to be bound by the terms of this Agreement (on the same terms as the Management Holder); and further provided that any such Person(s) shall, in any event, be deemed to have so agreed
by accepting such shares of Common Stock and Common Stock Equivalents. In the event that any Management Holder or any Permitted Management Holder Transferee transfers any shares of Common Stock or
Common Stock Equivalents to any transferee, in accordance with the terms of this Agreement, other than a Permitted Management Holder Transferee or any Person that is a Party to this Agreement, such
shares of Common Stock or Common Stock Equivalents, as the case may be, shall thereafter be free from the restrictions set forth in this Agreement and no longer subject thereto and such transferee
shall have no rights hereunder, and the definition of Party hereunder shall not include such transferee. 

        4.9    Management's Shares of Stock.    The provisions of  Section 4.9 shall apply only to Common Stock or Common Stock
Equivalents (including, without limitation, Common Stock acquired pursuant to the
exercise of the EBITDA Contingent Warrant) acquired by Management Holders after December 21, 2000 (the "Post-Closing Management
Stock"), and shall terminate upon the closing of a Qualified IPO. 

        (a)   Optional Purchase of Post-Closing Management Stock. In the event the Company terminates a Management Holder
as an employee of the Company or any Subsidiary for Cause or a Management Holder terminates his employment with the Company or any Subsidiary without Good Reason, then such Management Holder and his
Permitted Management Holder Transferees holding any Post-Closing Management Stock (the "Management Holder Sellers") shall have the
obligation to offer to sell and the Company shall have the right and option, but shall not be required, to purchase all or a portion of the Post-Closing Management Stock of the Management
Holder Sellers at the price and on the terms dictated in Section 4.9(f) and  Section 4.9(g). The Company shall have the period described in
Section 4.9(e) to notify
the Management Holder Sellers of the Company's election to purchase all or a portion of the Post-Closing Management Stock. 

        (b)   Mandatory Purchase of Post-Closing Management Stock. In the event (i) the Company terminates a
Management Holder as an employee of the Company or any Subsidiary other than for Cause, (ii) a Management Holder terminates his employment with the Company or any Subsidiary for Good Reason,
(iii) a Management Holder's employment as an employee of the Company or any Subsidiary terminates as a result of Permanent Disability or Retirement, (iv) if a 

17

 

Management
Holder is not an employee of the Company or any Subsidiary but is a member of the Board of Directors, and such Management Holder ceases to be a member of the Board of Directors, or
(v) a Management Holder dies, then such Management Holder or the legal representative of the Management Holder and his Management Holder Permitted Transferees holding any
Post-Closing Management Stock (again, the "Management Holder Sellers") shall have the obligation to sell and the Company shall have the
obligation to purchase all of the Post-Closing Management Stock held by such Management Holder Sellers at the price and on the terms set forth in  Section 4.9(f) and Section 4.9(g). 

        (c)   Termination of a Management Holder's Marital Relationship. 

        (i)    If,
upon the divorce of a Management Holder, all or any portion of that Management Holder's Post-Closing Management Stock is allocated or set aside
("Allocated Stock") to his spouse ("Divorced Spouse"), such Management Holder and the Company shall have
the right, but shall not be required, to purchase all or a portion of such Allocated Stock pursuant to Section 4.9(c)(iii). However, any such
Post-Closing Management Stock allocated or set aside to a Divorced Spouse who is a registered shareholder prior to such divorce shall not be deemed to be Allocated Stock. 

        (ii)   If
the spouse ("Deceased Spouse") of a Management Holder dies, and it is determined that all or any portion of a
Management Holder's Post-Closing Management Stock or any of the Post-Closing Management Stock held of record by the Deceased Spouse would not vest in such Management Holder
("Non-Vested Stock"), such Management Holder and the Company shall have the right, but shall not be required, to purchase all or a portion
of such Non-Vested Stock pursuant to Section 4.9(c)(iii). 

        (iii)  Upon
the divorce of his spouse and the determination that there is Allocated Stock, a Management Holder shall have, for thirty (30) days following the date of
such determination, the right, but shall not be required, to purchase all or a portion of such Allocated Stock. Upon the death of his spouse and the determination that there is Non-Vested
Stock, a Management Holder shall have, for thirty (30) days following the date of such determination, the right, but shall not be required, to purchase all or a portion of such
Non-Vested Stock. If within such thirty (30) day period such Management Holder does not purchase all of the Allocated Stock or Non-Vested Stock, then such Management
Holder shall notify the Company of its right to purchase all or a portion of the remaining Allocated Stock or Non-Vested Stock pursuant to  Section 4.9(c)(iv). 

        (iv)  The
Company shall have the period described in Section 4.9(e) to notify the Divorced Spouse or the legal
representatives of the Deceased Spouse of the Company's election to purchase all or a portion of the remaining Allocated Stock or Non-Vested Stock. For purposes of  Section 4.9(e), the date on which
the event that gives the Company the right to purchase such Stock occurs will be deemed to be the date the
Company receives notice that a Management Holder has purchased less than all the Allocated Stock or Non-Vested Stock, or in the absence of any notice, thirty (30) days from the
determination that there is Allocated Stock or Non-Vested Stock. 

        (v)   All
purchases of Post-Closing Management Stock made pursuant to this Section 4.9(c) shall be made at a
price determined under Section 4.9(f) and on such terms as determined by Section 4.9(g). 

        (vi)  The
undersigned spouse of each of the Management Holders joins in the execution of this Agreement to evidence her knowledge of its existence and content, to acknowledge
that this Section 4.9 is fair, equitable and in her best interest, and to bind her community interest, if any, and her interest in Allocated
Stock or Non-Vested Stock, if any, and her heirs, 

18

 

beneficiaries,
assigns, executors, administrators, and legal representatives to the covenants, agreements, terms, and conditions contained in this  Section 4.9. 

        (d)   Bankruptcy or Reorganization of Management Holder. In the event a Management Holder or any of his Management Holder
Permitted Transferees holding any Post-Closing Management Stock shall file a voluntary petition in bankruptcy, or shall be adjudged a bankrupt or insolvent, or shall file any
petition or answer seeking for relief under any present or future statute, law, or regulation, or shall file any answer admitting the material allegations of a petition filed against it in any
bankruptcy proceeding, or if a decree or order by a court shall have been entered adjudging such Management Holder or such Management Holder Permitted Transferee to be bankrupt or insolvent under
federal bankruptcy laws or any applicable law of the United States of America or any state law, or appointing a receiver, trustee or assignee in bankruptcy or insolvency of such Management Holder or
such Management Holder Permitted Transferee, or their respective assets, and such decree or order shall have continued undischarged or unstayed for a period of thirty (30) days, the Company
shall have the right, but shall not be required in accordance with the provisions of this Section 4.9(d), to purchase all or a portion of the
Post-Closing Management Stock held by such Management Holder or such Management Holder Permitted Transferee at the price and on the terms set forth in  Section 4.9(f) and Section 4.9(g). The Company shall have the period described in  Section 4.9(e) to notify the Management Holder or the Management Holder Permitted Transferee,
as the case may be, of the Company's election to
purchase all or a portion of the applicable Post-Closing Management Stock. 

        (e)   Procedure for Purchase of Post-Closing Management Stock. Within forty-five (45) days after
the date which is the date the Company receives notice of the
occurrence of an event which gives the Company the right to purchase Post-Closing Management Stock pursuant to Section 4.9, the Chief
Executive Officer of the Company, or in his absence any authorized person, shall call and cause to be held a special meeting of the Board of Directors to determine (i) if the Company has the
option to purchase any portion of such Post-Closing Management Stock, whether the Company desires to purchase any portion or all of such Post-Closing Management Stock, and
(ii) if the Company elects to purchase any portion or all of such Post-Closing Management Stock or is required to purchase any portion or all of such Post-Closing
Management Stock, whether such purchase shall be for cash or on the terms set forth in Section 4.9(g). The Board of Directors shall have forty-five (45) days from the date of
the special meeting to exercise, by written notice, the right of the Company to purchase any or all of such Post-Closing Management Stock. If no written notice is given, or the special
meeting is not held within the prescribed time limits, the Company shall be deemed (a) with respect to the decision whether to exercise the option to purchase any portion of such
Post-Closing Management Stock, to have determined to purchase none of such Post-Closing Management Stock, and (b) with respect to the decision whether to purchase any
portion or all of such Post-Closing Management Stock for cash or on the terms set forth in Section 4.9(g), to have determined to
purchase such portion or all of such Post-Closing Management Stock on the terms set forth in Section 4.9(g). 

        (f)    Price Per Share for Post-Closing Management Stock. Except as otherwise provided in this Section (f),
the price per share at which shares of Post-Closing Management Stock may be purchased pursuant to this Section 4.9 shall be their
Fair Market Value. The price per share at which Post-Closing Management Stock may be purchased pursuant to Section 4.9(a) shall be
the lesser of (i) their Fair Market Value and (ii) the net book value per share of the Company, computed in accordance with United States generally accepted accounting principles
consistently applied, as of the end of the most recent completed fiscal quarter. 

19

 

        (g)   Terms of Purchase of Post-Closing Management Stock by the Company. 

        (i)    Any
purchaser of Post-Closing Management Stock pursuant to this Section 4.9 (the
"Purchaser") may pay the full amount of the purchase price for the Post-Closing Management Stock being purchased in cash at the time of
purchase ("Closing") or, at his or its option, elect to defer a portion of the purchase price. If an election is made to defer payment, no less than
twenty percent (20%) of the purchase price must be paid in cash at the Closing. Any deferred portion of the purchase price shall be evidenced by a promissory note ("Promissory
Note") of the Purchaser. 

        (ii)   The
Promissory Note shall bear interest at a fixed rate equal to the prime rate in effect by JP Morgan Chase Bank, N.A. on the date of the Closing, may be prepaid at
any time without penalty (any principal prepayment shall be applied against the next maturing installment of principal), shall provide for acceleration upon default, penalty interest, notice and
opportunity to cure upon default, and such other standard and customary terms as the parties may agree. Except during any period in which the
payments due under the Promissory Note are tolled pursuant to Section 4.9(g)(v), the Promissory Note shall require equal annual payments of
principal plus accrued interest over a term of four (4) years. The first such payment shall be due on the first anniversary of the Closing, and subsequent payments shall be due consecutively on
the subsequent anniversaries of such date until the fourth anniversary date at which time the unpaid balance of the Promissory Note plus accrued interest shall be due and payable. 

        (iii)  The
payment of the Promissory Note shall be secured at any time and from time to time by that number of shares of Post-Closing Management Stock which
equals one hundred ten percent (110%) of the value of the unpaid principal amount remaining under the Promissory Note at such time. For purposes of this  Section 4.9(g)(iii), the value of the shares
of Post-Closing Management Stock held as security for the payment of the Promissory Note
shall be determined in accordance with the provisions of Section 4.9(f). At any time and from time to time, the Purchaser shall be entitled to a
release of collateral to the extent that the value of the Post-Closing Management Stock held by the holder of the Promissory Note exceeds the unpaid principal amount remaining under the
Promissory Note by more than twenty-five percent (25%). Upon request by the Purchaser for such release, the holder of the Promissory Note shall exchange the stock certificate held as
collateral for a new stock certificate which reflects the release of shares pursuant to this provision. In addition to the release of collateral described above, the Purchaser shall have the right, at
any time and from time to time, to substitute certificates of deposit issued by any state or national bank as security for the Purchaser's obligations. The shares of Post-Closing
Management Stock shall be released in such amount so that the sum of the face value of the certificate of deposit and one hundred ten percent (110%) of the value of the shares of
Post-Closing Management Stock retained by the holder of the Promissory Note (calculated in accordance with the provisions of  Section 4.9(f)) equals the unpaid principal amount remaining under the
Promissory Note. So long as the Purchaser is not in default under the
Promissory Note, the Purchaser shall be entitled to receive all interest paid on such substituted collateral. 

        (iv)  Notwithstanding
any provision herein to the contrary, the Company shall only be required to purchase Post-Closing Management Stock pursuant to this  Section 4.9 to the extent permitted by law. 

        (v)   Any
Promissory Note issued by the Company pursuant to this Section 4.9 shall provide that it is payable only out
of "surplus" (as described in §154 of the Delaware General Corporation Law), and shall further provide that, in the event the Company shall not, at the time set for any payment, have
available an adequate surplus from which to make such 

20

 

payment,
or any portion thereof, the Company shall not make such payment, or such portion thereof, as the case may be, and the date for payment, or such portion thereof, shall be tolled, with interest
accruing thereon until such surplus is available. The provisions of this Agreement regarding the Company's issuance and payment of Promissory Notes only from surplus shall not be construed to impose
on the Company any obligation to create or generate any surplus of any type whatsoever. However, each year the Company shall not declare any cash or stock dividend or voluntarily cause any other
charge to be made against surplus if the result thereof would be to cause surplus to fall below the level needed to make any payment(s) on a Promissory Note(s) which is payable during such year period
or whose payment has been and is, at the time of such dividend or charge, tolled pursuant to this Section 4.9(g)(v). 

        (vi)  In
the event the payment of any installment on any Promissory Note is tolled for a period of more than twelve (12) months, such Promissory Note shall be in
default, and the holder of such Promissory Note may declare the principal and all interest accrued thereon to be due and payable and may foreclose on any shares of Post-Closing Management
Stock or other collateral which shall be the security therefor. 

        (h)   Closing of Purchases. The Closing of the purchase of Post-Closing Management Stock pursuant to this  Section 4.9 shall take place within forty-five (45) days
from the date the procedures set forth in  Section 4.9 are complied with, at the time and place chosen by the Company, which shall be reasonably convenient to all parties.
 

        (i)    Termination of Rights to Sell and Obligations to Purchase. Notwithstanding any other provision contained in this
Agreement, the rights and obligations to sell or purchase Post-Closing Management Stock set forth in this Section 4.9 shall terminate
upon the later to occur of the Lock-Up Expiration Date or the date that is the expiration of the Subsequent Restricted Period. 

        (j)    Insurance. At its discretion, the Company may purchase insurance coverage on the life of a Management Holder to ensure
adequate surplus or funds to purchase the applicable Management Holder Sellers' Post-Closing Management Stock under this Section 4.9.
If it obtains this coverage, the Company is obligated to use any insurance proceeds to purchase the maximum number of shares possible. After purchasing all of the Post-Closing Management
Stock of the applicable Management Holder Sellers, the Company shall retain any excess insurance proceeds. Each Management Holder agrees to use his best effort to assist the Company in obtaining
insurance coverage. 

 
 

ARTICLE 5    
    
    REGISTRATION RIGHTS;
  PIGGYBACK REGISTRATION    
    

        5.1    Demand Registration Rights.    

        (a)   At
any time after a date that is the earlier to occur of either (i) December 21, 2008 or (ii) after a Qualified IPO (the
"Demand Period"), the DLJ Parties may, on up to three (3) occasions, make a written request of the Company (a "Demand
Request") for registration under the Securities Act (a "Demand Registration") of Registrable Securities held by the DLJ Parties,
provided that such Registrable Securities shall have proposed offering proceeds for such offering that equals or exceeds US $10 million (or US $5 million in the event the Company is able
to register such Registrable Securities on Form S-3). The Southwest Parties, collectively, and the FESCO Parties (acting through the FESCO Stockholder Agent), collectively, may each
make one (1) such Demand Request for a Demand Registration, provided (i) they meet the threshold valuations for the offering proceeds as set forth in the foregoing sentence,
(ii) the Demand Period has commenced and (iii) the DLJ Parties' percentage ownership of outstanding Common Stock of 

21

 

the
Company is less than 25% of their percentage ownership of outstanding Common Stock immediately following the closing of the 2000 SPA. 

        (b)   The
Company may defer the filing (but not the preparation) of a registration statement required by this Section until a date not later than 60 days after the
Required Filing Date (as defined below) if (i) at the time the Company receives the Demand Request, the Company or its Subsidiaries are engaged in confidential negotiations, other confidential
business activities or is otherwise in possession of material non-public information, disclosure of which would be required in such registration statement (but would not be required if
such registration statement were not filed), and the Board of Directors of the Company determines in good faith that such disclosure would be materially detrimental to the Company and its
stockholders, (ii) an investment banking firm advises the Company that effecting such registration would materially and adversely affect an offering of securities of the Company, or
(iii) prior to receiving the Demand Request, the Board of Directors had determined to effect a registered underwritten public offering of the Company's equity securities for the Company's
account and the Company had taken substantial steps (including, but not limited to, selecting (subject to the terms of this Agreement) and entering into a letter of intent with the managing
Underwriter for such offering) and is proceeding with reasonable diligence to effect such offering. A deferral of the
filing of a registration statement pursuant to this subsection (b) shall be lifted, and the requested registration statement shall be filed forthwith, if: in the case of a deferral pursuant to
clause (i) of the preceding sentence, the negotiations or other activities are disclosed or terminated; in the case of a deferral pursuant to clause (ii) of the preceding sentence, such
investment banking firm advises the Company that effecting such registration would no longer materially and adversely affect an offering of securities of the Company; or, in the case of a deferral
pursuant to clause (iii) of the preceding sentence, the proposed registration for the Company's account is abandoned. In order to defer the filing of a registration statement pursuant to this
subsection (b), the Company shall promptly, upon determining to seek such deferral, deliver to a requesting holder a certificate signed by the President or CEO of the Company stating that the Company
is deferring such filing pursuant to this subsection (b) and the basis therefor in reasonable detail. Within twenty (20) days after receiving such certificate, the requesting holder for
which registration was previously requested may withdraw such request by giving notice to the Company; if withdrawn, the Demand Request shall be deemed not to have been made for all purposes of this
Agreement. Notwithstanding the foregoing, the Company may not defer the filing a registration statement pursuant to this subsection (b) more than twice every 12 months. 

        (c)   Each
Demand Request shall specify the number of shares of Registrable Securities proposed to be sold. Subject to subsection (b) of this  Section 5.1, the Company shall use its commercially
reasonable efforts to file the Demand Registration within 60 days after receiving a
Demand Request (the "Required Filing Date") and shall use all commercially reasonable efforts to cause the same to be declared effective by the SEC as
promptly as practicable after such filing, provided that the Company need effect only one Demand Registration at any time in accordance with this Section. The Company shall pay all of its fees, costs
and expenses, other than underwriting discounts and commissions, related to any such Demand Registration; provided, however, if the Demand Registration is subsequently withdrawn by the Party or
Parties initiating the Demand Registration, the Party or Parties may decide either (i) to pay pro rata any expenses of such registration and retain their rights to such Demand Registration or
(ii) to elect to have the Company bear such expenses (in which event such Demand Registration shall count as one of such Party's demands for Demand Registration). 

        (d)   Notwithstanding
anything to the contrary contained in this Agreement, the Company shall not be required to register any Person's Registrable Securities pursuant to a
Demand Registration 

22

 

unless
such Person accepts the terms of the underwriting agreement between the Company and the Underwriter. 

        5.2    Notice; Piggyback Registration.    Subject to the provisions of this Agreement, if the Company proposes to
file a registration statement under the Securities Act with respect to an offering of any equity securities by the Company for its own account or for the account of any of its equity holders,
including a registration statement filed pursuant to Section 5.1, (other than a registration statement on Form S-4 or
Form S-8 (or such corresponding forms adopted by the SEC for use by foreign issuers), or any substitute form that may be adopted by the SEC, or any registration statement filed in
connection with an exchange offer or offering of securities solely to the Company's existing security holders), then the Company shall give written notice of such proposed filing to the Parties as
soon as practicable (but in no event less than 30 days before the anticipated effective date of
such registration statement), and such notice shall offer each such Person the opportunity to register the Applicable Percentage of the Registrable Securities held by each such Person (a
"Piggyback Registration"). Subject to the limitations in the preceding sentence based on the Applicable Percentage for each such Person and  Sections 5.3, 5.4, 5.5,
5.6 and 5.7 hereof, the Company shall include in each such Piggyback Registration all Registrable
Securities requested to be included in the registration for such offering. Each such holder of Registrable Securities shall be permitted to withdraw all or part of such holder's Registrable Securities
from a Piggyback Registration at any time prior to the effective date thereof. 

        5.3    Obligations of the Company.    Whenever required under this  Section 5 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible: 

        (a)   Prepare
and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration
statement to be declared effective, and keep such registration statement effective for up to 120 days; provided, however, that if Holders of
Registrable Securities holding shares having an aggregate value in excess of $10 million request that such registration statement be filed on Form S-3 under Rule 415
on a continuous basis and such filing is permitted under applicable SEC rules, the Company shall keep such registration statement effective until all such Registrable Securities are sold thereunder
and/or cease to be Registrable Securities, or for two years if earlier, provided that the aggregate value of shares registered under such registration statement also exceeds $10 million. 

        (b)   Prepare
and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for up to 120 days, or such longer
period in connection with a Rule 415 offering described in Section 5.3(a) above. 

        (c)   Furnish
to the Parties such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. 

        (d)   Use
its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or "blue sky" laws of such
jurisdictions in the United States as shall be reasonably requested by the Parties, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 

        (e)   In
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. 

23

 

        (f)    Notify
each Party covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, such obligation to continue for 120 days, or such
longer period in connection with a Rule 415 offering described in Section 5.3(a) above. 

        (g)   Use
its reasonable efforts to cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which the same securities
issued by the Company are then listed. 

        (h)   Provide
a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case not
later than the effective date of such registration. 

        (i)    Use
its reasonable efforts to furnish, at the request of any Party requesting registration of Registrable Securities pursuant to this  Article 5, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration pursuant to
this Article 5, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the
date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Party or Parties requesting
registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Parties requesting registration of Registrable
Securities. 

        5.4    Indemnification.    In the event any Registrable Securities are included in a registration statement under this  Section 5: 

        (a)   To
the extent permitted by law, the Company will indemnify and hold harmless each Party, each of its officers, directors, partners, legal counsel, accountants, and any
underwriter (as defined in the Securities Act) for such Party and each person, if any, who controls such Party or underwriter within the meaning of the Securities Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay
to each such Party, each of its officers, directors, partners, legal counsel, accountants, and any underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 5.4(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement 

24

 

is
effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Party, each of its officers, directors, partners, legal
counsel, accountants, and any underwriter or controlling person for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Party, underwriter or controlling person. 

        (b)   To
the extent permitted by law, each selling Party will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, legal counsel for the Company, accountants for the Company, any underwriter, any other
Party selling securities in such registration statement and any controlling person of any such underwriter or other Party, against any losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written
information furnished by such Party expressly for use in connection with such registration; and each such Party will pay, as incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section 5.4(b), in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained in this  Section 5.4(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Party, which consent shall not be unreasonably withheld; provided, that in no event shall any indemnity under this  Section 5.4(b) exceed the net proceeds from the offering received by such Party, except in the case of willful fraud by such Party. 

        (c)   Promptly
after receipt by an indemnified party under this Section 5.4 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this  Section 5.4, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to
the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under this Section 5.4, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5.4. 

        (d)   If
the indemnification provided for in this Section 5.4 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in 

25

 

such
loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution
by a Party under this Section 5.4(d) exceed the net proceeds from the offering received by such Party, except in the case of willful fraud by
such Party. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission. 

        (e)   Notwithstanding
the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control with respect to the Company and the Parties. 

        (f)    The
obligations of the Company and Parties under this Section 5.4 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Article 5, and otherwise. 

        5.5    Reports Under Securities Exchange Act of 1934.    With a view to making available to the Parties the benefits
of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Party to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to: 

        (a)   make
and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after 90 days after the effective date
of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company remains subject to the periodic reporting requirements under
Sections 13 or 15(d) of the Exchange Act; 

        (b)   take
such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Parties, if
requested pursuant to a Demand Registration, to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the
fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; 

        (c)   file
with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and 

        (d)   furnish
to any Party, so long as the Party owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied
with the reporting requirements of SEC Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at
any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Party of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such
form. 

        5.6    No Assignment of Demand Rights.    The rights to cause the Company to register Registrable Securities pursuant
to Section 5.1 may not be assigned to third parties, including Permitted Transferees or Other Permitted Transferees. 

26

 

        5.7    Limitations on Subsequent Registration Rights.    From and after the date of this Agreement, the Company shall
not enter into any agreement with any holder or prospective holder of any securities of
the Company which would grant such holder or prospective holder registration rights that are more favorable than the registration rights of the Parties. 

        5.8    Selection of Underwriters.    The Board of Directors shall have the right to designate, in their sole and
absolute discretion, the book-running managing Underwriter (the "Managing Underwriter") with respect to any Piggyback Registration or Demand
Registration, or with respect to any other underwritten public offering of Registrable Securities or other securities of the Company and shall select such additional Underwriters to be used in
connection with the offering, if any. The Board of Directors shall also have the right to select one or more co-managers for each such offering if the Board of Directors, in their sole
discretion, shall determine that any be necessary, and the underwriting fees related to any such offering shall be allocated among any such co-managers in such proportions as the Board of
Directors shall determine. In the event of any such offering, the Managing Underwriter, the Company and any Selling Stockholders will enter into an agreement appropriate to the circumstances,
containing provisions for, among other things, compensation, indemnification, contribution, and representations and warranties, which are usual and customary for similar agreements entered into by the
Managing Underwriter or other investment bankers of national standing acting in similar transactions. 

        5.9    Underwriters' Cut-Backs.    The Company shall use all commercially reasonable efforts to cause the
Managing Underwriter or any other managing Underwriter of a proposed underwritten offering (including an offering pursuant to a Demand Registration), as the case may be, to permit the Registrable
Securities requested to be included in the registration statement for such offering under Section 5.2 or pursuant to other piggyback registration
rights, if any, granted by the Company ("Piggyback Securities") to be included on the same terms and conditions as any similar securities included
therein. Notwithstanding the foregoing, the Company shall not be required to include any Party's Piggyback Securities in such offering unless such Party accepts the terms of the underwriting agreement
between the Company and the Managing Underwriter (or other managing Underwriter) or Underwriters, and otherwise complies with the provisions of  Section 5.10 below. If the managing Underwriter or
Underwriters of a proposed underwritten offering advise the Company in writing that in its or
their opinion the total amount of securities, including Piggyback Securities, to be included in such offering is sufficiently large to potentially impede or interfere with the offering, then in such
event the securities to be included in such offering shall be allocated first to the Company and then, to the extent that any additional securities can, in the opinion of such managing Underwriter or
Underwriters, be sold without any such potential to impede or interfere with the offering, pro rata among the holders of Registrable Securities on the basis of the number of Registrable Securities
requested to be included in such registration by each such holder. In addition, if the Managing Underwriter or Underwriters of a proposed underwritten offering advise the Company in writing that in
its or their opinion the total amount of Piggyback Securities of the Management Holders to be included in such offering is, as a result of such Management Holders' positions as employees and officers
of the Company, sufficiently large to potentially impede or interfere with the offering, then the amount of Piggyback Securities of such Management Holders to be included in such offering shall be
reduced to an amount, and allocated in a manner, that, in the opinion of the Management Underwriter or Underwriters, will not so impede or interfere with the offering. 

        5.10    Participation.    No Party may participate in any underwritten registration under this  Article 5 unless such Party
(i) agrees to sell such Party's Registrable Securities on the basis provided in any underwriting arrangements
approved by the Person entitled hereunder to approve such arrangements, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements and this Agreement and (iii) if requested by another Person participating in such underwritten registration, 

27

 

agrees
that all securities convertible or exchangeable into shares of Common Stock that are included in such underwritten registration shall be so converted or exchanged on or prior to the
consummation thereof. 

        5.11    Termination or Postponement by the Company.    Notwithstanding anything herein to the contrary except in the
case of a Demand Registration, at any time prior to the effectiveness of any registration statement filed pursuant hereto, the Company shall have the right, in its sole and absolute discretion, not to
proceed with the registration of any securities pursuant to such registration statement and, in the event that the Company exercises such right, no holder of Registrable Securities shall have any
right to require the Company to register any such Registrable Securities except in accordance with the express provisions of this Agreement. In the case of a registration statement filed pursuant
Section 5.1, at any time after the filing of such registration statement but prior to the effectiveness thereof, the Company shall have the right to postpone requesting that the SEC declare
such registration statement effective: 

        (a)   for
the Contractual Lock-up Period relating to any underwritten public offering of Company securities or any private placement of Company securities made
pursuant to Rule 144A; and 

        (b)   for
a period of up to 90 days if the Company is engaged in confidential negotiations, other confidential business activities or is otherwise in possession of
material non-public information, disclosure of which would be required in such registration statement (but would not be required if such registration were not filed), and the Board of
Directors of the Company determines in good faith that such disclosure would be materially detrimental to the Company and its stockholders; 

provided, however, that the Company may not postpone requesting the effectiveness of a registration statement filed pursuant to Section 5.1
pursuant to this Section 5.11 more than twice every 12 months. The Company may only terminate a Demand Registration and withdraw a registration statement filed pursuant to
Section 5.1 with the consent of the Party submitting the Demand Request relating thereto or upon receipt of a request for such withdrawal from the SEC. 

        5.12    Lock-Up Letters.    Each holder of Registrable Securities (whether or not such Registrable
Securities are included in a registration statement pursuant hereto) agrees to execute a written agreement not to effect any public sale or distribution of the issue being registered or of any
securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant
to Rule 144 under the Securities Act, during the 14 days prior to, and during the 180-day period (or shorter period permitted by the Managing Underwriter, if applicable)
beginning on, the effective date of a registration statement filed pursuant hereto except as part of such registration if and to the extent requested by the Company, in the case of a
non-underwritten public offering, or if and to the extent requested by the Managing Underwriter or managing Underwriter or Underwriters, as the case may be, in the case of an underwritten
public offering. 

 
 

ARTICLE 6
  
    REGISTRATION PROCEDURES    
    

        6.1    Procedures.    

        (a)   The
Company may require each Selling Holder to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as it
may from time to time reasonably request and such other information as may be legally required in connection with any registration. Notwithstanding anything herein to the contrary, the Company 

28

 

shall
have the right to exclude from any offering the Registrable Securities of any Selling Holder who does not comply with the provisions of the immediately preceding sentence. 

        (b)   Each
Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event that makes any statement made in a registration statement or
related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect, or that requires the making of any changes in such registration
statement, prospectus or documents so that, in the case of the registration statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (A) such Selling Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder's receipt of the copies of a
supplemented or amended prospectus contemplated by the description in this sentence and (B) if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than
permanent file copies, then in such Selling Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company
shall give such notice, the Company shall extend the period during which such registration
statement shall be maintained effective by the number of days during the period from and including the date of the giving of notice pursuant to this sentence to the date when the Company shall make
available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of this sentence. 

        6.2    Registration Expenses.    In connection with any registration statement required to be filed hereunder, the
Company shall pay the following registration expenses (the "Registration Expenses"): (i) all registration and filing fees (including, without
limitation, with respect to filings to be made with the National Association of Securities Dealers, Inc.), (ii) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses of the
Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the
listing on a securities exchange or inter-dealer or similar quotation system of the Registrable Securities if the Company shall choose to list such Registrable Securities, (vi) fees and
disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company, (vii) the reasonable fees and expenses of one
counsel for the Selling Holders (collectively), (viii) the fees and expenses of any special experts retained by the Company in connection with such registration, and (ix) fees and
expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to Rule 2720(c) of the National Association of Securities
Dealers, Inc. The Company shall not have any obligation to pay any underwriting fees, discounts, or commissions attributable to the sale of Registrable Securities or, except as provided by
clause (ii) or (vii) above, any out-of-pocket expenses of the Selling Holders (or the agents who manage their accounts). 

        6.3    Suspension Periods.    In the event the Company has filed a registration statement that has been declared
effective by the SEC (including a registration statement on Form S-3 under Rule 415 that provides for periodic resales by a Selling Holder), the Company may provide notice to
the Parties hereto that the Company has elected to require the suspension of the sale by the Parties of Registrable 

29

 

Securities
(including securities registered under any such effective registration statement) (a "Suspension Period"): 

        (a)   for
the Contractual Lock-up Period relating to any underwritten public offering of Company securities or any private placement of Company securities made
pursuant to Rule 144A; and 

        (b)   for
a period of up to 90 days if the Company is engaged in confidential negotiations, other confidential business activities or is otherwise in possession of
material non-public information, disclosure of which would be required in such registration statement (but would not be required if such registration were not filed), and the Board of
Directors of the Company determines in good faith that such disclosure would be materially detrimental to the Company and its stockholders; 

provided, however, that the Company may not cause a Suspension Period to occur more than twice every 12 months. 

 
 

ARTICLE 7
  
    TERMINATION    
    

        7.1    Termination.    This Agreement shall terminate upon the earlier of (i) the dissolution, liquidation or
winding-up of the Company or (ii) December 21, 2010. A Person who ceases to hold any shares of Common Stock or Common Stock Equivalents and who ceases to beneficially own any
shares of Common Stock or Common Stock Equivalents shall cease to be a Party and shall have no further rights or obligations under this Agreement. 

 
 

ARTICLE 8
  
    MISCELLANEOUS    
    

        8.1    FESCO Stockholder Agent.    Each of the FESCO Parties hereby irrevocably appoints First Reserve Corporation to
be the representative (the "FESCO Stockholder Agent") of the FESCO Parties following the Closing Date in any matter arising out of this Agreement. For
any matter in which The Company is entitled to rely on or otherwise deal with the FESCO Parties, The Company shall be entitled to communicate solely with the FESCO Stockholder Agent and shall be
entitled to rely on any such communications as being the desire and will of the FESCO Parties. Notice delivered to the FESCO Stockholder Agent in accordance with  Section 8.7 hereof shall be deemed
notice to all of the FESCO Parties. For purposes of this Agreement, each FESCO Party, without any further
action on its part, shall be deemed to have consented to the appointment of First Reserve Corporation as the attorney-in-fact for and on behalf of each such FESCO Party, and
the taking by the FESCO Stockholder Agent of any and all actions and the making of any decisions required or permitted to be taken by him under this Agreement. Accordingly, the FESCO Stockholder Agent
has unlimited authority and power to act on behalf of each FESCO Party with respect to this Agreement and the disposition, settlement or other handling of all indemnification claims, amendments,
waivers, and other rights or obligations arising from and taken pursuant to this Agreement. The FESCO Parties will be bound by all actions taken by the FESCO Stockholder Agent in connection with this
Agreement, and the Company shall be entitled to rely on any action or decision of the FESCO Stockholder Agent. The FESCO Stockholder Agent will not incur any liability with respect to any action taken
or suffered by it in reliance upon any notice, direction, instruction, consent, statement or other document believed by it to be genuine and to have been signed by the proper person (and shall have no
responsibility to determine the authenticity thereof), nor for any other action or inaction, except its own willful misconduct, bad faith or gross negligence. In all questions arising under this
Agreement, the FESCO 

30

 

Stockholder
Agent may rely on the advice of counsel, and the FESCO Stockholder Agent will not be liable to the FESCO Parties for anything done, omitted or suffered in good faith by the FESCO
Stockholder Agent based on such advice. Notwithstanding the foregoing, none of the other Parties hereto will incur any liability to any FESCO Party with respect to any action taken or suffered by it
in reliance upon any notice, direction, instruction, consent, statement, in each case whether written or oral, or other document provided by the FESCO Stockholder Agent, and no action or inaction on
the part to FESCO Stockholder Agent shall relieve any FESCO Party of its obligations hereunder to the other Parties hereto. 

        8.2    Amendment.    Any provision of this Agreement may be altered, supplemented, amended or waived only by the
written consent of each of (i) the Company (ii) the DLJ Parties and (iii) a majority of the outstanding shares of Common Stock owned by all Holders (including the DLJ Parties),
except that (i) any Party may unilaterally waive any of its rights hereunder so long as such waiver is in writing and (ii) any provision of this Agreement may be altered, supplemented,
amended or waived without the consent of the Management Holders unless such alteration, supplementation or amendment materially and adversely affects the rights set forth herein of the Management
Holders differently from the manner in which such alteration, supplementation or amendment affects the rights hereunder of the other Parties. Notwithstanding the foregoing, no provision of this
Agreement may be altered, supplemented, or waived in a manner adversely affecting the rights of any FESCO Party set forth herein, without the consent of such Party. 

        8.3    Specific Performance.    The Parties and the Company recognize that the obligations imposed on them in this
Agreement are special, unique, and of extraordinary character, and that in the event of breach by any party, damages will be an insufficient remedy; consequently, it is agreed that the Parties and the
Company may have specific performance and injunctive relief (in addition to damages) as a remedy for the enforcement hereof, without proving damages. 

        8.4    Assignment.    Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and assigns of the Parties and the Company. No such assignment shall relieve the assignor from any liability hereunder. Any
purported assignment made in violation of this Section 8.4 shall be void and of no force and effect. 

        8.5    Stock Subject to this Agreement.    All shares of Common Stock and Common Stock Equivalents now owned or
hereafter acquired by any of the Parties shall be subject to, and entitled to the benefits of, the terms of this Agreement. The Company shall cause any transferee or recipient of an original issuance
of any shares of Common Stock or Common Stock Equivalents, other than such transferee or recipient in a Qualified IPO or any other public offering, to become a Party and be bound as if an original
Party hereto. 

        8.6    Legends.    

        (a)   Each
certificate for shares of Common Stock and Common Stock Equivalents held by any Person a party hereto shall bear (i) a legend to the effect that such shares
have not been registered under the Securities Act or any state securities laws and (ii) a legend in substantially the following form: 

THIS
SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS, RESTRICTIONS ON TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THE SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, DATED AS OF APRIL
2, 2004, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES. 

31

 

        (b)   The
restrictions on transfer of shares of Common Stock set forth in such legends (each, a "Restriction") shall cease and
terminate as to any particular share of Common Stock when, in the opinion of counsel to a Holder, which opinion and counsel are reasonably satisfactory to the Company and which opinion shall be
delivered to the Company in writing, either or both of such Restrictions are no longer required. Whenever any such Restriction shall cease and terminate as to any share of Common Stock, the holder
thereof shall be entitled to receive from the Company, without expense to
such older, new certificate(s) not bearing a legend or legends, as the case may be, stating such Restriction(s). 

        8.7    Notices.    Any and all notices, designations, consents, offers, acceptances or other communications provided
for herein (each a "Notice") shall be given in writing by (i) reputable overnight courier, (ii) registered letter or (iii) telecopy
with receipt confirmed, which shall be addressed or sent to the respective addresses as follows (or such other address as the Company or any Party may specify to the Company and all other Parties by
Notice): 

The Company:

Basic
Energy Services, Inc.

400 W. Illinois, Suite 800

Midland, TX 79701

Phone: (432) 620-5500

Fax: (318) 570-0437 

with
a copy to: 

Andrews
Kurth LLP

600 Travis, Suite 4200

Houston, Texas 77002

Attention: David C. Buck

Phone: (713) 220-4200

Fax: (713) 220-4285 

DLJ Parties:

DLJMB
Funding III, Inc.

c/o Credit Suisse First Boston 

Eleven Madison Avenue, 16th Floor

New York, New York 10010

Attn: Ben Silbert

Fax: (917) 326-8076 

DLJMB
Funding III, Inc.

c/o Global Energy Partners

1000 Louisiana, Suite 4600

Houston, Texas 77002

Attn: Steve Webster

Fax: (713) 890-1500 

with
a copy to: 

Steven
D. Rubin, Esq.

Weil, Gotshal & Manges LLP

700 Louisiana, Suite 1600

Houston, Texas 77002

(713) 546-5000

Fax: (713) 224-9511 

32

 

First Reserve Fund VIII, LP: 

First
Reserve Fund VIII, L.P.

One Lafayette Place

Greenwich, Connecticut 06830

Attention: Thomas R. Denison

Phone: (203) 661-6601

Facsimile: (203) 661-6729 

with
a copy to: 

Gibson,
Dunn & Crutcher LLP

1801 California, Suite 4100

Denver, Colorado 80202

Attention: Steven K. Talley

Phone: (303) 298-5700

Facsimile: (303) 296-5310 

Southwest Royalties Holdings, Inc.:

Southwest
Royalties Holdings, Inc.

406 North Big Spring

Midland, Texas 79701

Attention: President 

Southwest Partners II, L.P.:

Southwest
Partners II, L.P.

406 North Big Spring

Midland, Texas 79701

Attention: General Partner 

Southwest Partners III, L.P.:

Southwest
Partners III, L.P.

406 North Big Spring

Midland, Texas 79701

Attention: General Partner 

All Other Stockholders

At
the address set forth immediately below their respective signatures on the signature pages hereto. 

All
Notices shall be deemed effective and received (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified above and receipt thereof is confirmed;
(ii) if given by overnight courier, on the business day immediately following the day on which such Notice is delivered to a reputable overnight courier service; or (iii) if given in
person or by registered letter, when such Notice is delivered at the address specified above. No Party shall be entitled to receive a Notice hereunder (or a copy of a Notice delivered to the Company)
if, at the time such Notice is to be sent, such Party (including its Affiliates and the employees of such Party and its Affiliates) no longer owns any shares of Common Stock. 

        8.8    Confidentiality.    

        (a)   The
Parties shall, and shall cause their respective officers, directors, employees and agents and the respective subsidiaries and Affiliates of the Parties and their
respective officers, directors, employees and agents to, hold confidential and not use in any manner detrimental to the Company 

33

 

or
any of its Subsidiaries all information they may have or obtain concerning the Company or any of its Subsidiaries and their respective assets, business, operations or prospects
("Confidential Information"); provided, however, that the foregoing shall not apply to
(i) information that is or becomes generally available to the public other than as a result of a disclosure by a Party or any of its employees, agents, accountants, legal counsel or other
representatives, (ii) information that is or becomes available to a Party or any of its employees, agents, accountants, legal counsel or other representatives on a nonconfidential basis prior
to its disclosure by the Company or its employees, agents, accountants, legal counsel or other representatives, and (iii) information that is required to be disclosed by a Party or any of its
employees, agents, accountants, legal counsel or other representatives as a result of any applicable law, rule or regulation of any governmental authority or stock exchange. If any Party desires to
sell shares of Common Stock and in connection with such potential sale desires to disclose information regarding the Company to the potential purchaser in such sale which it is not permitted to
disclose pursuant to the preceding sentence, such Party shall notify the Company of such Party's desire to disclose such information and shall identify the potential purchaser in such notification.
The Company may require any such potential purchaser of shares of Common Stock to enter into a confidentiality agreement with respect to Confidential information on customary terms used in
confidentiality agreements in connection with corporate acquisitions. 

        (b)   Notwithstanding
anything to the contrary set forth herein or in any other agreement to which the Parties hereto are Parties or by which they are bound, the obligations
of confidentiality contained herein and therein (the "Confidentiality Obligations"), as they relate to the transactions contemplated by the Merger
Agreement, dated as of January 7, 2003 (the "Merger Agreement"), by and among Basic, the Company and BES Merger Sub, Inc., a Delaware
corporation, and the Agreement and Plan of Conversion, dated as of January 7, 2003 (the "Conversion Agreement"), by and among Basic, the Company,
Basic Energy Services GP, LLC and Basic Energy Services LP, LLC, shall not apply to the "structure or tax aspects" (as such phrase is used in Section 1.6011-4T(a)(3) (or any
successor provision) of the Treasury Regulations (the "Confidentiality Regulations") promulgated under
Section 6011 of the Internal Revenue Code of 1986, as amended) of the transactions contemplated by the Merger Agreement and the Conversion Agreement; provided,
however, that the Confidentiality Regulations nevertheless shall apply to any and all items of information not required to be freely disclosable in order for the transactions
contemplated by the Merger Agreement and the Conversion Agreement not to be treated as "offered under conditions of confidentiality" within the meaning of the Confidentiality Regulations. 

        8.9    Counterparts.    This Agreement may be executed in two or more counterparts and each counterpart shall be
deemed to be an original and all such counterparts together shall constitute one and the same agreement of the parties hereto. 

        8.10    Section Headings.    Headings contained in this Agreement are inserted only as a matter of convenience and in
no way define, limit or extend the scope or intent of this Agreement or any provisions hereof 

        8.11    Choice of Law.    This Agreement shall be governed by and construed in accordance with the internal laws of
the State of New York, without regard to choice of law rules (other than New York General Obligations Law Section 5-1401), except to the extent, if any, that mandatory choice of law
rules in effect in the State of New York require that any provision hereof be governed by and construed in accordance with the laws of the State of Delaware. 

        8.12    Entire Agreement.    This Agreement contains the entire understanding of the parties hereto respecting the
subject matter hereof and supersedes all prior agreements, discussions and understandings with respect thereto. 

34

 

        8.13    Cumulative Rights.    The rights of the Parties and the Company under this Agreement are cumulative and in
addition to all similar and other rights of the parties under other agreements. 

        8.14    Severability.    If any term, provision, covenant, or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. 

        8.15    Submission to Jurisdiction.    

        (a)   Any
legal action or proceeding with respect to this Agreement, the shares of Common Stock or any document related thereto shall be brought solely in the courts of the
State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Company and each Party hereby accepts for itself and
in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions. 

        (b)   The
Company and each Party irrevocably consent to the service of process of any of the aforesaid courts in any such action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to the Company or such Party, respectively, at its address provided herein. 

        (c)   Nothing
contained in this Section 8.15 shall affect the right of any party hereto to serve process in any other
manner permitted by law. 

        8.16    Waiver of Jury Trial.    Each of the Parties hereto waives any right it may have to trial by jury in respect
of any litigation based on, or arising out of, under or in connection with this Agreement, any shares of Common Stock, Common Stock Equivalents or any course of conduct, course of dealing, verbal or
written statement or action of any Party hereto. 

SIGNATURES
CONTAINED ON SUCCEEDING PAGES 

35

 

        IN
WITNESS WHEREOF, the Parties hereto have executed this Stockholders' Agreement as of the date first above written, and shall become effective as of (and subject to the occurrence of)
the Effective Date. 

	 	 	Basic Energy Services, Inc.
	

 	
 	

By:	

/s/  KENNETH V. HUSEMAN      
	 	 	 	

	 	 	Name:	Kenneth V. Huseman
	 	 	 	

	 	 	Title:	President
	 	 	 	

	

 	
 	

DLJMB FUNDING III, INC.*
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

DLJ ESC II, L.P.*
	 	 	By:	DLJ LBO PLANS MANAGEMENT

CORPORATION, its General Partner
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

DLJ OFFSHORE PARTNERS III, C.V.*
	 	 	By:	DLJ Merchant Banking III, Inc.,

Managing General Partner
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

* DLJ Party. Notices shall be given to the New York address set forth in Section 8.7.
	 	 	 	 

36

 

	

 	
 	

DLJMB PARTNERS III GMBH & CO. KG*
	 	 	By:	DLJ Merchant Banking III, Inc.,

Manager of
	

 	
 	

 	

DLJMB III, LLC,

General Partner of
	

 	
 	

 	

DLJ Merchant Banking III, L.P.,

Managing Limited Partner
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

DLJ MERCHANT BANKING PARTNERS III, L.P.*
	 	 	By:	DLJ Merchant Banking III, Inc.,

Managing General Partner
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

DLJ MERCHANT BANKING III, INC.,

as Advisory General Partner on behalf of

DLJ Offshore Partners III, C.V.*
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	 	 	 	

	

 	
 	

* DLJ Party. Notices shall be given to the New York address set forth in Section 8.7.
	 	 	 	 

37

 

	

 	
 	

DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-1, C.V.*
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of DLJ Offshore Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General Partner of DLJ Offshore Partners III-2, C.V.*
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

DLJ OFFSHORE PARTNERS III-1, C.V.*
	 	 	By:	DLJ Merchant Banking III, Inc.,

Managing General Partner
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

DLJ OFFSHORE PARTNERS III-2, C.V.*
	 	 	By:	DLJ Merchant Banking III, Inc.,

Managing General Partner
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

* DLJ Party. Notices shall be given to the New York address set forth in Section 8.7.
	 	 	 	 

38

 

	

 	
 	

MILLENIUM PARTNERS II, L.P.*
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

MBP III PLAN INVESTORS, L.P.*
	 	 	By:	DLJ LBO Plans Management Corporation II,

as General Partner
	

 	
 	

By:	

/s/  MICHAEL ISIKOW      
	 	 	 	

	 	 	Name:	Michael Isikow
	 	 	 	

	 	 	Title:	Attorney-in-Fact
	

 	
 	

SOUTHWEST ROYALTIES HOLDINGS, INC.
	

 	
 	

By:	

/s/  H. H. WOMMACK III      
	 	 	 	

	 	 	Name:	H. H. Wommack III
	 	 	 	

	 	 	Title:	President
	

 	
 	

SOUTHWEST PARTNERS II, L.P.
	

 	
 	

By:	

SOUTHWEST ROYALTIES HOLDINGS, INC.,

its General Partner
	

 	
 	

By:	

/s/  H. H. WOMMACK III      
	 	 	 	

	 	 	Name:	H. H. Wommack III
	 	 	 	

	 	 	Title:	President
	

 	
 	

* DLJ Party. Notices shall be given to the New York address set forth in Section 8.7.
	 	 	 	 

39

 

	

 	
 	

SOUTHWEST PARTNERS III, L.P.
	

 	
 	

By:	

SOUTHWEST ROYALTIES HOLDINGS,

INC., its General Partner
	

 	
 	

By:	

/s/  H. H. WOMMACK III      
	 	 	 	

	 	 	Name:	H. H. Wommack III
	 	 	Title:	President
	

 	
 	

FIRST RESERVE FUND VIII, LP
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 
	

 	
 	

PETER O. KANE
	

 	
 	

	 	 	Address:
	

 	
 	

MICHAEL D. SCHMID
	

 	
 	

	 	 	Address:
	

 	
 	

JAY R. ANDERSON
	

 	
 	

	 	 	Address:
	 	 	 	P.O. Box 4448

116 North Piney Cottonwood Lane

Marbleton, WY 83113
	

 	
 	

WILLIAM L. HUBBELL
	

 	
 	

/s/  WILLIAM L. HUBBELL      
	 	 	

	 	 	Address:
	 	 	 	4505 S. Yosemite St., Unit 344

Denver, CO 80237
	 	 	 	 

40

 

	

 	
 	

DONALD C. BUSHA REVOCABLE TRUST
	

 	
 	

By:	

/s/  DONALD C. BUSHA      
	 	 	Name:	Donald C. Busha
	 	 	Title:	Trustee
	 	 	Address:
	 	 	 	2735 64th Avenue

Greeley, CO 80634
	

 	
 	

JAY D. HACKLIN
	

 	
 	

	 	 	Address:
	

 	
 	

RANDY SPAUR
	

 	
 	

/s/  RANDY SPAUR      
	 	 	

	 	 	Address:
	

 	
 	

JOEY D. FIELDS
	

 	
 	

/s/  JOEY FIELDS      
	 	 	

	

 	
 	

Address:
	 	 	 	400 W. Illinois, Suite 800

Midland, TX 79701
	

 	
 	

DUB W. HARRISON
	

 	
 	

/s/  DUB W. HARRISON      
	 	 	

	

 	
 	

Address:
	 	 	 	400 W. Illinois, Suite 800

Midland, TX 79701
	 	 	 	 

41

 

	

 	
 	

KENNETH V. HUSEMAN
	

 	
 	

/s/  KENNETH V. HUSEMAN      
	 	 	

	

 	
 	

Address:
	 	 	 	400 W. Illinois, Suite 800

Midland, TX 79701
	

 	
 	

JAMES J. CARTER
	

 	
 	

/s/  JAMES J. CARTER      
	 	 	

	

 	
 	

Address:
	 	 	 	400 W. Illinois, Suite 800

Midland, TX 79701
	

 	
 	

CHARLES W. SWIFT
	

 	
 	

/s/  CHARLES W. SWIFT      
	 	 	

	

 	
 	

Address:
	 	 	 	400 W. Illinois, Suite 800

Midland, TX 79701

42

QuickLinks

SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT

RECITALS

ARTICLE 1 DEFINITIONS

ARTICLE 2 REPRESENTATIONS AND WARRANTIES

ARTICLE 3 MANAGEMENT OF THE COMPANY; ACTIVITIES OF THE PARTIES

ARTICLE 4 TRANSFER OF SECURITIES

ARTICLE 5 REGISTRATION RIGHTS; PIGGYBACK REGISTRATION

ARTICLE 6 REGISTRATION PROCEDURES

ARTICLE 7 TERMINATION

ARTICLE 8 MISCELLANEOUSQuickLinks
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Exhibit 10.8  

         STOCK PURCHASE AGREEMENT  

 Among  

 The Sellers Named Herein  

 FESCO Holdings, Inc.,  

 as the Company  

 and  

 BES Holding Co., a Delaware corporation,  

 as Buyer  

 For the Purchase of All of the Outstanding Capital Stock of the Company  

 September 18, 2003  

 
  
 

    TABLE OF CONTENTS    
    

	ARTICLE 1 PURCHASE AND SALE	 	1
	1.1	 	Agreement to Sell and to Purchase	 	1
	1.2	 	Purchase Price	 	2
	1.3	 	Deliveries at Closing	 	2
	
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS	
 	

3
	2.1	 	Organizational Matters; Company Subsidiaries	 	3
	2.2	 	Capitalization; Title to Shares	 	3
	2.3	 	Validity of Agreement; Authorization	 	4
	2.4	 	No Conflict or Violation	 	4
	2.5	 	Consents and Approvals	 	4
	2.6	 	Financial Statements	 	4
	2.7	 	Absence of Undisclosed Liabilities	 	4
	2.8	 	Absence of Certain Changes or Events	 	5
	2.9	 	Title to and Condition of Properties	 	5
	2.10	 	Intellectual Property	 	5
	2.11	 	Licenses, Permits and Governmental Approvals	 	6
	2.12	 	Compliance with Law	 	7
	2.13	 	Material Contracts	 	7
	2.14	 	Labor Matters	 	8
	2.15	 	ERISA	 	8
	2.16	 	Taxes	 	11
	2.17	 	Litigation	 	12
	2.18	 	Environmental Matters	 	13
	2.19	 	Insurance	 	13
	2.20	 	Bank Accounts	 	13
	2.21	 	Customers and Suppliers	 	14
	2.22	 	Seller Representations	 	14
	2.23	 	Finder's Fees	 	15
	
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER	
 	

15
	3.1	 	Organizational Matters; Buyer Subsidiaries	 	15
	3.2	 	Capitalization; Title to Shares	 	16
	3.3	 	Validity of Agreement; Authorization	 	16
	3.4	 	No Conflict or Violation	 	16
	3.5	 	Consents and Approvals	 	17
	3.6	 	Financial Statements	 	17
	3.7	 	Absence of Undisclosed Liabilities	 	17
	3.8	 	Absence of Certain Changes	 	17
	3.9	 	Title to and Condition of Properties	 	17
	3.10	 	Intellectual Property	 	18
	3.11	 	Licenses, Permits and Governmental Approvals	 	18
	3.12	 	Compliance with Law	 	18
	3.13	 	Material Contracts	 	18
	3.14	 	Labor Matters	 	18
	3.15	 	ERISA	 	19
	3.16	 	Taxes	 	21
	3.17	 	Litigation	 	21
	3.18	 	Environmental Matters	 	22
	 	 	 	 	 

i

 

	3.19	 	Insurance	 	22
	3.20	 	Customers and Suppliers	 	22
	3.21	 	Finder's Fees	 	22
	
ARTICLE 4 ADDITIONAL AGREEMENTS	
 	

23
	4.1	 	Access to Information; Confidentiality	 	23
	4.2	 	Conduct of Business	 	24
	4.3	 	Negotiation with Others	 	26
	4.4	 	Information; Supplements to Schedules	 	26
	4.5	 	Delivery of Documents and Other Materials	 	27
	4.6	 	Further Assurances	 	27
	4.7	 	Covenant Not to Compete With the Business	 	28
	4.8	 	Non-Solicitation of Employees	 	28
	4.9	 	Release	 	29
	4.10	 	Tax Matters	 	29
	4.11	 	Continuation of Business by Buyer	 	29
	4.12	 	No Public Announcement	 	30
	4.13	 	Termination of Certain Agreements	 	30
	4.14	 	Expenses	 	30
	4.15	 	Management of Arbitration Proceeding	 	30
	
ARTICLE 5 BUYER'S CONDITIONS	
 	

30
	5.1	 	Representations, Warranties and Covenants	 	31
	5.2	 	Good Standing	 	31
	5.3	 	Closing Deliveries	 	31
	5.4	 	Subscription Agreements	 	31
	5.5	 	No Litigation	 	31
	5.6	 	No Company Material Adverse Event	 	31
	5.7	 	Licenses, Consents and Approvals	 	31
	5.8	 	Consents of Third Persons	 	31
	5.9	 	Legal Opinion	 	32
	5.10	 	Payment of Obligations	 	32
	5.11	 	Resolutions	 	32
	5.12	 	Director Resignations	 	32
	5.13	 	Employment Arrangements	 	32
	5.14	 	Audited 2002 Financial Statements	 	32
	
ARTICLE 6 SELLERS' CONDITIONS	
 	

32
	6.1	 	Representations, Warranties and Covenants	 	32
	6.2	 	Good Standing	 	32
	6.3	 	Closing Deliveries	 	32
	6.4	 	Licenses, Consents and Approvals	 	33
	6.5	 	No Litigation	 	33
	6.6	 	No Buyer Material Adverse Effect	 	33
	6.7	 	Resolutions	 	33
	6.8	 	Legal Opinion	 	33
	
ARTICLE 7 INDEMNIFICATION	
 	

33
	7.1	 	Indemnification by the Sellers	 	33
	7.2	 	Indemnification by Buyer	 	34
	7.3	 	Limits on Indemnification; Payment	 	34
	7.4	 	Procedure	 	36
	7.5	 	Failure to Pay Indemnification	 	37
	 	 	 	 	 

ii

 

	7.6	 	Express Negligence	 	37
	7.7	 	Tax Treatment of Indemnity Payments	 	37
	
ARTICLE 8 NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS, REPRESENTATIONS, WARRANTIES AND AGREEMENTS	
 	

37
	
ARTICLE 9 TERMINATION	
 	

38
	9.1	 	Termination	 	38
	9.2	 	Liability Upon Termination	 	38
	9.3	 	Notice of Termination	 	39
	
ARTICLE 10 DEFINITIONS OF CERTAIN TERMS	
 	

39
	
ARTICLE 11 MISCELLANEOUS	
 	

43
	11.1	 	Stockholder Agent	 	43
	11.2	 	Notices	 	43
	11.3	 	Specific Performance	 	44
	11.4	 	Assignment and Successors	 	44
	11.5	 	Entire Agreement; Amendment	 	44
	11.6	 	Governing Law	 	45
	11.7	 	Waiver	 	45
	11.8	 	Severability	 	45
	11.9	 	No Third Party Beneficiaries	 	45
	11.10	 	Arbitration	 	45
	11.11	 	Counterparts	 	47
	11.12	 	Headings	 	47
	11.13	 	Negotiated Transaction	 	47

iii

 
 
 

DISCLOSURE SCHEDULES    
    

Company Disclosure Schedule  

Schedule 2.1(a)(ii)—Company
Foreign Qualifications 

Schedule 2.1(b)—Company
Subsidiaries 

Schedule 2.1(c)(i)—Company
Subsidiary Incorporation and Organization 

Schedule 2.1(c)(ii)—Company
Subsidiary Foreign Qualifications 

Schedule 2.2—Company
Certificate of Incorporation and Bylaws 

Schedule 2.4—Conflicts
or Violations 

Schedule 2.5—Consents
and Approvals 

Schedule 2.6—Company
Financial Statements 

Schedule 2.7—Undisclosed
Liabilities 

Schedule 2.8—Certain
Changes or Events 

Schedule 2.9(a)—Owned
Real Property 

Schedule 2.9(b)—Leased
Real Property 

Schedule 2.9(d)—Sufficiency
of Property 

Schedule 2.10(a)—Intellectual
Property 

Schedule 2.10(b)—Intellectual
Property Agreements 

Schedule 2.10(c)—Infringements 

Schedule 2.10(d)—Corporate
Names 

Schedule 2.11—Licenses,
Permits and Approvals 

Schedule 2.13(a)—Material
Contracts 

Schedule 2.13(b)—Validity
and Breaches 

Schedule 2.13(c)—Enforceability

Schedule 2.14(d)—Labor
Matters 

Schedule 2.14(g)—Labor
Complaints 

Schedule 2.15(b)—ERISA 

Schedule 2.16(c)—Taxes 

Schedule 2.17—Litigation 

Schedule 2.18—Environmental
Matters 

Schedule 2.19(a)—Insurance
Policies 

Schedule 2.19(b)—Insurance
Claims 

Schedule 2.20—Bank
Accounts 

Schedule 2.23—Finder's
Fees 

Schedule 4.13—Certain
Agreements 

Schedule 5.10—Indebtedness
or Obligations 

Schedule 5.13—Key
Officers 

Buyer Disclosure Schedule  

Schedule 3.1(b)—Buyer
Subsidiaries 

Schedule 3.1(c)—Buyer
Subsidiary Incorporation and Organization 

Schedule 3.2—Options,
Warrants and Convertible Securities 

Schedule 3.5—Consents
and Approvals 

Schedule 3.6—Buyer
Financial Statements 

Schedule 3.7—Undisclosed
Liabilities 

Section 3.8—Certain
Changes of Events 

Schedule 3.9(a)—Owned
Real Property 

Schedule 3.9(b)—Leased
Real Property 

Schedule 3.10—Intellectual
Property 

Schedule 3.11—Licenses,
Permits and Approvals 

Schedule 3.12—Compliance
With Law 

Schedule 3.13—Material
Contracts 

Schedule 3.14(d)—Labor
Matters 

Schedule 3.14(g)—Labor
Complaints 

Schedule 3.16(c)—Taxes 

Schedule 3.17—Litigation 

Schedule 3.18—Environmental
Matters 

Schedule 3.19—Insurance

Schedule 5.13—Key
Officers 

iv

 
 
 

EXHIBITS    
    

	

Exhibit A	

— Sellers and Purchase Price
	

 	

— Sellers
	

 	

— Remaining Stockholders
	

Exhibit B	

— Form of Subscription Agreement
	

Exhibit C	

— Form of Amended and Restated Stockholders' Agreement of Buyer
	

Exhibit D	

— Form of Escrow Agreement
	

Exhibit E	

— Form of Opinion of Counsel for Sellers
	

Exhibit F	

— Form of Opinion of Counsel for Buyer

v

 
 

STOCK PURCHASE AGREEMENT    
    

        THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of September 18, 2003, by and among FESCO Holdings, Inc., a Delaware corporation (the "Company"), each of the "Sellers"
named on Exhibit A hereto (each a "Seller" and collectively the
"Sellers") and BES Holding Co., a Delaware corporation ("Buyer"). 

R E C I T A L S:  

        WHEREAS, the Company is the parent company of First Energy Service Company, a Delaware corporation
("FESCO"), based in Littleton, Colorado principally engaged in the oil-field services business; 

        WHEREAS, the Sellers own in the aggregate 376,846 shares (the "Initial Shares") of common
stock, par value $0.001 per share, of the Company ("Company Common Stock"), which represent approximately 93% of the outstanding capital stock of the
Company; 

        WHEREAS, the "Remaining Stockholders" named on Exhibit A hereto (the
"Remaining Stockholders") own an aggregate of 29,761 shares of Company Common Stock (the "Remaining
Shares," and with the Initial Shares, the "Shares"); 

        WHEREAS, each of the Sellers desires to sell the Initial Shares to Buyer, and Buyer desires to purchase the same, all upon the terms and
subject to the conditions set forth herein; 

        WHEREAS, immediately upon execution of this Agreement, First Reserve Fund VIII, L.P., a Delaware limited partnership (the
"First Reserve Fund"), shall deliver a Compelled Transfer Notice (as defined in the First Energy Services Company Stockholder Agreement, dated
June 16, 2000 (the "Seller Agreement"), by and among FESCO (as predecessor-in-interest to the Company), the Sellers and
the Remaining Stockholders) to each of the Remaining Stockholders compelling such Remaining Stockholders to sell their respective Remaining Shares to Buyer for the same consideration and upon the same
terms as the Sellers as provided herein; 

        WHEREAS, in accordance with the Seller Agreement, each of the Remaining Stockholders shall be required to execute and deliver at or prior
to Closing a Subscription Agreement in the form attached as Exhibit B hereto, pursuant to which the Remaining Stockholders shall sell, and Buyer
shall purchase, all of the Remaining Shares; and 

        WHEREAS, for Federal income tax purposes, the transaction contemplated by this Agreement is intended to qualify as a tax-free
reorganization pursuant to Section 368 of the Internal Revenue Code of 1986, as amended. 

        NOW, THEREFORE, in consideration of the premises, the respective representations, warranties and covenants and agreements contained
herein, and other good and valuable consideration, the legal sufficiency of which are herby acknowledged, the parties hereto agree as follows: 

 
 

ARTICLE 1
  PURCHASE AND SALE    
    

        1.1    Agreement to Sell and to Purchase.    

        (a)   On
the Closing Date, upon the terms and subject to the conditions contained herein, each Seller shall transfer, sell, assign and convey to Buyer, and Buyer shall
purchase from each Seller, the Initial Shares, free and clear of any pledges, restrictions on transfer, proxies and noting or other agreements, liens, claims, charges, mortgages, security interests or
other legal or equitable encumbrances, limitation or restrictions of any nature whatsoever ("Encumbrances"). 

        (b)   Subject
to the conditions set forth in this Agreement, the closing of such sale and purchase (the "Closing") shall take
place at the offices of Gibson, Dunn & Crutcher LLP located at 1801 California, Suite 4100, Denver, Colorado 80202 on the third Business Day following the satisfaction of 

 

the
conditions in Articles 5 and 6 hereto (other than those conditions that by their nature are to be
fulfilled at Closing) or at such other time, date and place as the parties hereto shall mutually agree upon in writing (the "Closing Date"). Failure to
consummate the transactions contemplated hereby on such date shall not result in a termination of this Agreement or relieve any party hereto of any obligation hereunder. Title to, ownership of and
control over the Initial Shares shall pass to Buyer at the Closing. 

        1.2    Purchase Price.    In consideration of the transfer to Buyer of the Initial Shares,
Buyer shall pay to the Sellers at Closing an aggregate of 676,569 shares of common stock of Buyer, par value $0.01 per share ("Buyer Common Stock"),
such shares to be allocated among the Sellers as set forth on Exhibit A hereto (the "Purchase
Price"); provided, however, that 169,143 of such shares of Buyer Common Stock (the "Escrowed
Shares"), which shall also be allocated among the Sellers as set forth on Exhibit A hereto, shall be held in escrow
pursuant to the terms of the Escrow Agreement, a form of which is attached as Exhibit D hereto. 

        1.3    Deliveries at Closing.    At Closing: 

        (a)   Each
Seller shall make the following deliveries to Buyer: 

        (i)    a
duly executed certificate, countersigned by the appropriate officers of the Company, representing all of the shares of Company Common Stock owned by such Seller in the
name of Buyer, (ii) a copy of a letter from such Seller, addressed to and acknowledged by the Company, as registrar with respect to the Company Common Stock, instructing such registrar to
cancel the certificate(s) representing the Initial Shares and to reissue a new certificate representing the same number of shares of Company Common Stock in the name of Buyer and (iii) a copy
of the cancelled certificates(s) representing the applicable Initial Shares; and 

        (ii)   a
duly executed Amended and Restated Stockholders' Agreement of Buyer, in the form attached as Exhibit C hereto. 

        (b)   Buyer
shall deliver: 

        (i)    to
each Seller, a duly executed certificate, countersigned by the appropriate officer(s) of Buyer, representing the number of shares of Buyer Common Stock set forth
opposite the name of such Seller on Exhibit A hereto, which in the aggregate shall be equal to the Purchase Price less the Escrowed Shares; 

        (ii)   to
each Remaining Stockholder (upon execution and delivery by such Remaining Stockholder of a Subscription Agreement (in the form attached as  Exhibit B hereto), the Escrow Agreement (in the form
attached as Exhibit D hereto) and the
Amended and Restated Stockholder's Agreement of Buyer (in the form attached as Exhibit C hereto)), a duly executed certificate, countersigned by
the appropriate officer(s) of Buyer, representing the number of shares of Buyer Common Stock set forth opposite the name of such Remaining Stockholder on  Exhibit A hereto, which in the aggregate
shall be equal to 53,431 shares of Buyer Common Stock less 13,356 of such shares that will be held in
escrow pursuant to the terms of the Escrow Agreement, a form of which is attached as Exhibit D hereto; 

        (iii)  to
the Escrow Agent, duly executed certificates countersigned by the appropriate officer(s) of Buyer, (i) the Escrowed Shares, issued in each Seller's name and
(ii) the 13,356 shares of Buyer Common Stock, issued in each Remaining Stockholder's name, that will also be held in escrow pursuant to the terms of the Escrow Agreement; and 

        (iv)  a
duly executed Amended and Restated Stockholders' Agreement of Buyer, in the form attached as Exhibit C hereto. 

2

 

 
 

ARTICLE 2
  REPRESENTATIONS AND WARRANTIES OF THE SELLERS    
    

        The Sellers, jointly and severally (except for Section 2.22 hereof, which representations are made
severally and not jointly) hereby represent and warrant to Buyer as follows: 

        2.1    Organizational Matters; Company Subsidiaries.    

        (a)   The
Company: (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) is duly qualified to
conduct business and is in good standing in each other jurisdiction set forth on Schedule 2.1(a)(ii) hereto and there is no other jurisdiction
where the Company's ownership, operation or lease of property or the conduct of its business would require such qualification, except where the failure to be so qualified would not result in exposure
to the Company of losses, damages or liabilities in excess of $50,000 in the aggregate, taking into account any such failures by the Company or any of the Company Subsidiaries; and (iii) has
the requisite power and authority and the legal right to own and operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be
conducted. 

        (b)   Each
direct or indirect Subsidiary of the Company is set forth on Schedule 2.1(b) hereto (each, a
"Company Subsidiary"). Except as set forth thereon, neither the Company nor any Company Subsidiary: (i) is engaged in any joint venture,
partnership or similar arrangement with any other Person; (ii) is an Affiliate of any other Person; or (iii) otherwise holds any equity interest any other Person. 

        (c)   Each
Company Subsidiary: (i) is a corporation, duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of
incorporation, as set forth on Schedule 2.1(c)(i) hereto; (ii) is duly qualified to conduct business and is in good standing in each other
jurisdiction listed on Schedule 2.1(c)(ii) hereto and there is no other jurisdiction where any Company Subsidiary's ownership, operation or lease
of property or the conduct of its business would require such qualification, except where the failure to be so qualified would not result in exposure to losses, damages or liabilities in excess of
$50,000 in the aggregate, taking into account any such failures by the Company or any of the Company Subsidiaries; and (iii) has the requisite power and authority and the legal right to own and
operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be conducted. 

        2.2    Capitalization; Title to Shares.    Attached as  Schedule 2.2 hereto are true and
correct copies of the Certificate of Incorporation and Bylaws of the Company as amended and in full force and
effect. The authorized capital of the Company consists of 500,000 shares of Company Common Stock, par value $0.001 per share, of which 406,607 shares are issued and outstanding and issued of record to
the Sellers as set forth on Exhibit A hereto, and 500,000 shares of preferred stock, par value $.001 per share, of which no shares are issued and
outstanding. The issued and outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid and non-assessable and were not issued in violation
of any preemptive, preferential purchase or other similar rights of any Person. The Company has outstanding options to acquire 8,990 shares of Company Common Stock, of which 2,138.5 have vested as of
the date hereof. Other than as set forth in this Section 2.2 hereof, the Company has no outstanding options, warrants, convertible securities,
calls, rights, commitments, preemptive rights, agreements, arrangements or understandings of any character obligating the Company (i) to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of the Company or any securities or obligations convertible into or exchangeable for shares of capital stock of the Company; or (ii) to grant, extend
or enter into any such option, warrant, convertible security, call, right, commitment, preemptive right, agreement, arrangement or understanding. 

3

 

        2.3    Validity of Agreement; Authorization.    The Company has all requisite power and
authority to enter into this Agreement, to consummate the transactions contemplated hereby and to perform its obligations under this Agreement. The execution and delivery of this Agreement and the
performance of the Company's obligations hereunder have been duly and validly authorized by the board of directors of the Company and no other proceedings on the part, or on behalf, of the Company are
necessary to effect such execution, delivery and performance. This Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally or by general equitable principles). 

        2.4    No Conflict or Violation.    The execution, delivery and performance of this Agreement
by the Sellers and the consummation of the transactions contemplated hereby do not and will not: (a) violate any provision of the charter, bylaws or other organizational documents of the
Company or any of the Company Subsidiaries; (b) violate any applicable Law or any judgment, order or decree of any Governmental Entity applicable to the Sellers, the Company, the Company
Subsidiaries or any of the respective properties or assets of the Company or the Company Subsidiaries; (c) subject to the consents required as set forth on  Schedule 2.4 hereto, violate or
result in a breach of or constitute (with due notice or lapse of time or both) a default or cause any obligation,
penalty or premium to arise or accrue under any contract, lease, credit or loan agreement, mortgage, security agreement, indenture or other agreement or instrument to which the Company or any of the
Company Subsidiaries is a party or by which any of them is bound or to which any of the respective properties or assets of the Company or the Company Subsidiaries is subject; (d) result in the
creation of imposition of any Encumbrance upon any of the properties or assets of the Company or any of the Company Subsidiaries; or (e) result in the cancellation, modification, revocation or
suspension of any License (as defined in Section 2.11 hereof) of the Company or any of the Company Subsidiaries, except in the case of  clauses (b),
(c), (d) and  (e) above that would not result in liabilities that could reasonably be expected to exceed
$75,000 in the aggregate or otherwise have a Company Material
Adverse Effect. 

        2.5    Consents and Approvals.    Except as disclosed on  Schedule 2.5 hereto, no consent,
approval, waiver or authorization of, or filing, registration or qualification with, any Governmental Entity or
any other Person (on the part of the Company, the Sellers, or any of the Company Subsidiaries) is required for the Company or the Sellers to execute and deliver this Agreement or to perform their
respective obligations hereunder, except as would not result in liabilities that could reasonably be expected to exceed $75,000 in the aggregate or otherwise have a Company Material Adverse Effect. 

        2.6    Financial Statements.    Attached as  Schedule 2.6 hereto are true, correct and
complete copies of: (a) the audited consolidated balance sheets, statements of income and
statements of cash flows of the Company as of and for the years ended December 31, 2000 and December 31, 2001 and (b) the unaudited consolidated balance sheet, statement of income
and statement of cash flows of the Company as of and for the year ended December 31, 2002 and the three-month period ended March 31, 2003 and the six-month period ended
June 30, 2003 (collectively, the "Company Financial Statements"). The Company Financial Statements: (x) have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered; (y) fairly present the financial position of the Company as of their respective dates and the results of operations of
the Company for the periods indicated therein; and (z) have not been rendered untrue, incomplete or unfair as representations of the financial condition of the Company as of the respective
dates of the Company Financial Statements by events subsequent to the respective dates of the Company Financial Statements. 

        2.7    Absence of Undisclosed Liabilities.    Except as disclosed on  Schedule 2.7 hereto or
on the unaudited Company Financial Statements as of June 30, 2003, neither the Company nor any of the Company
Subsidiaries has any indebtedness or liability, absolute or contingent, which is not shown or provided for in the Company Financial Statements, other than (a) liabilities incurred or accrued in
the 

4

 

ordinary
course of business consistent with past practice since June 30, 2003 or (b) liabilities of the Company or any Company Subsidiary that individually or in the aggregate are not
material to the Company and that are not required by GAAP to be included in the Company Financial Statements. 

        2.8    Absence of Certain Changes or Events.    Except as set forth on  Schedule 2.8 hereto,
since December 31, 2002, the business of the Company and each of the Company Subsidiaries has been conducted in the
ordinary course of business consistent with past practices and neither the Company nor any of the Company Subsidiaries has taken any of the actions described in Sections
4.2(a) through (v) hereof, except in connection with entering into this Agreement. 

        2.9    Title to and Condition of Properties.    

        (a)   Schedule 2.9(a) hereto sets forth a complete and accurate list of all of the real property owned by the Company or
each Company Subsidiary. Except as set forth on Schedule 2.9(a) hereto, the Company and each Company Subsidiary has good and marketable title to
all of such owned real property, free and clear of all Encumbrances, except for Permitted Encumbrances. 

        (b)   Schedule 2.9(b) hereto sets forth a complete and accurate list of all leases of real property to which the Company
or any of the Company Subsidiaries is a party on the date hereof or by which any of them is presently bound (whether as lessee or lessor). Except as set forth on  Schedule 2.9(b) hereto,
(i) all of such leases are in full force and effect and are valid and enforceable in accordance with their terms,
(ii) there is not under any such lease any default by the Company or any Company Subsidiary or, to the Company's Knowledge, any other Person, or any event that with notice or lapse of time or
both would constitute a default and (iii) the Company or any Company Subsidiary is in possession of the real property covered under each lease set forth on  Schedule 2.9(b) hereto in which it
is a lessee. 

        (c)   The
Company and the Company Subsidiaries have good and marketable title to, or valid and subsisting leasehold interests in, all of the personal property reflected on the
Company Financial Statements or used or useful in their respective businesses, free and clear of all Encumbrances, except for Permitted Encumbrances. 

        (d)   Except
as set forth on Schedule 2.9(d) hereto, the Company and its Subsidiaries own or control all of the assets,
contracts, leases or Licenses required to enable them to collectively operate their respective businesses after the Closing Date in the same manner as such businesses are presently conducted. Except
as set forth on Schedule 2.9(d) hereto, the businesses of the Company and its Subsidiaries as presently conducted are not dependent on the right
to use the assets or property of others. 

        2.10    Intellectual Property.    

        (a)   Schedule 2.10(a) hereto sets forth a true and complete list of all Intellectual Property used in the businesses of
the Company and the Company Subsidiaries, and, for each item listed, a statement as to whether such Intellectual Property is (i) wholly owned (in which such case the owner shall be named),
(ii) licensed from a third party (in which such case the licensee and third-party licensor shall be named), or (iii) licensed to third parties by the Company or any Company Subsidiary
(in which such case the third-party licensee shall be named). 

        (b)   Schedule 2.10(b) hereto sets forth a true and complete list of all agreements, whether in the form of a
development, license, assignment, confidentiality or other agreements, relating to the Intellectual Property to which the Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound. 

        (c)   Except
as set forth on Schedule 2.10(c) hereto: (i) the Company or a Company Subsidiary owns all right,
title and interest in and to, or has a valid and enforceable license or other right to use lawfully, all the Intellectual Property used by the Company or the Company Subsidiaries in connection with
their businesses, free and clear of any Encumbrances; (ii) neither the Company nor any of the 

5

 

Company
Subsidiaries has infringed or otherwise violated the Intellectual Property of any other Person; (iii) to the Company's Knowledge, no Person has infringed or otherwise violated the
Intellectual Property of the Company and the Company Subsidiaries; (iv) the consummation of the transactions contemplated by this Agreement will not alter, impair or extinguish any Intellectual
Property of the Company and the Company Subsidiaries; and (v) to the Company's Knowledge, there are no agreements, judicial orders or settlement agreements which limit or restrict the Company's
or any of the Company Subsidiaries' rights to use any Intellectual Property. 

        (d)   The
Intellectual Property of the Company includes the corporate names "First Energy Services" and "FESCO" and any derivations thereof and each corporate name or
derivation thereof currently or formerly used by a Company Subsidiary, including without limitation the corporate names listed on  Schedule 2.10(d) hereto. All goodwill with respect to the use of
such names will inure to the benefit of Buyer, and none of the Sellers shall
have any right to sue or recover against any Person with respect to the use of such name. 

        (e)   For
purposes hereof, "Intellectual Property" shall mean all: 

        (i)    all
letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States
or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State, or
any other country, and all reissues, continuations, continuations in part or extensions thereof (collectively, "Patents"); 

        (ii)   all
copyrights and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or
any other country or any political subdivision thereof, and all reissues, extensions or renewals thereof (collectively, "Copyrights"); and 

        (iii)  all
trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any
of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or
territory thereof, or any other country or any political subdivision thereof; all reissues, extensions or renewals thereof; and all goodwill associated with or symbolized by any of the foregoing
(collectively, "Marks"). 

        2.11    Licenses, Permits and Governmental Approvals.    Except as set forth on  Schedule 2.11
hereto, (a) the Company and each Company Subsidiary has all material consents, licenses, permits, certificates, franchises,
authorizations and approvals issued or granted to any of them by, and has made all material registrations and filings with, any Governmental Entity as are necessary for the conduct of their respective
businesses as currently conducted (each a "License" and, collectively, the "Licenses"); (b) each
License has been issued to, and duly obtained and fully paid for by, the holder thereof and is valid, in full force and effect, except where such invalidity or failure to be in full force and effect
would not have a Material Adverse Effect; and (c) subject to the receipt of all consents listed on Schedule 2.5 hereto, none of such
Licenses will terminate or become terminable as a result of the transactions contemplated by this Agreement. Notwithstanding anything to the contrary in this  Section 2.11, the representations and
warranties in this Section 2.11 shall not apply to
(x) any right to Intellectual Property (which shall be subject to the representations in Section 2.10 hereof) or (y) any License
required under applicable Environmental Law (which shall be subject to the representations in Section 2.18 hereof). 

6

 

        2.12    Compliance with Law.    Except with respect to Tax matters (which are provided for in  Section 2.16 hereof), Intellectual Property matters (which are provided for in  Section 2.10 hereof) or environmental, health and safety matters (which are
provided for in  Section 2.18 hereof) and except as set forth on Schedule 2.12 hereto, the operations of
each of the Company and the Company Subsidiaries are and have been conducted in material compliance with all applicable laws, regulations, orders and other requirements of all Governmental Authorities
having jurisdiction over the Company and the Company Subsidiaries and their respective assets, properties and operations. 

        2.13    Material Contracts.    

        (a)   Schedule 2.13(a) hereto sets forth a true and complete list of the contracts, agreements, instruments and
commitments, whether written or oral ("Contracts"), to which the Company or any Company Subsidiary is a party, by which any of them is bound or
otherwise relating or affecting any of their assets, properties or operations, in each of the following categories: 

        (i)    each
partnership, limited liability company or joint venture agreement; 

        (ii)   each
Contract (or group of related Contracts) for the purchase by the Company and/or any Company Subsidiary of goods and/or services involving total annual payments in
excess of $20,000 in 2002 or $10,000 in the first six months of 2003; 

        (iii)  each
Contract (or group of related Contracts) for the sale by the Company or any Company Subsidiary of goods and/or services involving total annual revenues in excess
of $20,000 in 2002 or $10,000 in the first six months of 2003; 

        (iv)  each
Contract (or group of related Contracts) relating to a Debt Obligation; 

        (v)   each
Contract relating to a loan or advance to, or investment in, any Person or any agreement, contract, commitment or understanding relating to the making of any such
loan, advance or investment; 

        (vi)  each
Contract limiting or purporting to limit the ability of the Company or any Company Subsidiary to engage or compete in any line of business with any person or in
any geographic area; 

        (vii) any
Contract with the stockholders or any Affiliate of the Company; 

        (viii) any
labor union, management service, employment, consulting or other similar type of Contract; 

        (ix)  any
Contract obligating the Company or that would obligate or require any subsequent owner of the Company to provide for indemnification or contribution with respect to
any matter; 

        (x)   any
sales, distributorship, agency or similar agreement relating to the products sold or services provided by the Company; 

        (xi)  any
license, royalty or similar Contract; 

        (xii) any
Contract (or group of related Contracts) not entered into in the ordinary course of business consistent with past practices not cancelable by the Company, without
penalty to the Company, within 30 calendar days; or 

        (xiii) any
other Contract that might reasonably be expected to be material to the Company or its business. 

Each
of the above, a "Company Material Contract." 

        (b)   Except
as set forth on Schedule 2.13(b) hereto, (i) each such Contract is (A) in full force and
effect and is a valid and binding obligation of the Company or the Company Subsidiary party to such Contract and (B) to Company's Knowledge, a valid and binding obligation of each other party
thereto, 

7

 

(ii)(A)
the Company or the Company Subsidiary party to such Contract is not in breach thereof or default thereunder (and no event or circumstance has occurred that with notice, or lapse of time or
both, would constitute an event of default), (B) to the Company's Knowledge, no other party to any such Contract is in breach thereof or default thereunder and (iii) there is no pending
or, to Company's Knowledge, threatened litigation with respect to any such Contract. 

        (c)   Except
as set forth on Schedule 2.13(c) hereto, the enforceability of the Contracts set forth on  Schedule 2.13(a) hereto will not be affected in any
manner by the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby nor will the counterparties thereto be subject to any additional rights or privileges thereunder as a result thereof because of a "change of control" or otherwise. 

        2.14    Labor Matters.    As of the date hereof, (a) no strikes or other material labor
disputes against the Company or any Company Subsidiary are pending or, to the Company's Knowledge, threatened; (b) the hours worked by and payments made to employees of the Company and each
Company Subsidiary comply with the Fair Labor Standards Act and each other federal, state, local or foreign Law applicable to such matters; (c) all payments due from the Company and each
Company Subsidiary for employee health and welfare insurance have been paid or accrued as a liability on the books of the Company or such Company Subsidiary; (d) except as set forth on  Schedule 2.14(d)
 hereto, neither the Company nor any Company Subsidiary is a party to or bound by any collective bargaining agreement, management
agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement; (e) there is
no organizing activity involving the Company or any Company Subsidiary pending or, to the Company's Knowledge, threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to the Company's Knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of the Company or any Company
Subsidiary has made a pending demand for recognition; and (g) except as set forth in Schedule 2.14(g) hereto, there are no material
complaints or charges against the Company or any Company Subsidiary pending or, to the Company's Knowledge, threatened to be filed with any Governmental Entity or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of employment by the Company or any Company Subsidiary of any individual. 

        2.15    ERISA.    For purposes of this  Section 2.15, unless otherwise indicated, all
references to the "Company" shall include the Company and each ERISA Affiliate of the Company. 

        (a)   Since
December 31, 2002, there has not been any adoption or amendment by the Company of any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical,
dependent care, cafeteria, employee assistance, scholarship or other plan, program, arrangement or understanding (whether or not covered under Section 3(3) of ERISA and whether or not legally
binding) maintained in whole or in part, contributed to, or required to be contributed to by the Company for the benefit of any present or former officer, employee or director of the Company
(collectively, and including all amendments thereto, "Benefit Plans"). 

        (b)   Schedule 2.15(b) hereto contains a list and brief description of all "employee pension benefit plans" (as defined
in Section 3(2) of ERISA) ("Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
("Welfare Plans") and all other Benefit Plans maintained in whole or in part, contributed to, or required to be contributed to, within six years prior
to the Closing Date by the Company for the benefit of any present or former officer, employee or director of the Company. The Company has made available to Buyer true, complete and correct copies of
(i) each Benefit Plan, including, without limitation, participating employer agreements (or, in the case of any unwritten 

8

 

Benefit
Plans, descriptions thereof), (ii) the six annual reports on Form 5500 most recently filed with the IRS and the related summary annual report distributed to participants with
respect to each Benefit Plan (if any such report was required), (iii) all minutes of meetings of any committee established to administer any Benefit Plan other than minutes that would be
subject to privacy laws relating to disclosure of medical information, (iv) the most recent actuarial report for each Benefit Plan for which an actuarial report is required by ERISA or other
applicable law, (v) all summary plan descriptions for each Benefit Plan for which such summary plan description is required by ERISA or other applicable Law and each summary of material
modifications prepared, as required by ERISA or other applicable law, (vi) each trust agreement relating to any Benefit Plan, (vii) all applications, including all attachments, submitted
to the IRS by the Company for IRS determination letters or rulings with respect to Benefit Plans and the IRS determination letters or rulings issued as a result of such applications and all other
material correspondence for the last six consecutive years prior to the Closing Date with the IRS or the United States Department of Labor relating to plan qualification, filing of required forms, or
pending, contemplated and announced plan audits, (viii) descriptions of all claims filed and pending (other than for benefits in the normal course), lawsuits pending, grievances pending and
similar actions pending with respect to Benefit Plans of the Company, (ix) a listing of all employees or former employees receiving long term disability benefits under a Benefit Plan of the
Company, (x) a listing of all prior mergers, consolidations or transfers of Benefit Plan assets or liabilities described in Section 414(l) of the Code or the regulations thereunder that
have occurred within the last six years prior to the Closing Date, (xi) copies of all collective bargaining agreements (and any related side letters of understanding) that relate to any Benefit
Plans of the Company, and (xii) a listing of all Company employees indicating date of birth, date of commencement of service, job title or brief job description, the amount of the employee's
salary and bonus, if applicable, the date of the last salary increase for each salaried employee, any material commitments, arrangements, promises or understandings with the employee as to salary or
bonus, if applicable, and any other contract or payment agreement between the Company and the employee. 

        (c)   The
Company does not sponsor, maintain, participate in or contribute to, and has not at any time sponsored, maintained, participated in or contributed to (and never has
been required to contribute to), any (i) "multiemployer plan" as that term is defined in Section 414(f) of the Code or Section 4001(a)(3) of ERISA; (ii) foreign Benefit
Plans; or (iii) voluntary employee benefit associations intended to be exempt from federal income tax under Section 501(c)(9) of the Code, and neither the Company nor any Benefit Plan
maintains or contributes to any group annuity contract. 

        (d)   Each
Pension Plan that is subject to Section 201, 301 or 401 of ERISA has been the subject of a determination letter from the IRS to the effect that such Pension
Plan is qualified under Section 401(a) of the Code, as currently in effect, or can still be submitted in a timely manner to the IRS for such a letter, and no such determination letter has been
revoked nor, to the Company's Knowledge, has revocation of any such letter been threatened, nor has any such Pension Plan been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its qualification or increase its costs, and to the Company's Knowledge, nothing has occurred or failed to occur in connection with the
adoption or maintenance of such Pension Plan which would cause the loss of such qualification, and all amendments required to be adopted before the Closing Date for any such Pension Plan to continue
to be so qualified have been or will be duly and timely adopted. Each Pension Plan that is not subject to Section 201, 301 or 401 of ERISA has timely filed the statement required by 29 CFR
2520.104-23. The Company and each ERISA Affiliate has paid all premiums (including any applicable interest, charges and penalties for late payment) due the Pension Benefit Guaranty
Corporation (the "PBGC") with respect to each Pension Plan for which premiums to the PBGC are required. No Pension Plan in whole or in part ever
maintained by the Company or any ERISA Affiliate has been terminated or partially terminated under circumstances which would result in liability to the PBGC. 

9

 

        (e)   Each
of the Benefit Plans which is sponsored by the Company or any ERISA Affiliate: (i) is in compliance with all reporting and disclosure requirements of
Part 1 of Subtitle B of Title I of ERISA or other applicable law, (ii) has had the appropriate required Form 5500 (or equivalent annual report) timely filed with the appropriate
governmental authority for each year of its existence, (iii) has at all times complied with the bonding requirements of Section 412 of ERISA or other applicable law, (iv) has no
issue pending (other than the payment of benefits in the normal course) nor any issue resolved adversely to the Company which may subject the Company to the payment of any material penalty, interest,
tax or other obligation, nor is there any basis for any imposition of any such liability, and (v) has been maintained in all material respects with the requirements of ERISA and the Code and
other applicable Law (including all rules and regulations issued thereunder) not otherwise covered hereunder so as not to give rise to any liabilities to the Company. 

        (f)    The
execution of this Agreement or the consummation of the transactions contemplated by this Agreement will not give rise to any, or trigger any, change of control,
accelerated vesting, severance or other similar provisions in any Benefit Plan. 

        (g)   No
Pension Plan that is subject to Title IV of ERISA and which the Company or any ERISA Affiliate maintains, or to which the Company or any ERISA Affiliate is obligated
to contribute had, as of December 31, 2002, an "unfunded benefit liability" (as such term is defined in Section 4001(a)(18) of ERISA), based on actuarial assumptions which have been
furnished to Buyer. None of the Pension Plans of the Company or any ERISA Affiliate which are subject to Section 302 of ERISA or Section 412 of the Code has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived. No Pension Plan sponsored by the Company or any ERISA Affiliate has a
"liquidity shortfall" as defined in Section 412(m)(5) of the Code. No notice has been required under Section 4011 of ERISA with respect to any Pension Plan sponsored by the Company or
any ERISA Affiliate, or to which the Company or any ERISA Affiliate is obligated to contribute. No event described in Section 401(a)(29) of the Code has occurred or can reasonably be expected
to occur with respect to the Company. No "reportable event" (as that term is defined in Section 4043 of ERISA and for which the 30-day notice requirement has not been waived) has
occurred with respect to any such Pension Plan within the last six years prior to the Closing Date, other than as may arise as a result of the consummation of the transactions contemplated by this
Agreement. Each such Pension Plan of the Company or any ERISA Affiliate (including any such plan covering retirees or other former employees) may be amended or terminated without liability (other than
with respect to pension benefits in the ordinary course) to the Company on or at any time after the consummation of the transactions contemplated by this Agreement without contravening the terms of
such plan, or any Law or agreement that pertains to the Company. 

        (h)   None
of the Company, the officers of the Company, the Benefit Plans (including the Pension Plans) or any fiduciary of any Benefit Plan which are subject to ERISA, or any
trustee or administrator thereof, has engaged in a "prohibited transaction" (as such term is defined in Section 406, 407 or 408 of ERISA or Section 4975 of the Code) or any other breach
of fiduciary responsibility that could subject the Company or the officers of the Company to the tax or penalty on prohibited transactions imposed by such Section 4975 or to any liability under
Section 502(i) or (1) of ERISA, or any other provision of ERISA, which would have any adverse effect on the properties, business, results of operation or financial condition of
the Company. 

        (i)    With
respect to any Welfare Plan, (i) each such Welfare Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with the applicable requirements of Part 6 of Title I of ERISA and Section 4980B(f) of the Code and other applicable Law and (ii) each such
Welfare Plan (including any such plan covering retirees or other former employees) may be amended (including, without limitation, to prospectively curtail or discontinue benefits and/or impose or
increase employee, retiree or other former employee participant contribution requirements) or terminated without liability (other than with respect to welfare benefits 

10

 

in
the ordinary course) to the Company on the consummation of the transactions contemplated by this Agreement without contravening the terms of such plan, or any Law or agreement that pertains to the
Company. 

        (j)    All
contributions required by Law or by a collective bargaining or other agreement to be made under the Benefit Plans with respect to all periods through the Closing
Date, including a pro rata share of contributions due for the current plan year, will have been made by such date or provided for by adequate reserves properly reflected on the books of the Company in
accordance with GAAP. No changes in contributions or benefit levels have been implemented or negotiated (but not yet implemented), with respect to any Benefit Plan since the date on which the
information provided in the attached Disclosure Schedule has been provided, and no such changes are scheduled to occur other than in the ordinary course of business. 

        (k)   The
Company does not have and will not have any liability or obligation for taxes, penalties, contributions, losses, claims, damages, judgments, settlement costs,
expenses, costs, or any other liability or liabilities of any nature whatsoever arising out of or in any manner relating to any Benefit Plan that has been, or is, contributed to (or required to be
contributed to) by the Company or any ERISA Affiliate. 

        (l)    The
Company shall, and the Sellers shall cause the Company to, take all necessary action to assure that neither the Company, any officer of the Company nor or any
fiduciary of any Benefit Plan who is an employee of the Company makes any generally disseminated written or oral representation to any employee or any participant in any Benefit Plan prior to the
Closing concerning the transactions contemplated by this Agreement or the effect such transactions will have on the Benefit Plans that is inconsistent with the terms of such Benefit Plans and without
the prior written consent of Buyer (which consent shall not unreasonably be withheld). The Company has not made any such representation to any employee or any participant in any Benefit Plan prior to
the signing of this Agreement. 

        2.16    Taxes.    (a) The Company and each of the Company Subsidiaries has filed (or joined in
the filing of) when due all U.S. and other material Tax Returns required by applicable Law to be filed with any Governmental Entity, (b) all such Tax Returns were true, correct and complete in
all material respects as of the time of such filing; (c) all Taxes relating to periods ending on or before the Closing Date owed by the Company or any of the Company Subsidiaries (whether or
not shown on any Tax Return) at any time on or prior to the Closing Date, if required to have been paid, have been or will be timely paid (except for Taxes that are being contested in good faith in
appropriate proceedings and that are set forth on Schedule 2.16(c)) hereto; (d) any material liability of the Company or any of the
Subsidiaries for Taxes not yet due and payable, or that is being contested in good faith in appropriate proceedings, has been adequately provided for on the Company's Financial Statements in
accordance with GAAP and the amount of the liability of the Company and the Company Subsidiaries for unpaid Taxes for all periods (or portions thereof) ending on or before the Closing Date shall not,
in the aggregate, exceed the amount of current liability accruals for Taxes (excluding reserves for deferred Taxes net of any provision for net operating losses) as such accruals are reflected in the
Company Financial Statements, except to the extent of Taxes arising out of operations and transactions in the ordinary course of business of the Company and the Company Subsidiaries since the date of
such financial statements in accordance with past practice the accruals for which have been made in a manner consistent with past practice; (e) there is no action, suit, proceeding,
investigation, audit or claim now pending against, or with respect to, the Company or any of the Company Subsidiaries in respect of any material Tax or Tax assessment, nor has any claim for additional
material Tax or Tax assessment been asserted in writing or, to the Company's Knowledge been proposed by any Tax authority; (f) no written claim has been made by any Government Authority in a
jurisdiction where the Company and the Company Subsidiaries do not currently file any Tax Returns that any of them is or may be subject to Tax by such jurisdiction, nor to the Company's Knowledge has
any such assertion been threatened or proposed in writing; (g) neither the Company nor any of the Company Subsidiaries 

11

 

is
a party to any tax sharing agreement or other agreement, whether written or unwritten, providing for the payment of Taxes, payment for Tax losses, entitlements to refunds or similar Tax matters;
(h) the Company and each of the Company Subsidiaries has withheld and paid all material Taxes required to be withheld by the Company or such Company Subsidiary in connection with any amounts
paid or owing to any employee, creditor, independent contractor or other third party; (i) none of the Tax Returns of the Company or any Company Subsidiary are currently being audited by the IRS
or any other applicable Governmental Entity; (j) neither the Company nor any Company Subsidiary has executed or filed with the Internal Revenue Service or any other Governmental Entity any
agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Taxes; (k) neither the Company nor any of the Company Subsidiaries is or
has been a member of any affiliated, combined, unitary or similar group for Tax purposes (other than a group the common parent of which is the Company); and (l) there are no liens for Taxes
(other than current Taxes not yet due and payable) upon the assets of the Company or any of the Company Subsidiaries. 

        For
purposes of this Agreement, "Tax Returns" shall mean all returns, reports, exhibits, schedules, information statements and other
documentation (including any additional or supporting material) filed or maintained, or required to be filed or maintained, in connection with the calculation, determination, assessment or collection
of any Tax and shall include any amended returns required as a result of examination adjustments made by the Internal Revenue Service or other Governmental Entity. For purposes of this Agreement,
"Tax" or "Taxes" shall mean any and all federal, state, local, foreign and other taxes, levies, fees,
imposts and duties of whatever kind (including any interest, penalties or additions to the tax imposed in connection therewith or with respect thereto), including, without
limitation, taxes imposed on, or measured by, income, franchise, profits or gross receipts, and also ad valorem, value added, sales, use, service, real or personal property, capital stock, license,
payroll, withholding, employment, social security, workers' compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and
gains taxes and customs duties. 

        2.17    Litigation.    

        (a)   No
action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the Company's Knowledge, threatened against the Sellers, any Affiliate of the
Sellers, the Company or any Company Subsidiary, before any Governmental Entity or before any arbitrator or panel of arbitrators (collectively,
"Litigation") which the Company reasonably expects will (a) have a Material Adverse Effect on the Company or any Company Subsidiary or
(b) materially impair or delay the ability of any of the Sellers to perform their obligations under this Agreement or consummate the transactions contemplated hereby. Except as set forth on  Schedule 2.17 hereto, there is no Litigation pending or, to the Company's Knowledge, threatened, that seeks damages in excess of $75,000 or
injunctive relief against, or alleges criminal misconduct of, the Company or any Company Subsidiary. 

        (b)   The
Company is involved in an arbitration proceeding relating to the termination of employment of a former employee, and related matters with the former shareholders of
Schmid Oilfield Services, Inc., with respect to which the Company has accrued $848,652 as of June 30, 2003 as reflected in the Company Financial Statements as of such date. The Company
reasonably believes the amount of this accrual is sufficient to cover any liability to the Company that may result from any award made by the arbitrator(s) in such proceeding or any settlement
thereof. 

12

  

        2.18    Environmental Matters.    Except as set forth on  Schedule 2.18 hereto, (i) the real property listed on Schedule 2.9 hereto is free
of contamination from any Hazardous Material except for such contamination that would not adversely impact the value or marketability of such real property in any material respect and that would not
result in liabilities that could reasonably be expected to exceed $75,000; (ii) neither the Company nor any Company Subsidiary has caused or suffered to occur any use, release, transportation,
storage, or disposal of Hazardous Materials on, at, in, under, above, to, from or about any of its real properties except where such use, release, transportation, storage or disposal would not
adversely impact the value or marketability of such real property in any material respect and would not result in liabilities that could reasonably be expected to exceed $75,000; (iii) the
Company and each of the Company Subsidiaries are and have been in compliance with all Environmental Laws, except for such noncompliance that would not result in liabilities which could reasonably be
expected to exceed $75,000; (iv) the Company and each of the Company Subsidiaries have obtained, and are in compliance with, all Permits required by Environmental Laws for the operations of
their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Permits would not result in liabilities that could
reasonably be expected to exceed $75,000, and all such permits are valid, uncontested and in good standing; (v) neither the Company nor any Company Subsidiary is involved in operations or knows
of any facts, circumstances or conditions, including any use, release, transportation, storage, or disposal of Hazardous Materials, that are likely to result in any liabilities which could reasonably
be expected to exceed $75,000, and neither the Company nor any Company Subsidiary has permitted any current or former tenant or occupant of its real property to engage in any such operations;
(vi) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses in excess of
$75,000 or injunctive relief against, or that alleges criminal misconduct by, the Company or any Company Subsidiary; (vii) no notice has been received by the Company or any Company Subsidiary
identifying the addressee as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the Company's Knowledge, there are no facts, circumstances or
conditions that may result in the Company or any Company Subsidiary being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (viii) the Company and
the Company Subsidiaries have provide to Buyer copies of all existing environmental reports, reviews and audits relating to their real property and all other material written information pertaining to
actual or potential Environmental Liabilities. Notwithstanding the foregoing, except as disclosed in Schedule 2.18 hereto, none of the matters
addressed in clauses (i) through (viii) above, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect. 

        2.19    Insurance.    Schedule 2.19(a)
hereto lists all insurance policies of any nature maintained, for current occurrences by the Company or any Company Subsidiary, as well as a summary of the terms of each such policy. All such policies
are in full force and effect. All premiums due on such policies have been paid and no notice of cancellation or termination or intent to cancel has been received by the Company or any Company
Subsidiary with respect to such policies. There is no dispute with respect to such policies. Schedule 2.19(b) hereto sets forth a list of all
pending claims (including with respect to insurance obtained but not currently maintained) and the claims history for the Company and each Company Subsidiary during the last five years (including with
respect to insurance obtained but not currently maintained). 

        2.20    Bank Accounts.    Schedule 2.20
hereto lists all banks and other financial institutions at which the Company and each Company Subsidiary maintains deposit or other accounts or safe deposit boxes and such Schedule correctly
identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, the complete account number therefor and the
authorized signatories or persons having access to such accounts. 

13

 

        2.21    Customers and Suppliers.    There is no actual nor, to the Company's Knowledge,
threatened termination or cancellation of, or any material adverse modification or change in the business relationship of the Company or any Company Subsidiary with any customer or group of customers
whose purchases during the twelve months ended June 30, 2003 caused them to be ranked among the ten largest customers of the Company and the Company Subsidiaries, in the aggregate, or the
business relationship of the Company or any Company Subsidiary with any supplier material to its operations. 

        2.22    Seller Representations.    

        (a)   Each
Seller is not a "foreign person" within the meaning of Section 1445 if the Code and (i) if an individual, he has reached the age of majority and is a
United States citizen or resident; (ii) if a corporation, limited liability company or partnership, it is formed under the laws of a state of the United States and is authorized and otherwise
duly qualified to hold real property and interests therein; and (iii) if the undersigned is a trustee, the undersigned and each co-trustee is such a citizen of such age or a
corporation organized under the laws of the United States, and all trust beneficiaries are such citizens of such age and United States citizens or residents. 

        (b)   Each
of the First Reserve Fund and Randy D. Spaur is an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). Each Seller understands that Buyer will rely upon the exemptions provided by the Securities Act,
Regulation D thereunder and various state securities laws and will rely on the representations and warranties of such Seller contained herein for purposes of such determination. Each Seller is
acquiring Buyer Common Stock for its own account and not with a view to, or for the offer or sale in connection with, any distribution thereof. Each Seller acknowledges that the shares of Buyer Common
Stock have not been registered under the Securities Act, or any state securities laws, and that the shares of Buyer Common Stock may not be transferred or sold except pursuant to a registration
statement filed in accordance with the Securities Act or pursuant to any applicable exemption therefrom under the Securities Act and state securities laws. 

        (c)   Each
Seller has such knowledge of Buyer and its business and such experience in financial and business matters to enable it to evaluate the merits and risks of an
investment in Buyer Common Stock. Each Seller has made an informed investment decision with respect to the shares of Buyer Common Stock to be acquired pursuant to this Agreement. Each Seller
understands that there can be no assurance as to the federal or state tax result of an investment in Buyer Common Stock. Each Seller understands that no state or federal governmental authority has
made any finding or determination relating to the fairness of an investment in Buyer Common Stock and no state or federal governmental authority has recommended or endorsed or will recommend or
endorse an investment in Buyer Common Stock. Each Seller understands that there has been no public market for Buyer Common Stock and it is not likely that after the Closing there will be such a
market. Each Seller understands that the transferability of Buyer Common Stock will be restricted by Buyer's Stockholders' Agreement. 

        (d)   Each
Seller owns the Initial Shares set forth opposite its name on Exhibit A hereto of record and beneficially,
free and clear of any Encumbrances. Each Seller has full power and legal right to cause such Initial Shares to be sold, assigned, transferred and delivered to Buyer, and upon delivery of such Initial
Shares as provided for hereunder, Buyer will acquire good and valid title thereto. 

        (e)   Each
Seller has all requisite power and authority to enter into this Agreement, to consummate the transactions contemplated hereunder and to perform its obligations
under this Agreement. If such Seller is not an individual person, the execution and delivery of this Agreement and the performance of its obligations hereunder have been duly and validly authorized by
such Seller's board of directors, the board of directors of such Seller' general partner or established trust procedures, as applicable, and no other proceedings on the part, or on behalf, of such
Seller is necessary for such execution, delivery and performance. This Agreement has been duly authorized, executed and delivered by such Seller and is a legal, valid and binding obligation of such
Seller, enforceable against such Seller in accordance with its 

14

 

terms
(except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally or by general equitable principles). 

        (f)    The
execution, delivery and performance of this Agreement by each Seller and the consummation of the transactions contemplated hereby do not and will not:
(i) violate any provision of the charter, bylaws or other organizational documents of such Seller; (ii) violate any applicable Law or any judgment, order or decree of any Governmental
Entity applicable to such Seller; or (iii) violate or result in a breach of or constitute (with due notice or lapse of time or both) a default or cause any obligation, penalty or premium to
arise or accrue under any contract, lease, credit or loan agreement, mortgage, security agreement, indenture or other agreement or instrument to which such Seller is a party or by which he or it is
bound or to which any of the properties or assets of such Seller is subject. 

        (g)   Immediately
following Closing, no Seller shall own or otherwise control any assets or properties necessary for the Company and the Company Subsidiaries to conduct their
respective businesses in substantially the same manner as conducted immediately prior to Closing. 

        2.23    Finder's Fees.    Except for remaining fees owed by the Company to Simmons &
Company International that shall not exceed $307,000 (the "Simmons Fee"), neither the Sellers, the Company nor any of their Affiliates have employed or
retained any investment banker, broker, agent, finder or other party, or incurred any obligation for brokerage fees, finder's fees, advisory fees or commissions, with respect to the sale by the
Sellers of the Initial Shares or with respect to the transactions contemplated by this Agreement, or otherwise dealt with anyone purporting to act in the capacity of a finder or broker with respect
thereto whereby any party hereto may be obligated to pay such a fee or commission. The Sellers agree to jointly and severally indemnify and hold Buyer and its Affiliates harmless from and against any
and all claims, liabilities or obligations with respect to all fees, commissions or expenses (other than the Simmons Fee) asserted by any Person on the basis of any act, statement, agreement or
commitment alleged to have been made by the Sellers or any of the Affiliates of the Sellers with respect to any such fee, commission or expense. 

 
 

ARTICLE 3
  REPRESENTATIONS AND WARRANTIES OF BUYER    
    

        Buyer hereby represents and warrants to the Sellers as follows: 

        3.1    Organizational Matters; Buyer Subsidiaries.    

        (a)   Buyer:
(i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) is duly qualified to
conduct business and is in good standing in each other jurisdiction where Buyer's ownership, operation or lease of property or the conduct of its business would require such qualification, except
where the failure to be so qualified would not result in exposure to Buyer of losses, damages or liabilities in excess of $100,000 in the aggregate, taking into account any such failures by Buyer or
any of its subsidiaries; and (iii) has the requisite power and authority and the legal right to own and operate its properties, to lease the property it operates under lease and to conduct its
business as now, heretofore and proposed to be conducted. 

        (b)   Each
direct or indirect Subsidiary of Buyer is set forth on Schedule 3.1(b) hereto (each, a
"Buyer Subsidiary"). Except as set forth thereon, neither Buyer nor any Buyer Subsidiary: (i) is engaged in any joint venture, partnership or
similar arrangement with any other Person; (ii) is an Affiliate or any other Person; or (iii) otherwise holds any equity interest any other Person. 

        (c)   Each
Buyer Subsidiary: (i) is a corporation, limited liability company or limited partnership, as the case may be, duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation or organization, as set forth on Schedule 3.1(c) hereto; (ii) is
duly qualified to conduct business and is in good standing in each other jurisdiction where any Buyer Subsidiary's ownership, operation or lease of property or the conduct of its business would
require such 

15

 

qualification,
except where the failure to be so qualified would not result in exposure to losses, damages or liabilities in excess of $100,000 in the aggregate, taking into account any such failures
by Buyer or any of the Buyer Subsidiaries; and (iii) has the requisite power and authority and the legal right to own and operate its properties, to lease the property it operates under lease
and to conduct its business as now, heretofore and proposed to be conducted. 

        3.2    Capitalization; Title to Shares.    

        (a)   The
authorized capital of Buyer consists of 6,500,000 shares of Buyer Common Stock, par value $0.01 per share, of which 4,228,070 shares are issued and outstanding, and
500,000 shares of preferred stock, par value $0.01 per share, of which 225,000 shares have been designated shares of Series A 10% Cumulative Preferred Stock (the
"Preferred Stock"), of which 159,012.604 such shares are issued and outstanding; provided,  however, that
prior to the Closing Buyer may increase the authorized number of shares of Buyer Common Stock to 7,500,000 shares and may exchange and
convert its outstanding shares of Preferred Stock into shares of Buyer Common Stock (the "Preferred Stock Exchange"). The issued and outstanding shares
of Buyer Common Stock have been duly authorized and validly issued and are fully paid and non-assessable and were not issued in violation of any preemptive, preferential purchase or other
similar rights of any Person. Buyer has outstanding (i) warrants to acquire 870,000 shares of Buyer Common Stock and (ii) options to acquire 261,160 shares of Buyer Common Stock. Other
than as (i) set forth on Schedule 3.2 hereto, (ii) set forth in the Stockholders' Agreement, dated December 21, 2000 (the
"Buyer Stockholders' Agreement") by and among Basic Energy Services, Inc. (as predecessor-in-interest to Buyer) and the
stockholders named therein, as amended through the date hereof, or (iii) contemplated by the Preferred Stock Exchange, Buyer has no outstanding options, warrants, convertible securities, calls,
rights, commitments, preemptive rights, agreements, arrangements or understandings of any character obligating Buyer to (a) issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Buyer or any securities or obligations convertible into or exchangeable for shares of capital stock of Buyer or (b) grant, extend or enter into any such
option, warrant, convertible security, call, right, commitment, preemptive right, agreement, arrangement or understanding. 

        (b)   Upon
delivery of the shares of Buyer Common Stock to the Sellers as provided hereunder, each Seller will acquire good and valid title thereto, and such shares of Buyer
Common Stock will be validly issued, fully paid and non-assessable. 

        3.3    Validity of Agreement; Authorization.    Buyer has all requisite power and authority to
enter into this Agreement, to consummate the transactions contemplated hereunder and to perform its obligations
under this Agreement. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly and validly authorized by Buyer's board of directors and no other
proceedings on the part, or on behalf, of Buyer are necessary to effect such execution, delivery and performance. This Agreement has been duly authorized, executed and delivered by Buyer and is a
legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally or by general equitable principles). 

        3.4    No Conflict or Violation.    The execution, delivery and performance of this Agreement
by Buyer and the consummation of the transactions contemplated hereby do not and will not: (a) violate any provision of the charter, bylaws or other organizational documents of Buyer or any of
the Buyer Subsidiaries; (b) violate any applicable Law or any judgment, order or decree of any Governmental Entity applicable to Buyer, the Buyer Subsidiaries or any of the respective
properties or assets of Buyer or the Buyer Subsidiaries; (c) violate or result in a breach of or constitute (with due notice or lapse of time or both) a default or cause any obligation, penalty
or premium to arise or accrue under any contract, lease, credit or loan agreement, mortgage, security agreement, indenture or other agreement or instrument to which Buyer or any of the Buyer
Subsidiaries is a party or by which any of them is 

16

 

bound
or two which any of the respective properties or assets of Buyer or the Buyer Subsidiaries is subject; (d) result in the creation of imposition of any Encumbrance upon any of the
properties or assets of Buyer or any of the Buyer Subsidiaries; or (e) result in the cancellation, modification, revocation or suspension of any License of Buyer or any of the Buyer
Subsidiaries, except in the case of clauses (b), (c),  (d) and (e) above that would not have a Buyer Material Adverse Effect. 

        3.5    Consents and Approvals.    Except as disclosed on  Schedule 3.5 hereto, no consent,
approval, waiver or authorization of, or filing, registration or qualification with, any Governmental Entity or
any other Person (on the part of Buyer or any of the Buyer Subsidiaries) is required for Buyer to execute and deliver this Agreement or to perform its respective obligations hereunder, except that
would not have a Buyer Material Adverse Effect.. 

        3.6    Financial Statements.    Attached as  Schedule 3.6 hereto are true, correct and
complete copies of: (a) the audited consolidated balance sheets, statements of income and
statements of cash flows of Buyer as of and for the years ended December 31, 2000, December 31, 2001 and December 31, 2002 and (b) the unaudited consolidated balance sheet,
statement of income and statement of cash flows of Buyer as of and for the three-month period ended March 31, 2003 and the six-month period ended June 30, 2003 (collectively,
the "Buyer Financial Statements"). The Buyer Financial Statements: (x) have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered; (y) fairly present the financial position of Buyer as of their respective dates and the results of operations of Buyer for the periods indicated therein; and
(z) have not been rendered untrue, incomplete or unfair as representations of the financial condition of Buyer as of the respective dates of the Buyer Financial Statements by events subsequent
to the respective dates of the Buyer Financial Statements. 

        3.7    Absence of Undisclosed Liabilities.    

        Except
as disclosed on Schedule 3.7 hereto or on the unaudited Buyer Financial Statements as of June 30, 2003, neither Buyer
nor any of the Buyer Subsidiaries has any indebtedness or liability, absolute or contingent, which is not shown or provided for in the Buyer Financial Statements, other than (a) liabilities
incurred or accrued in the ordinary course of business consistent with past practice since June 30, 2003 or (b) liabilities of Buyer or any Buyer Subsidiary that individually or in the
aggregate are not material to Buyer and that are not required by GAAP to be included in the Buyer Financial Statements. 

        3.8    Absence of Certain Changes.    Except as set forth on  Schedule 3.8 hereto, since
December 31, 2002, the business of Buyer and each of the Buyer Subsidiaries has been conducted in the ordinary
course of business consistent with past practices and neither Buyer nor any of the Buyer Subsidiaries has taken any of the actions described in Sections
4.2(a) through (g), (j) through  (q), (t) and (v) hereof, except in connection with
entering into this Agreement. 

        3.9    Title to and Condition of Properties.    

        (a)   Except
as set forth on Schedule 3.9(a) hereto, Buyer has good and marketable title to all of its owned real
property, free and clear of all Encumbrances, except for Permitted Encumbrances. 

        (b)   Except
as set forth on Schedule 3.9(b) hereto, (i) all leases of real property to which Buyer or any of the
Buyer Subsidiaries is a party on the date hereof or by which any of them is presently bound (whether as lessee or lessor) are in full force and effect and are valid and enforceable in accordance with
their terms, (ii) there is not under any such lease any default by Buyer or any of the Buyer Subsidiaries or, to Buyer's Knowledge, any other Person, or any event that with notice or lapse of
time or both would constitute a default and (iii) Buyer or any Buyer Subsidiary is in possession of the real property covered under any such lease except as set forth on  Schedule 3.9(b) hereto
in which it is a lessee. 

17

 

        (c)   Except
as pledges made pursuant to the Buyer Credit Facility, Buyer and the Buyer Subsidiaries have good and indefeasible title to, or valid and subsisting leasehold
interests in, all of the personal property reflected on the Buyer Financial Statements or used or useful in their respective businesses, free and clear of all Encumbrances. 

        3.10    Intellectual Property.    Except as set forth on  Schedule 3.10 hereto: (i) Buyer
or a Buyer Subsidiary owns all right, title and interest in and to, or has a valid and enforceable license
or other right to use lawfully, all the Intellectual Property used by Buyer or the Buyer Subsidiaries in connection with their businesses, free and clear of any Encumbrances; (ii) neither Buyer
nor any of the Buyer Subsidiaries has infringed or otherwise violated the Intellectual Property of any other Person; (iii) to Buyer's Knowledge, no Person has infringed or otherwise violated
the Intellectual Property of Buyer and the Buyer Subsidiaries; (iv) the consummation of the transactions contemplated in this Agreement will not alter, impair or extinguish any Intellectual
Property of Buyer and the Buyer Subsidiaries; and (v) to Buyer's Knowledge, there are no agreements, judicial orders or settlement agreements which limit or restrict Buyer's or any of the Buyer
Subsidiaries' rights to use any Intellectual Property. 

        3.11    Licenses, Permits and Governmental Approvals.    Except as set forth on  Schedule 3.11
hereto, (a) Buyer and each Buyer Subsidiary have all Licenses as are necessary for the conduct of their respective
businesses as currently conducted; (b) each License has been issued to, and duly obtained and fully paid for by, the holder thereof and is valid, in full force and effect, except where such
invalidity or failure to be in full force and effect would not have a Buyer Material Adverse Effect, and (c) none of such Licenses will terminate or become terminable as a result of the
transactions contemplated by this Agreement. Notwithstanding anything to the contrary in this Section 3.11, the representations and warranties in
this Section 3.11 shall not apply to (x) any right to Intellectual Property (which shall be subject to the representations in  Section 3.10
hereof) or (y) any License required under applicable Environmental Law (which shall be subject to the representations in  Section 3.18 hereof).
 

        3.12    Compliance with Law.    Except with respect to Tax matters (which are provided for in  Section 3.16 hereof), Intellectual Property matters (which are provided for in  Section 3.10 hereof) or environmental, health and safety matters (which are
provided for in  Section 3.18 hereof) and except as set forth on Schedule 3.12 hereto, the operations of
Buyer and each of the Buyer Subsidiaries are and have been conducted in material compliance with all applicable laws, regulations, orders and other requirements of all Governmental Authorities having
jurisdiction over Buyer and the Buyer Subsidiaries and their respective assets, properties and operations. 

        3.13    Material Contracts.    Except as set forth on  Schedule 3.13 hereto, (i) each
Contract (or group of related Contracts) to which Buyer or any Buyer Subsidiary is a party, by which any of
them is bound or otherwise relating or affecting any of their assets, properties or operations that involves the payment to or by Buyer or any Buyer Subsidiary of more than $75,000 over the course of
twelve consecutive months (a "Buyer Material Contract") is (A) in full force and effect and is a valid and binding obligation of Buyer or the
Buyer Subsidiary party to such Contract and (B) to Buyer's Knowledge, a valid and binding obligation of each other party thereto, (ii)(A) Buyer or the Buyer Subsidiary party to such
Contract is not in breach thereof or default thereunder (and no event or circumstance has occurred that with notice, or lapse of time or both, would constitute an event of default), (B) to
Buyer's Knowledge, no other party to any such Contract is in breach thereof or default thereunder; (iii) there is no pending or, to Buyer's Knowledge, threatened litigation with respect to any
such Contract; and (iv) the enforceability of all of such Contracts will not be affected in any manner by the execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. 

        3.14    Labor Matters.    As of the date hereof, (a) no strikes or other material labor
disputes against Buyer or any Buyer Subsidiary are pending or, to Buyer's Knowledge, threatened; (b) the hours worked 

18

 

by
and payments made to employees of Buyer and each Buyer Subsidiary comply with the Fair Labor Standards Act and each other federal, state, local or foreign Law applicable to such matters;
(c) all payments due from Buyer and each Buyer Subsidiary for employee health and welfare insurance have been paid or accrued as a liability on the books of Buyer or such Buyer Subsidiary;
(d) except as set forth on Schedule 3.14(d) hereto, neither Buyer nor any Buyer Subsidiary is a party to or bound by any collective
bargaining agreement, management agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or
arrangement; (e) there is no organizing activity involving Buyer or any Buyer Subsidiary pending or, to Buyer's Knowledge, threatened by any labor union or group of employees; (f) there
are no representation proceedings pending or, to Buyer's Knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of Buyer or any Buyer Subsidiary
has made a pending demand for recognition; and (g) except as set forth in Schedule 3.14(g) hereto, there are no material complaints or
charges against Buyer or any Buyer Subsidiary pending or, to Buyer's Knowledge, threatened to be filed with any Governmental Entity or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by Buyer or any Buyer Subsidiary of any individual. 

        3.15    ERISA.    For purposes of this  Section 3.15, unless otherwise indicated, all
references to "Buyer" include Buyer and each ERISA Affiliate of Buyer. 

        (a)   Since
December 31, 2002, there has not been any adoption or amendment by Buyer of any Benefit Plans. 

        (b)   Buyer
does not sponsor, maintain, participate in or contribute to, and has not at any time sponsored, maintained, participated in or contributed to (and never has been
required to contribute to), any (i) "multiemployer plan" as that term is defined in Section 414(f) of the Code or Section 4001(a)(3) of ERISA; (ii) foreign Benefit Plans;
or (iii) voluntary employee benefit associations intended to be exempt from Federal income Tax under Section 501(c)(9) of the Code, and neither the Buyer nor any Benefit Plan maintains
or contributes to any group annuity contract. 

        (c)   Each
Pension Plan that is subject to Section 201, 301 or 401 of ERISA has been the subject of a determination letter from the IRS to the effect that such Pension
Plan is qualified under Section 401(a) of the Code, as currently in effect, or can still be submitted in a timely manner to the IRS for such a letter, and no such determination letter has been
revoked nor, to Buyer's Knowledge, has revocation of any such letter been threatened, nor has any such Pension Plan been amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualification or increase its costs, and to Buyer's Knowledge, nothing has occurred or failed to occur in connection with the adoption or
maintenance of such Pension Plan which would cause the loss of such qualification, and all amendments required to be adopted before the Closing Date for any such Pension Plan to continue to be so
qualified have been or will be duly and timely adopted. Each Pension Plan that is not subject to Section 201, 301 or 401 of ERISA has timely filed the statement required by 29 CFR
2520.104-23. Buyer and each ERISA Affiliate has paid all premiums (including any applicable interest, charges and penalties for late payment) due the PBGC with respect to each Pension Plan
for which premiums to the PBGC are required. No Pension Plan in whole or in part ever maintained by Buyer or any ERISA Affiliate has been terminated or partially terminated under circumstances which
would result in liability to the PBGC. 

        (d)   Each
of the Benefit Plans which is sponsored by Buyer or any ERISA Affiliate: (i) is in compliance with all reporting and disclosure requirements of Part 1
of Subtitle B of Title I of ERISA or other applicable law, (ii) has had the appropriate required Form 5500 (or equivalent annual report) timely filed with the appropriate governmental
authority for each year of its existence, (iii) has at all times complied with the bonding requirements of Section 412 of ERISA or other applicable law, (iv) has no issue pending
(other than the payment of benefits in the normal course) nor any issue 

19

 

resolved
adversely to Buyer which may subject Buyer to the payment of any material penalty, interest, tax or other obligation, nor is there any basis for any imposition of any such liability, and
(v) has been maintained in all material respects with the requirements of ERISA and the Code and other applicable Law (including all rules and regulations issued thereunder) not otherwise
covered hereunder so as not to give rise to any liabilities to Buyer. 

        (e)   The
execution of this Agreement or the consummation of the transactions contemplated by this Agreement will not give rise to any, or trigger any, change of control,
accelerated vesting, severance or other similar provisions in any Benefit Plan. 

        (f)    No
Pension Plan that is subject to Title IV of ERISA and which Buyer or any ERISA Affiliate maintains, or to which Buyer or any ERISA Affiliate is obligated to
contribute had, as of December 31, 2002, an "unfunded benefit liability" (as such term is defined in Section 4001(a)(18) of ERISA), based on actuarial assumptions which have been
furnished to the Company. None of the Pension Plans of Buyer or any ERISA Affiliate which are subject to Section 302 of ERISA or Section 412 of the Code has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived. No Pension Plan sponsored by Buyer or any ERISA Affiliate has a
"liquidity shortfall" as defined in Section 412(m)(5) of the Code. No notice has been required under Section 4011 of ERISA with respect to any Pension Plan sponsored by Buyer or any
ERISA Affiliate, or to which Buyer or any ERISA Affiliate is obligated to contribute. No event described in Section 401(a)(29) of the Code has occurred or can reasonably be expected to occur
with respect to Buyer. No "reportable event" (as that term is defined in Section 4043 of ERISA and for which the 30-day notice requirement has not been waived) has occurred with
respect to any such Pension Plan within the last six years prior to the Closing Date, other than as may arise as a result of the consummation of the transactions contemplated by this Agreement. Each
such Pension Plan of Buyer or any ERISA Affiliate (including any such plan covering retirees or other former employees) may be amended or terminated without liability (other than with respect to
pension benefits in the ordinary course) to Buyer on or at any time after the consummation of the transactions contemplated by this Agreement without contravening the terms of such plan, or any Law or
agreement that pertains to Buyer. 

        (g)   None
of Buyer, the officers of Buyer, the Benefit Plans (including the Pension Plans) or any fiduciary of any Benefit Plan which are subject to ERISA, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term is defined in Section 406, 407 or 408 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject Buyer or the officers of Buyer to the tax or penalty on prohibited transactions imposed by such Section 4975 or to any liability under
Section 502(i) or (1) of ERISA, or any other provision of ERISA, which would have any adverse effect on the properties, business, results of operation or financial condition of
Buyer. 

        (h)   With
respect to any Welfare Plan, (i) each such Welfare Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with the applicable requirements of Part 6 of Title I of ERISA and Section 4980B(f) of the Code and other applicable Law and (ii) each such
Welfare Plan (including any such plan covering retirees or other former employees) may be amended (including, without limitation, to prospectively curtail or discontinue benefits and/or impose or
increase employee, retiree or other former employee participant contribution requirements) or terminated without liability (other than with respect to welfare benefits in the ordinary course) to Buyer
on the consummation of the transactions contemplated by this Agreement without contravening the terms of such plan, or any Law or agreement that pertains to Buyer. 

        (i)    All
contributions required by Law or by a collective bargaining or other agreement to be made under the Benefit Plans with respect to all periods through the Closing
Date, including a pro rata share of contributions due for the current plan year, will have been made by such date or provided for 

20

 

by
adequate reserves properly reflected on the books of Buyer in accordance with GAAP. No changes in contributions or benefit levels have been implemented or negotiated (but not yet implemented), with
respect to any Benefit Plan since the date on which the information provided in the attached Disclosure Schedule has been provided, and no such changes are scheduled to occur other than in the
ordinary course of business. 

        (j)    Buyer
does not have and will not have any liability or obligation for taxes, penalties, contributions, losses, claims, damages, judgments, settlement costs, expenses,
costs, or any other liability or liabilities of any nature whatsoever arising out of or in any manner relating to any Benefit Plan that has been, or is, contributed to (or required to be contributed
to) by Buyer or any ERISA Affiliate. 

        3.16    Taxes.    (a) Buyer and each of the Buyer Subsidiaries has filed (or joined in the
filing of) when due all U.S. and other material Tax Returns required by applicable Law to be filed with any Governmental Entity; (b) all such Tax Returns were true, correct and complete in all
material respects as of the time of such filing; (c) all Taxes relating to periods ending on or before the Closing Date owed by Buyer or any of the Buyer Subsidiaries (whether or not shown on
any Tax Return) at any time on or prior to the Closing Date, if required to have been paid, have been or will be timely paid (except for Taxes that are being contested in good faith in appropriate
proceedings and, to the extent the amount being contested exceeds $50,000, that are set forth on Schedule 3.16(c) hereto); (d) any
material liability of Buyer or any of the Purchaser Subsidiaries for Taxes not yet due and payable, or that is being contested in good faith in appropriate proceedings, has been adequately provided
for on the financial statements of Buyer in accordance with GAAP and the amount of the liability of Buyer and the Buyer Subsidiaries for unpaid Taxes for all periods (or portions thereof) ending on or
before the Closing Date shall not, in the aggregate, exceed the amount of the current liability accruals for Taxes (excluding reserves for deferred Taxes) as such accruals are reflected in the Company
Financial Statements, except to the extent of Taxes arising out of operations and transactions in the ordinary course of business of the Company and the Company Subsidiaries since the date of such
financial statements in accordance with past practice the accruals for which have been made in a manner consistent with past practice; (e) there is no action, suit, proceeding, investigation,
audit or claim now pending against, or with respect to, Buyer or any of the Buyer Subsidiaries in respect of any material Tax or Tax assessment, nor has any claim for additional material Tax or Tax
assessment been asserted in writing or, to Buyer's Knowledge been proposed by any Tax authority; (f) no written claim has been made by any Government Authority in a jurisdiction where Buyer and
the Buyer Subsidiaries do not currently file any Tax Returns that any of them is or may be subject to Tax by such jurisdiction, nor to Buyer's Knowledge has any such assertion been threatened or
proposed in writing; (g) neither Buyer nor any of the Buyer Subsidiaries is a party to any tax sharing agreement or other agreement, whether written or unwritten, providing for the payment of
Taxes, payment for Tax losses, entitlements to refunds or similar Tax matters; (h) Buyer and each of the Buyer Subsidiaries has withheld and paid all material Taxes required to be withheld by
Buyer or such Buyer Subsidiary in connection with any amounts paid or owing to any employee, creditor, independent contractor or other third party; (i) none of the Tax Returns of Buyer or any
Buyer Subsidiary are currently being audited by the IRS or any other applicable Governmental Entity; and (j) neither Buyer nor any Buyer Subsidiary has executed or filed with the Internal
Revenue Service or
any other Governmental Entity any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Taxes. 

        3.17    Litigation.    No Litigation is now pending nor, to Buyer's Knowledge, threatened
against Buyer, any Affiliate of Buyer, or any Buyer Subsidiary, before any Governmental Entity or before any arbitrator or panel of arbitrators which Buyer reasonably expects will (a) have a
Material Adverse Effect on Buyer or any Buyer Subsidiary or (b) materially impair or delay the ability of Buyer or any Buyer Subsidiary to perform its obligations under this Agreement or
consummate the transactions contemplated hereby. Except as set forth on Schedule 3.17 hereto, there is no Litigation pending nor, to 

21

 

Buyer's
Knowledge, threatened, that seeks damages in excess of $150,000 or injunctive relief against, or alleges criminal misconduct of, Buyer or any Buyer Subsidiary. 

        3.18    Environmental Matters.    Except as set forth on  Schedule 3.18 hereto, (i) the
real property owned or leased by Buyer or any Buyer Subsidiary is free of contamination from any Hazardous
Material except for such contamination that would not adversely impact the value or marketability of such real property in any material respect and that would not result in liabilities that could
reasonably be expected to exceed $150,000; (ii) neither Buyer nor any Buyer Subsidiary has caused or suffered to occur any use, release, transportation, storage, or disposal of Hazardous
Materials on, at, in, under, above, to, from or about any of its real properties except where such use, release, transportation, storage or disposal would not adversely impact the value or
marketability of such real property in any material respect and would not result in liabilities that could reasonably be expected to exceed $150,000; (iii) Buyer and each of the Buyer
Subsidiaries are and have been in compliance with all Environmental Laws, except for such noncompliance that would not result in liabilities which could reasonably be expected to exceed $150,000;
(iv) Buyer and each of the Buyer Subsidiaries have obtained, and are in compliance with, all Permits required by Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Permits would not result in liabilities that could reasonably be expected to exceed
$150,000, and all such Permits are valid, uncontested and in good standing; (v) neither Buyer nor any Buyer Subsidiary is involved in operations or knows of any facts, circumstances or
conditions, including any use, release, transportation, storage, or disposal of Hazardous Materials, that are likely to result in any liabilities which could reasonably be expected to exceed $150,000,
and neither Buyer nor any Buyer Subsidiary has permitted any current or former tenant or occupant of its real property to engage in any such operations; (vi) there is no Litigation arising
under or related to any Environmental Laws, Environmental Permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses in excess of $150,000 or injunctive relief against, or
that alleges criminal misconduct by, Buyer or any Buyer Subsidiary; (vii) no notice has been received by Buyer or any Buyer Subsidiary identifying the addressee as a "potentially responsible
party" or requesting information under CERCLA or analogous state statutes, and to Buyer's Knowledge, there are no facts, circumstances or conditions that may result in Buyer or any Buyer Subsidiary
being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (viii) Buyer and the Buyer Subsidiaries have provide to Sellers copies of all existing
environmental reports, reviews and audits relating to their real property and all other material written information pertaining to actual or potential Environmental Liabilities. Notwithstanding the
foregoing, except as disclosed in Schedule 3.18 hereto, none of the matters addressed in clauses
(i) through (viii) above, individually or in the aggregate, could reasonably be expected to have a Buyer Material Adverse
Effect. 

        3.19    Insurance.    Schedule 3.19
hereto lists all insurance policies of any nature maintained, for current occurrences by Buyer or any Buyer Subsidiary, as well as a summary of the terms of each such policy. All such policies are in
full force and effect. All premiums due on such policies have been paid and no notice of cancellation or termination or intent to cancel has been received by Buyer or any Buyer Subsidiary with respect
to such policies. There is no dispute with respect to such policies. 

        3.20    Customers and Suppliers.    There is no actual nor, to Buyer's Knowledge, threatened
termination or cancellation of, or any material adverse modification or change in the business relationship of Buyer or any Buyer Subsidiary with any customer or group of customers whose purchases
during the twelve months ended June 30, 2003 caused them to be ranked among the ten largest customers of Buyer and the Buyer Subsidiaries, in the aggregate, or the business relationship of
Buyer or any Buyer Subsidiary with any supplier material to its operations. 

        3.21    Finder's Fees.    Neither Buyer nor any Affiliate of Buyer has employed or retained
any investment banker, broker, agent, finder or other party, or incurred any obligation for brokerage fees, finder's fees or commissions, with respect to the transactions contemplated by this
Agreement, or 

22

 

otherwise
dealt with anyone purporting to act in the capacity of a finder or broker with respect thereto whereby any party hereto may be obligated to pay such a fee or a commission. Buyer agrees to
indemnify and hold the Sellers and their respective Affiliates harmless from and against any and all claims, liabilities or obligations with respect to all fees, commissions or expenses asserted by
any Person on the basis of any act, statement, agreement or commitment alleged to have been made by Buyer or any Affiliate of Buyer with respect to any such fee, commission or expense. 

 
 

ARTICLE 4
  ADDITIONAL AGREEMENTS    
    

        4.1    Access to Information; Confidentiality.    

        (a)   Until
the Closing, the Sellers will furnish, and will cause the Company to furnish, Buyer and its employees, officers, accountants, attorneys, agents, investment bankers
and other authorized representatives (the "Buyer Representatives") with all financial, operating and other data and information concerning the assets,
commitments and properties of the Company and the Company Subsidiaries as Buyer shall from time to time reasonably request and will afford Buyer Representatives reasonable access to the offices,
properties, books, records, contracts and documents of the Company and the Company Subsidiaries and will be given the opportunity to ask questions of, and receive answers from, representatives of the
Company and the Company Subsidiaries. As part of its investigation, Buyer shall have the right to conduct environmental assessments of the Company's and the Company Subsidiaries' properties, including
soil and groundwater sampling, as it deems appropriate. No investigations by Buyer or the other Buyer Representatives shall reduce or otherwise affect the obligation or liability of the Sellers with
respect to any representations, warranties, covenants or agreements made herein or in any exhibit, schedule or other certificate, instrument, agreement or document, including the Schedules referred to
in Article 2 hereof, executed and delivered in connection with this Agreement, except as specifically provided in  Section 7.3(a)(iii) hereof. The
Company, the Company Subsidiaries and the Sellers will cooperate with Buyer and the Buyer Representatives in the
preparation of any documents or other materials that may be required by any Governmental Entity. 

        (b)   Until
the Closing, Buyer and the Buyer Subsidiaries will furnish each Seller and its employees, officers, accountants, attorneys, agents, investment bankers and other
authorized representatives (the "Seller Representatives") with all financial, operating and other data and information concerning the assets,
commitments and properties of Buyer and the Buyer Subsidiaries as Sellers shall from time to time reasonably request and will afford the Seller Representatives reasonable access to the offices,
properties, books, records, contracts and documents of Buyer and the Buyer Subsidiaries and will be given the opportunity to ask questions of, and receive answers from, representatives of Buyer and
the Buyer Subsidiaries; provided, however, that Buyer and the Buyer Subsidiaries shall not be required
to violate any of their obligations under any confidentiality agreement with a Person other than a party to this Agreement or an Affiliate thereof. No investigations by Sellers or the other Sellers
Representatives shall reduce or otherwise affect the obligation or liability of Buyer and the Buyer Subsidiaries with respect to any representations, warranties, covenants or agreements made herein or
in any exhibit, schedule or other certificate, instrument, agreement or document, including the Schedules referred to in Article 3 hereof,
executed and delivered in connection with this Agreement, except as specifically provided in Section 7.3(a)(iv) hereof. Buyer and the Buyer
Subsidiaries will cooperate with Sellers and the Seller Representatives in the preparation of any documents or other materials that may be required by any Governmental Entity. 

        (c)   The
parties to the Mutual Confidentiality and Nondisclosure Agreement, dated as of June 24, 2003 (the "Nondisclosure
Agreement"), among the Company, First Reserve Corporation and the Basic Energy Services, Inc. agree to the continued terms thereof. 

23

 

        (d)   Each
Seller (other than the First Reserve Fund, which is bound by the Nondisclosure Agreement) agrees to hold in confidence all, and not to disclose to others for any
reason whatsoever any, non-public information received by it or its representatives from the other party hereto in connection with the transactions contemplated by this Agreement except
(i) as required by law; (ii) for disclosure to officers, directors, employees and representatives of such party as necessary in connection with the transactions contemplated hereby or as
necessary to the operation of such party's business; and (iii) for information that becomes publicly available other than through such party. If the transactions contemplated by this Agreement
are not consummated, each party hereto (a) will return to the other party hereto all non-public documents and other material obtained from such other party, and all copies,
summaries and extracts thereof, or certify to such other party that such information has been destroyed and (b) agrees not to use for its own benefit or for the benefit of any other Person any
non-public information received by it or its representatives or Affiliates from the other party in connection with the transactions contemplated by this Agreement. 

        (e)   Notwithstanding
anything to the contrary in this Agreement, each party hereto may disclose to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the transactions contemplated hereby, and all materials of any kind (including opinions, if any or other tax analyses, if any) that are provided to it relating to such tax treatment
and tax structure; provided, however, that this sentence shall not permit any disclosure that otherwise
is prohibited by this Agreement (i) until the earlier of (x) the date of the public announcement of discussions relating to the Transaction, (y) the date of the public
announcement of the Transaction, and (z) the date of the execution of an agreement (with or without conditions) to enter into the Transaction; or (ii) if such disclosure would result in
a violation of federal or state securities laws; or (iii) to the extent not related to the tax structure or tax aspects of the transaction. Moreover, nothing in this Agreement shall be
construed to limit in any way any party's ability to consult any tax advisor regarding the tax treatment or tax structure of the transactions contemplated hereby. For the purposes of the foregoing
sentence, (i) the "tax treatment" of a transaction means the purported or claimed federal income tax treatment of the transaction, and (ii) the "tax structure" of a transaction means any
fact that may be relevant to understanding the purported or claimed federal income tax treatment of the transaction. Thus, for the avoidance of doubt, the parties acknowledge and agree that the tax
treatment and tax structure of any transaction does not include the name of any party to a transaction or any sensitive business information unless such information is related or relevant to the
purported or claimed federal income tax treatment of the transaction. 

        4.2    Conduct of Business.    The Company and the Sellers, on the one hand, and Buyer, on the
other hand, covenant and agree with such other party that from and after the date hereof until the Closing, except as expressly contemplated by this Agreement or as expressly consented to in writing
by such other party, to, and to cause the Company Subsidiaries (in the case of the Company and the Sellers) and the Buyer Subsidiaries (in the case of the Buyer) to, as the case may be: 

        (a)   operate
each such entity only in the usual, regular and ordinary manner consistent with past practice with a view to maintaining the goodwill that each such entity now
enjoys and, to the extent consistent with such operation, use all reasonable efforts to preserve intact its present business organization, keep available the services of their respective employees and
preserve their relationships with their respective customers, suppliers, jobbers, distributors and other Persons having business relations with each such entity; 

        (b)   use
all reasonable efforts to maintain the assets of each such entity in a state of repair, order and condition consistent with past practice; 

        (c)   maintain
the books of account and records relating to each such entity in the usual, regular and ordinary manner, in accordance with the usual accounting practices of
each such entity applied on a consistent basis and not increase the carrying value of any assets above their historical costs; 

24

 

        (d)   comply
in all material respects with all statutes, laws, orders and regulations applicable to each such entity and to the businesses, operations, properties or assets of
each such entity; 

        (e)   not
sell, assign, transfer, lease or otherwise dispose of any assets or properties of any such entity, except for dispositions of the inventories for value in the usual
and ordinary course of business consistent with past practice; 

        (f)    preserve
and maintain all rights that each such entity now enjoys in and to its respective Intellectual Property and not sell, assign, transfer, lease or otherwise
dispose of any of such Intellectual Property; 

        (g)   not
mortgage, pledge or otherwise create a security interest or permit there to be created or exist any Encumbrances on the existing assets or properties of each such
entity; 

        (h)   not
incur any obligation for borrowed money or purchase money indebtedness whether or not evidenced by a note, bond, debenture or similar instrument, except in the
ordinary course of business consistent with past practice (and in no event in an amount greater than $250,000 in the aggregate); 

        (i)    not
enter into any Contract that is not in the ordinary course of business consistent with past practice or that is with an Affiliate of any such entity; 

        (j)    not
amend or modify any Company Material Contract (in the case of the Company or any Company Subsidiary) or Buyer Material Contract (in the case of Buyer or any Buyer
Subsidiary), except in the ordinary course of business consistent with past practices and as would not material adversely effect such entity's rights under any such contract; 

        (k)   not
consent to the termination of any Company Material Contract (in the case of the Company or any Company Subsidiary) or Buyer Material Contract (in the case of Buyer
or any Buyer Subsidiary) or waive any of the rights of any of such entities with respect thereto; 

        (l)    not
permit any insurance policy naming any such entity as a beneficiary or a loss payee to be canceled or terminated or any of the coverage thereunder to lapse unless
simultaneously with such termination or cancellation replacement policies providing substantially the same coverage are in full force and effect; 

        (m)  pay
when due all accounts payable, all payments required by any Company Material Contract or Buyer Material Contract, and all Taxes (other than Taxes that are being
contested in good faith and for which adequate reserves exist in the Company Financial Statements or Buyer Financial Statements and that would not result in an Encumbrance being imposed on any assets
or properties of any of such entities); 

        (n)   not
make or rescind any material express or deemed election relating to Taxes, settle or compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or except as may be required by applicable Law, make any change to any of its material methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its most recently filed federal income tax return; 

        (o)   not
make or change any method of accounting or application of any principles under GAAP; 

        (p)   not
change the terms of employment of any officer or senior employee or increase the compensation or rate of compensation or commissions or bonuses payable by any of
such entities to any of their respective employees; 

        (q)   not
declare or pay any dividend on or make any other distribution in respect of any of the shares in the capital stock of any of such entities, or purchase, redeem or
otherwise acquire any of such shares other than in the Preferred Stock Exchange; 

25

 

        (r)   not
authorize or issue, sell, pledge, dispose of or encumber any shares of capital stock of the Company or any Company Subsidiary;  provided, that Buyer may issue shares of capital stock or securities
convertible thereinto having an aggregate value of up to $20 million (based
on the Buyer Per Share Value) and Buyer may issue shares of Buyer Common Stock in connection with the Preferred Stock Exchange; 

        (s)   not
grant any stock options, warrants or other rights to acquire capital stock (including any "phantom" shares) of the Company or any Company Subsidiary, other than, in
the case of Buyer, in connection with any employee compensation arrangement; 

        (t)    not
amend or otherwise modify the Certificate of Incorporation, bylaws, or organizational documents of any of such entities, except as contemplated by  Section 3.2 hereof; 

        (u)   not
amend any Benefit Plan except as required by Law or this Agreement; and 

        (v)   promptly
notify such other party in writing if any of such entities becomes aware of any change in the business or operations of any of such entities that shall have
occurred or that shall have been threatened (or any development that shall have occurred or that shall have been threatened involving a prospective change) that would reasonably be expected to have
Company Material Adverse Effect (in the case of the Company or any Company Subsidiary) or a Buyer Material Adverse Effect (in the case of Buyer or any Buyer Subsidiary). 

Notwithstanding
the foregoing, (x) clauses (h), (i), and  (u) above apply only to the Sellers, the Company and the
Company Subsidiaries and do not apply to Buyer or any of the Buyer Subsidiaries;
(y) Buyer may amend the Buyer Credit Facility or enter into a new credit facility or replace the Buyer Credit Facility; and (z) Buyer may make such changes to the terms and provisions of
its outstanding equity securities and options or warrants convertible thereinto and its outstanding indebtedness, including the maturities thereof (including, without limitation, any amendments or
modifications to the documents described in clause (t) above), (A) as may be required by the lenders in connection with amending the Buyer
Credit Facility or the Company Credit Facility or in connection with entering into a new credit facility to replace either of such facilities or (B) as may be requested by the holders of such
securities. 

        4.3    Negotiation with Others.    The Company and the Sellers agree that from the date hereof
until the Closing Date or the termination of this Agreement pursuant to Article 9 hereof, none of the Sellers or any of their respective
Affiliates, including the Company, will, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss or accept
or consider any proposal or offer from any Person not a party hereto or not affiliated with a party hereto with respect to a merger, consolidation, asset purchase, stock purchase or any similar
transaction involving the Company or any Company Subsidiary or their assets or properties. During such period, the Sellers will immediately notify Buyer regarding any such contact between the Sellers,
any Affiliate or any of their representatives and any Person regarding any such offer or
proposal or any related inquiry and shall return without discussion all offers or proposals regarding any such transaction involving the Company, any Company Subsidiary or their assets or properties. 

        4.4    Information; Supplements to Schedules.    

        (a)   During
the period from the date of this Agreement to the Closing Date, Buyer and the Sellers will promptly inform each other in writing of any claim, action or any
proceeding commenced against such party with respect to the transactions contemplated by this Agreement or any assets or property of the Company. 

        (b)   Buyer
and the Sellers shall from time to time up to the date that is two (2) weeks prior to the Closing (the "Schedule Freeze
Date"), by notice in accordance with this Agreement, supplement, amend or create any Schedule to reflect changes in any disclosure from the date of this Agreement or 

26

 

items
mistakenly omitted from disclosure at the time of this Agreement. No such supplemental, amended or additional Schedule shall be evidence, in and of itself, that the representations and
warranties in the corresponding section are no longer true and correct in all material respects. It is specifically agreed that such Schedules may be supplemented or amended to add immaterial, as well
as material, items thereto. Notwithstanding the foregoing, (i) for purposes of satisfaction of the conditions set forth in Article 5 and  6 hereof,
 the Schedules of Buyer and the Sellers, respectively, shall be deemed to include only that information contained therein on the date of this
Agreement and shall be deemed to exclude all information contained in any supplement or amendment thereto and (ii) for purposes of the indemnification provisions set forth in  Article 7 hereof,
the Schedules of Buyer and the Sellers, respectively, shall be deemed to include all information included in any supplement or
amendment thereto after the date of this Agreement through the Schedule Freeze Date. 

        4.5    Delivery of Documents and Other Materials.    

        (a)   The
Sellers shall maintain all documents, agreements, instruments, certificates, writings, notices, consents, affidavits, letters, telegrams, telexes, statements, files,
computer disks, microfiches or other documents in electronic format, schedules, exhibits or any other paper or record whatsoever relating to the Company or any Company Subsidiary that are in the
possession or control of the Company or any Company Subsidiary, including, without limitation, all files relating to the Company Financial Statements, computer disks reflecting any books or records,
documents or other papers, or other information or data relating to the operation of the Company stored on any electronic media, including computers ("Documents and Other
Materials"). The Sellers shall deliver at or prior to Closing any Documents and Other Materials that are the property of the Company or any Company Subsidiary that are not in
the possession of the Company or that are otherwise not the exclusive property of one or more of the Sellers. For a period of three (3) years after the Closing Date, Buyer agrees to provide the
Sellers with access to such Documents and Other Materials to the extent required for tax, financial accounting or legal purposes on a reasonable basis during normal business hours and to permit copies
to be made of such Documents and Other Materials as may be reasonably needed. 

        (b)   The
Sellers agree to provide Buyer with access to any Documents and Materials not delivered to Seller pursuant to  paragraph (a) above to extent required for tax, financial, accounting, legal,
operational or other reasonable purpose on a reasonable basis
during normal business hours and to permit copies to be made of such Documents and Other Materials as may be reasonably needed; provided, however, that
if any of such Documents and Other Materials retained by Sellers and not otherwise delivered to Buyer at Closing are material to business or operation of the Company or any of the Company
Subsidiaries, copies of such Documents and Other Materials shall be provided to Buyer at Closing. 

        (c)   All
such Documents and Other Materials so copied by any party pursuant to paragraphs (a) and  (b) above shall be maintained by such party in confidence, except
to the extent required to be disclosed under Law or in furtherance of any defense by
such party or any thereof to any action, suit or proceeding against such party or such Affiliate; provided, however, that the party possessing such
Documents and Other Materials shall be advised of any such proposed disclosure in advance and be entitled to seek a limitation on the use of such information and scope of such disclosure. 

        4.6    Further Assurances.    Each of the Sellers shall execute, acknowledge and deliver or
cause to be executed, acknowledged and delivered to Buyer such bills of sale, assignments (including but not limited to assignments of leases) and other instruments of transfer, assignment and
conveyance, in form and substance satisfactory to counsel for Buyer, as shall be necessary to vest in Buyer all the right, title and interest in and to the Shares free and clear of all Encumbrances
and shall use his or its best efforts to cause to be taken such other action as Buyer may require to more effectively implement and carry into effect the transactions contemplated by this Agreement,
including (i) using commercially reasonable efforts to assist or cause any of the Remaining Stockholders to implement and carry into effect the transactions contemplated hereby, including
causing the Company to bring an action to enforce the Seller Agreement if requested by Buyer, and (ii) promptly providing access to and copies of any Documents and Other Materials requested by
Buyer pursuant to Section 4.5(b) hereof. 

27

  

        4.7    Covenant Not to Compete With the Business.    Each of (i) the First
Reserve
Fund, on behalf of itself and any other private equity fund currently under common control with the First Reserve Fund ("Affiliated Funds") or any
entity in which the First Reserve Fund or any Affiliate Fund owns more than 50% of the outstanding voting securities or has the ability to appoint a majority of the board of directors or similar body
(a "Control Investment," and with the First Reserve Fund and the Affiliated Funds, the "First Reserve
Entities") and (ii) the other Sellers on behalf of themselves and their respective Affiliates (together with the First Reserve Entities, the
"Non-Compete Parties") agrees that, effective as of the Closing Date and for a period of two (2) years thereafter, none of the
Non-Compete Parties shall, without the consent of Buyer, directly or indirectly, design, develop, market, produce, manufacture, rent, provide or sell any products or services currently
provided by the Company or any Company Subsidiary in any geographic location in which the Company or any Company Subsidiary currently conducts its business or operations or solicit any customers of
the Company or any Company Subsidiary regarding the same or, except for the benefit of Buyer and its Affiliates, assist any Person to do the same;  provided, that the foregoing provisions of this
sentence shall not apply to (x) any existing business of the First Reserve Entities;
(y) any business acquired by a First Reserve Entity after the date hereof (an "Acquired Business"), to the extent that the revenues from the
portion of the Acquired Business that would otherwise violate the foregoing provisions represent less than 25% of the overall revenues of the Acquired Business; (z) an Acquired Business, if the
acquiring First Reserve Entity or Entities divests within six (6) months the portion of the Acquired Business such that the Acquired Business then satisfies  clause (y) above. Each of the
Sellers acknowledges that a remedy at Law for any breach or attempted breach of this  Section 4.7 will be inadequate and further agrees that any breach of this Section 4.7 will
result in irreparable harm to the Company and Buyer, and, accordingly, Buyer, shall, in addition to any other remedy that may be available to it, be entitled to specific performance and injunctive and
other equitable relief in case of any such breach or attempted breach. Each of the Sellers acknowledges that this covenant not to compete is being provided as an inducement to Buyer to acquire the
Initial Shares and that this Section 4.7 contains reasonable limitations as to time, geographical area and scope of activity to be restrained
that do not impose a greater restraint than is necessary to protect the goodwill or other business interest of Buyer. Whenever possible, each provision of this  Section 4.7 shall be interpreted in
such a manner as to be effective and valid under applicable Law but if any provision of this  Section 4.7 shall be prohibited by or invalid under applicable Law, such provision shall be ineffective
to the extent of such prohibition or
invalidity, without invalidating the remaining provisions of this Section 4.7. If any provision of this  Section 4.7 shall, for any reason, be
judged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not
affect, impair or invalidate the remainder of this Section 4.7 but shall be confined in its operation to the provision of this  Section 4.7
directly involved in the controversy in which such judgment shall have been rendered. In the event that the provisions of this  Section 4.7 should ever be deemed to exceed the time or geographic
limitations permitted by applicable laws, then such provision shall be
reformed to the maximum time or geographic limitations permitted by applicable law. The provisions of this Section 4.7 shall be in addition to
and shall not limit or be limited by the provisions of any other agreement to which the Company or any Affiliate, on the one hand, and any Seller or an Affiliate, on the other hand, are parties. 

        4.8    Non-Solicitation of Employees.    For a period of two (2) years
after the Closing Date, each Seller agrees not to, and to cause any Non-Compete Party not to, directly or indirectly, (i) induce or attempt to induce any employee of BES, the
Company or any Affiliate thereof (a "Covered Employee") to discontinue his employment with BES, the Company or any Affiliate thereof or
(ii) offer employment to, employ or otherwise engage as an employee, independent contractor or otherwise, any such employees; provided,  however, that
no Non-Compete Party shall be restricted in any general solicitation for employees or public advertising of employment not
specifically directed at such employees; provided, further, that a Non-Compete Party with
fifty (50) or more employees may hire a 

28

 

Covered
Employee, but only if such hiring directly results from such general solicitation or advertising and Sellers have no Actual Knowledge (as defined below) that a Covered Employee was hired. 

        4.9    Release.    

        (a)   As
of the Closing Date, each of the Sellers does hereby for himself or itself and his or its successors and assigns release, acquit and forever discharge Buyer, the
Company and their respective Affiliates, the officers, directors, employees and agents thereof and their respective successors and assigns, of and from any and all claims, demands, liabilities,
responsibilities, disputes, causes of action and obligations of every nature whatsoever, liquidated or unliquidated, known or unknown, matured or unmatured, fixed or contingent, that such Seller or
its Affiliates now has, owns or holds or has at any time previously had, owned or held against such parties, including, without limitation, all liabilities created as a result of the negligence, gross
negligence and willful acts of the Company or the Company Subsidiaries and their employees and agents, or under a theory of strict liability, existing as of the Closing Date or relating to any action,
omission or event occurring on or prior to the Closing Date; provided, however, that any claims,
liabilities, debts or causes of action that may arise in the connection with the failure of any of the parties hereto to perform any of their obligations hereunder or under any other agreement
relating to the transactions contemplated hereby or from any breaches by any of them of any representations or warranties herein or in connection with any of such other agreements shall not be
released or discharged pursuant to this Agreement. 

        (b)   Each
of the Sellers represents and warrants that he or it has not previously assigned or transferred, or purported to assign or transfer, to any Person or entity
whatsoever all or any part of the claims, demands, liabilities, responsibilities, disputes, causes of action or obligations released herein. Each of the Sellers covenants and agrees that such Seller
will not assign or transfer to any Person or entity whatsoever all or any part of the claims, demands, liabilities, responsibilities, disputes, causes of action or obligations to be released herein.
Each of the Sellers represents and warrants that such Seller has read and understands all of the provisions of this Section 4.9 and that he or it
has been represented by legal counsel of his or its own choosing in connection with the negotiation, execution and delivery of this Agreement. 

        (c)   The
release provided by the Sellers pursuant to this Section 4.9 shall apply notwithstanding that the matter for
which release is provided may relate to the ordinary, sole or contributory negligence, gross negligence, willful misconduct or violation of Law by a released party, including Buyer, its Affiliates,
officers, directors, employees and agents, and for liabilities based on theories of strict liability, and shall be applicable whether or not negligence of the released party is alleged or proven, it
being the intention of the parties to release the released party from and against its ordinary, sole and contributory negligence and gross negligence as well as liabilities based on the willful
actions or omissions of the released party and liabilities based on theories of strict liability. 

        4.10    Tax Matters.    

        (a)   After
the Closing Date, each of Buyer, the Company and its Subsidiaries, and the Sellers shall cooperate fully in preparing any Tax Returns of the Company and its
Subsidiaries and in preparing for any audits of, or disputes or litigation with, taxing authorities regarding any Tax Returns with respect to the Company and its Subsidiaries and make available to the
other parties and to any taxing authority as reasonably requested all information and documents relating to Taxes of the Company and its Subsidiaries. 

        (b)   The
Sellers shall pay, and shall indemnify Buyer from and against all sales, use, transfer, stock transfer, real property transfer, and recording Taxes, and other
similar Taxes and fees arising out of or in connection with the transactions effected pursuant to this Agreement. 

        4.11    Continuation of Business by Buyer.    Nothing in this Agreement, in any exhibit or
schedule hereto or in any agreement, instrument or other document executed or delivered in connection with 

29

 

this
Agreement shall require Buyer to manage and operate the business conducted by the Company or the Company Subsidiaries with any duty or standard of care to the Sellers. Notwithstanding the
foregoing, following Closing, Buyer will continue the historic business of the Company or continue to use a significant portion of the historic business assets of the Company in a business in
accordance with Treas. Reg. 1.368-1(d). 

        4.12    No Public Announcement.    None of Buyer, the Company or any Seller or any of their
respective Affiliates shall, without the written approval of Buyer and the Stockholder Agent make any press release or other public announcement concerning the transactions contemplated by this
Agreement, except as and to the extent that any such Person shall be so obligated by Law, in which case the other parties to this Agreement shall be advised and the parties shall use their best
efforts to cause a mutually agreeable release or announcement to be issued; provided, however, that the
foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement (including communications or disclosures to lenders or rating agencies or in
connection with the receipt
of any consents or contractual notices) or to comply with applicable accounting, tax and disclosure obligations of any Governmental Entity. 

        4.13    Termination of Certain Agreements.    Except for the employment agreements listed on  Schedule 4.13 hereto, effective prior to or as of the Closing, the Sellers and the Company (as applicable) shall have terminated or cancelled all
existing agreements between the Company or any Company Subsidiary, on the one hand, and the Sellers, the Remaining Stockholders, or their respective Affiliates, on the other hand, including without
limitation the Seller Agreement. Furthermore, in accordance with Section 3.5(a) of the Seller Agreement, each Seller agrees that upon the consummation of the sale of Initial Shares in
accordance with this Agreement, any and all options to acquire Company Common Stock (whether vested or unvested) shall automatically be terminated and any transaction involving such unvested options
shall be void and of no effect. 

        4.14    Expenses.    Except as otherwise provided in this Agreement, Buyer, the Company and
each Seller shall pay their respective costs and expenses incident to the negotiation and preparation of this Agreement and their respective performance and compliance with all agreements and
conditions contained herein on its part to be performed or complied with, including fees, expenses and disbursements of counsel, investment bankers and independent public accountants. Furthermore, as
between the Company and the Sellers, each Seller agrees that it shall bear its own such costs and expenses and that the only costs and expenses to be borne by the Company in connection with this
Agreement and the transactions contemplated hereby are those actually incurred by the Company in its own behalf, which specifically include the fees of Gibson, Dunn & Crutcher, LLP and
PricewaterhouseCoopers LLP. 

        4.15    Management of Arbitration Proceeding.    In the event that the arbitration proceeding
referred to in Section 2.17(b) hereof has not been finally resolved and any settlement or award paid prior to Closing, those individuals
affiliated with the First Reserve Fund that have been managing such arbitration proceeding on behalf of the Company through Closing shall continue to do so afterwards until such final resolution,
settlement or award payment. Any costs and expenses incurred by such individuals after Closing in connection therewith, if requested, shall be promptly reimbursed by the Company, but such costs and
expenses so reimbursed shall be subject to the indemnification provisions of Section 7.1(c) hereof. 

 
 

ARTICLE 5
  BUYER'S CONDITIONS    
    

        The obligation of Buyer to purchase the Initial Shares as contemplated hereby is, at the option of Buyer, subject to the satisfaction on or before the Closing
Date of the conditions set forth below, any of which may be waived by Buyer in writing. 

30

 

        5.1    Representations, Warranties and Covenants.    The representations and warranties of
each of the Sellers contained in this Agreement that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects on and as of the Closing Date, and
all representations and warranties of each of the Sellers that are qualified by materiality or Material Adverse Effect shall be true and correct on and as of the Closing Date, in each case with the
same force and effect as though such representations and warranties had been made or given on and as of the Closing Date; each and all of the agreements and covenants of the Sellers to be performed or
complied with by them on or before the Closing Date pursuant to this Agreement shall have been performed or complied with in all respects; and each of the Sellers shall have delivered to Buyer a
certificate, dated the Closing Date, regarding the matters set forth in this Section 5.1. 

        5.2    Good Standing.    The Sellers shall have delivered to Buyer certificates issued by
appropriate Governmental Entities evidencing the status of the Company and each of the Company Subsidiaries, as of a date not more than five calendar days prior to the Closing Date, in the State of
Delaware, and as of a date not more than five calendar days prior to the Closing Date, or such longer period as is reasonably practicable under the circumstances, in each other jurisdiction specified
in Schedule 2.1(a) hereto. 

        5.3    Closing Deliveries.    The Sellers shall have delivered or be standing ready to deliver
to Buyer each of the items specified in Section 1.3(a) hereof, including stock certificates representing the Initial Shares and any such
additional instruments of transfer of the Initial Shares as shall be reasonably requested by Buyer to vest in Buyer all the right, title and interest in and to the Initial Shares, in each case
executed and dated the Closing Date. 

        5.4    Subscription Agreements.    Each of the Remaining Stockholders shall have delivered or
be standing ready to deliver to Buyer: (i) a duly executed Subscription Agreement (in the form attached as Exhibit B hereto),
(ii) a duly executed Escrow Agreement (in the form attached as Exhibit D hereto), (iii) a duly executed Amended and Restated
Stockholder's Agreement of Buyer (in the form attached as Exhibit C hereto), (iv) stock certificates representing the Remaining Shares
endorsed in blank or accompanied by stock powers so endorsed, and any such additional instruments of transfer of such Remaining Shares as
shall be reasonably requested by Buyer to vest in Buyer all the right, title and interest in and to such Remaining Shares and (v) any document or instruments required to be delivered pursuant
to the agreements referred to in clauses (i) through (iii) above, in each case executed and dated the
Closing Date. 

        5.5    No Litigation.    No preliminary or permanent injunction or other order of any court or
other Governmental Entity shall be in effect or threatened nor shall there be in effect any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any
such case, prevents the consummation of the transactions contemplated by this Agreement. No suit, action, claim, proceeding or investigation before any Governmental Entity shall have been commenced or
threatened by any Person (other than Buyer or its Affiliates) seeking to prevent the sale of the Shares or asserting that the sale of all or a portion of the Shares would be unlawful. 

        5.6    No Company Material Adverse Event.    No Company Material Adverse Effect shall have
occurred since the date of this Agreement. 

        5.7    Licenses, Consents and Approvals.    All licenses, consents or approvals of
Governmental Entities required for the Sellers to consummate the transactions contemplated by this Agreement shall have been obtained. The Sellers shall have delivered to Buyer a copy of each of the
licenses, consents, approvals and other authorizations from Governmental Entities necessary or appropriate for the Sellers to consummate the transactions contemplated by this Agreement. 

        5.8    Consents of Third Persons.    All consents from third Persons listed on  Schedule 2.5
hereto shall have been obtained on terms satisfactory to Buyer. 

31

 

        5.9    Legal Opinion.    Buyer shall have been furnished an opinion of counsel to the Company
and the First Reserve Fund in the form attached as Exhibit E hereto. 

        5.10    Payment of Obligations.    Immediately prior to the Closing, the Sellers and their
respective Affiliates shall pay to the Company all indebtedness and other obligations that each such Person owes to the Company as of the Closing, except for the indebtedness listed on  Schedule 5.10 hereto. 

        5.11    Resolutions.    If and as applicable, the Sellers shall have delivered to Buyer
certified copies of resolutions of the board of directors or other equivalent body of each of the Sellers and the Company
approving this Agreement and the transactions contemplated hereby in a form reasonably acceptable to Buyer. 

        5.12    Director Resignations.    Buyer shall have received the effective resignations of each
of the directors of the Company and each Company Subsidiary, unless otherwise agreed to in writing by Buyer, and all actions shall have been taken so that immediately upon the Closing designees or
nominees of Buyer shall constitute all of the members of the Board of Directors of the Company and each Company Subsidiary. 

        5.13    Employment Arrangements.    Buyer shall have arranged acceptable employment
arrangements with each of the officers of the Company or a Company Subsidiary listed on Schedule 5.13 hereto. 

        5.14    Audited 2002 Financial Statements.    Prior to or at Closing, the Sellers shall have
delivered to Buyer an audited consolidated balance sheet, statement of income and statement of cash flows of the Company as of and for the year ended December 31, 2002, which financial
statements shall be substantially identical in form and substance (including the amounts set forth therein) to the unaudited consolidated balance sheet, statement of income and statement of cash flows
of the Company as of and for the year ended December 31, 2002 attached on Schedule 2.6 hereto. 

 
 

ARTICLE 6
  SELLERS' CONDITIONS    
    

        The obligation of each Seller to transfer the Initial Shares as contemplated hereby is, at the option of each Seller, subject to the satisfaction on or before the
Closing Date of the conditions set forth below, any of which may be waived by the Seller in writing. 

        6.1    Representations, Warranties and Covenants.    The representations and warranties of
each of Buyer contained in this Agreement that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects on and as of the Closing Date, and all
representations and warranties of Buyer that are qualified by materiality or Material Adverse Effect shall be true and correct on and as of the Closing Date, in each case with the same force and
effect as though such representations and warranties had been made or given on and as of the Closing Date; each and all of the agreements and covenants of Buyer to be performed or complied with by it
on or before the Closing Date pursuant to this Agreement shall have been performed or complied with in all respects; and Buyer shall have delivered to the Sellers a certificate signed by one of its
duly authorized officers, dated the Closing Date, regarding the matters set forth in this Section 6.1. 

        6.2    Good Standing.    Buyer shall have delivered to each of the Sellers a copy of a
certificate issued by appropriate Governmental Entities evidencing the status of Buyer, as of a date not more than five calendar days prior to the Closing Date, in the State of Delaware. 

        6.3    Closing Deliveries.    Buyer shall have delivered or be standing ready to deliver to
the Sellers each of the items specified in Section 1.3(b) hereof, including stock certificates representing the shares of Buyer Common Stock
representing the Purchase Price (other than the Escrowed Shares), in each case executed and dated the Closing Date. 

32

 

        6.4    Licenses, Consents and Approvals.    All licenses, consents or approvals of
Governmental Entities required for Buyer to consummate the transactions contemplated by this Agreement shall have been obtained. Buyer shall have delivered to the Sellers a copy of each of the
licenses, consents, approvals and other authorizations from Governmental Entities necessary or appropriate for Buyer to consummate the transactions contemplated by this Agreement. 

        6.5    No Litigation.    No preliminary or permanent injunction or other order of any
Governmental Entity shall be in effect or threatened nor shall there be any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case,
prevents the consummation of the transactions contemplated by this Agreement. No suit, action, claim, proceeding or investigation before any court or other Governmental Entity shall have been
commenced or threatened by any Person (other than the Sellers or any of their respective Affiliates) seeking to prevent the sale of the Initial Shares or asserting that the sale of all or a portion of
the Initial Shares would be unlawful. 

        6.6    No Buyer Material Adverse Effect.    No Buyer Material Adverse Effect shall have
occurred since the date of this Agreement. 

        6.7    Resolutions.    Buyer shall have delivered to each of the Sellers a copy of certified
resolutions of the board of directors of Buyer approving this Agreement and the transactions contemplated hereby. 

        6.8    Legal Opinion.    The Sellers shall have been furnished an opinion of counsel to Buyer
substantially in the form attached as Exhibit F hereto. 

 
 

ARTICLE 7
  INDEMNIFICATION    
    

        7.1    Indemnification by the Sellers.    

        (a)   Except
as otherwise limited by this Article 7 and Article 8
hereof, the Sellers, jointly and severally, agree to indemnify, defend and hold Buyer, each of its Affiliates and each of their respective officers, directors, employees, agents, stockholders and
controlling Persons and their respective successors and assigns, harmless from and against and in respect of any liabilities, losses, damages, demands, assessments, claims, costs and expenses
(including interest, awards, judgments, penalties, settlements, fines, costs of remediation, diminutions in value, consequential damages, costs and expenses incurred in connection with investigating
and defending any claims or causes of action (including, without limitation, attorneys' fees and expenses and all fees and expenses of consultants and other professionals)) actually suffered, incurred
or realized by such party (collectively, "Losses"), arising out of or resulting from or relating to any misrepresentation, breach of representation or
warranty (excluding the representations and warranties referenced in Section 7.1(b) hereof) or breach of any covenant or agreement made or
undertaken by the Company in this Agreement or any misrepresentation or omission from any other agreement, certificate or document delivered to Buyer pursuant to this Agreement, including the Company
Disclosure Schedule. 

        (b)   Except
as otherwise limited by this Article 7 and Article 8
hereof, each Seller, severally and not jointly, agrees to indemnify, defend and hold Buyer, each of its Affiliates and each of their respective officers, directors, employees, agents, stockholders and
controlling Persons and their respective successors and assigns, harmless from and against and in respect of any Losses arising out of or resulting from or relating to any misrepresentation or breach
of representation or warranty contained in Section 2.22 hereof. 

        (c)   Notwithstanding
the foregoing provisions of this Section 7.1, the Sellers jointly and severally agree to indemnify
Buyer in full to the extent any settlement or award under the arbitration proceeding referred to in Section 2.17(b) hereof results in a liability
to Buyer, the Company or any Affiliate(s) thereof, in the aggregate, in excess of the amount set forth in such Section 2.17(b) as having been 

33

 

accrued
by the Company as of June 30, 2003, as reflected in the Company Financial Statements as of such date. 

        7.2    Indemnification by Buyer.    Except as otherwise limited by this  Article 7 and
Article 8 hereof, Buyer agrees to indemnify, defend and hold the Sellers,
the Remaining Stockholder and their respective successors and assigns harmless from and against and in respect of any Losses arising out of or resulting from or relating to any misrepresentation,
breach of warranty or breach of any covenant or agreement made or undertaken by Buyer in this Agreement or any misrepresentation in or omission from any other agreement, certificate or document
delivered to the Sellers pursuant to this Agreement. 

        7.3    Limits on Indemnification; Payment.    

        (a)   Notwithstanding
anything in this Article 7, the foregoing indemnification obligations shall be subject to the
following limits: 

        (i)    no
Seller shall be liable for indemnification obligations under Sections 7.1(a) and  7.1(b) hereof, in the aggregate, in excess of 25% of the Purchase Price
received by such Seller at Closing; 

        (ii)   Buyer
shall not be liable indemnification obligations under Section 7.2 hereof in excess of 25% of the Purchase
Price paid by Buyer at Closing; 

        (iii)  Sellers
shall have no indemnification obligations with respect to a Claim by Buyer to the extent that prior to Closing Buyer had Actual Knowledge of the material facts
required to constitute such claim; 

        (iv)  Buyer
shall have no indemnification obligations with respect to a Claim by a Seller to the extent that prior to Closing any Seller had Actual Knowledge of the material
facts required to constitute such claim; 

        (v)   for
purposes of this Section 7.3(a), the amount of the Purchase Price received by any Seller or paid by Buyer, as
the case may be, shall be calculated by multiplying the number of shares of Buyer Common Stock received (or paid) times the Buyer Per Share Value. For purposes of this  Section 7.3, the parties
hereto agree that the "Buyer Per Share Value" shall be the "Fair Market
Value" per share of Buyer Common Stock as such term is defined in the Amended and Restated Stockholder's Agreement of Buyer; provided, that if the board
of directors of Buyer is required to determine fair market value pursuant to such definition, it may do so in its sole discretion without obligation to engage any third-party to assist in such
determination, as soon as practicable following delivery of notice by an Indemnitee with respect to a Claim hereunder; 

        (vi)  no
party shall have any indemnification obligation hereunder to the extent that a claim for indemnification is related to a representation, warranty or covenant that
has expired pursuant to Article 8 hereof and is brought after such expiration; and 

        (vii) for
purposes hereof, "Actual Knowledge" of a fact shall mean the actual knowledge of the individuals named in the last
sentence of this clause (vii), and shall not include any facts of which such individuals are not consciously aware, even if such individuals
reasonably should have been aware of such facts through the normal exercise of their duties or such facts could reasonably be inferred from the existence of other facts of which such individuals have
Actual Knowledge. Moreover, for the avoidance of doubt, none of such individuals shall be deemed to have Actual Knowledge of any such facts notwithstanding the fact that (A) a subordinate of
any of such individuals was consciously aware of such materials facts or (B) documents disclosing such material facts were included among due diligence or other materials provided to either the
Buyer Representatives or the Seller Representatives, as applicable. "Actual Knowledge" of Buyer shall mean the actual knowledge, as limited above, of Ken Huseman, Jim Carter, Bill Fox or Dub Harrison,
and "Actual Knowledge" of the Sellers shall mean the actual knowledge, as limited above, of Ben Guill, Thomas Denison, Randy Spaur, Tim O'Keefe or Peter Kane. 

34

 

        (b)   (i) except
as set forth in clause (c) below, no party entitled to receive indemnification hereunder (the
"Indemnitee") shall be entitled to assert any right under this Agreement against a party obligated to indemnify an Indemnitee hereunder (the
"Indemnitor") unless and until the aggregate amount of the Losses suffered by the Indemnitee, collectively, exceed $400,000 (the
"Basket"); provided, however, that once the amount of
Losses suffered exceeds the Basket amount with respect to any Indemnitee, the Indemnitor shall be obligated to indemnify the Indemnitee to the full extent of such Losses, including the Basket amount;
and 

        (ii)   upon
final resolution of the arbitration proceeding referred to in Section 2.17(b) hereof, to the extent any
payments required to be made by the Company in connection with any settlement of award thereunder are, together with any and all costs and expenses incurred in connection therewith (including any
costs and expenses reimbursed pursuant to Section 4.15 hereof), less than the amount set forth in such  Section 2.17(b) as having been accrued by
the Company as of June 30, 2003, as reflected in the Company Financial Statements as of such
date (such difference, the "Over-Accrual Amount"), then any Losses for which Buyer or its Affiliates would be entitled to indemnification,
after giving effect to the Basket if applicable, shall be reduced by such Over-Accrual Amount. 

        (c)   For
purposes of calculating the aggregate amount of Losses claimed against an Indemnitor, the amount of each Loss shall be reduced by (i) any third-party
insurance benefits which the Indemnitee received in respect of or as a result of such Losses, less the reasonable costs incurred by the Indemnitee to recover those insurance benefits to the extent
such costs are not otherwise recovered and (ii) any net Tax benefit actually recognized and realized by an Indemnitee, as determined in the sole discretion of such Indemnitee upon filing of its
or his final tax return for any applicable taxable year, with respect to such Losses in the taxable year or years in which such Losses occur as a result of a deduction to such Indemnitee's taxable
income in such year; provided, however, upon receipt of a request for payment by such Indemnitee, the Indemnitor shall not be entitled to withhold or
delay payment of any amounts owing under this Article 7 in reliance upon this clause (ii)
above. 

        (d)   Notwithstanding
the foregoing, the limitations set forth in Sections 7.3(a) and 7.3(b) hereof shall not apply with
respect to (i) the Sellers' liability to Buyer with respect to (A) breaches of the representations set forth in clause (d) of  Section 2.16 hereof, (B) breaches of the covenants set forth in Section 4.10(b)
hereof, (C) breaches under Section 7.1(b) hereof (with respect to breaches of the representations set forth in  Section 2.22 hereof,
including, without limitation, any defects or Encumbrances with respect to title to the Initial Shares, and  Section 2.16 hereof) and (D) breaches under Section 7.1
(c) hereof and
(ii) Buyer's liability to the Sellers with respect to Section 3.2(b) hereof. 

        (e)   The
responsibility for making payment to Buyer for any indemnification obligations of the Sellers under  Section 7.1(a) hereof shall be apportioned among the Sellers and the Remaining Stockholders by
multiplying the amount of the Loss by the
percentage interest set forth opposite the name of each Seller and Remaining Stockholder on Exhibit Ahereto. Any indemnification obligation of
Buyer to the Sellers under Section 7.1(a) hereof shall be apportioned among the Sellers by multiplying the amount of the aggregate Loss by the
percentage interest set forth opposite the name of each Seller on Exhibit A hereto. 

        (f)    (i) Any
indemnification obligations of a Seller under this Article 7 shall be satisfied by such Seller by
paying to Buyer the portion of such Loss for which such Seller is responsible (the "Individual Seller Amount") (A) in immediately available funds
by wire transfer to a bank account designated by Buyer or, at such Seller's election, (B) in shares of Buyer Common Stock. The number of shares of Buyer Common Stock to paid by a Seller
pursuant to clause (B) above shall be quotient of the Individual Seller Amount divided by Buyer Per Share Value. Any shares of Buyer Common Stock
paid to Buyer pursuant to clause (B) above shall first be drawn from the Escrowed Shares attributable to such Seller until none remain before
such Seller shall be required to pay any additional shares of Buyer 

35

 

Common
Stock to Buyer. Notwithstanding the foregoing, in the event that such Seller does not have a sufficient number of shares of Buyer Common Stock to satisfy its indemnification obligations in full
with respect to any Loss, such Seller shall pay to Buyer cash in the manner provided in clause (A) above; and 

        (ii)   The
difference between (A) the total Loss for which Buyer is entitled to indemnification under  Section 7.1(a) hereof and (B) the aggregate amount of Individual Seller Amounts determined under
 Section 7.3(e) hereof (the "Remaining Stockholder Amount") shall be drawn from the shares of
Buyer Common Stock attributable to the Remaining Stockholders that are deposited in escrow pursuant to the terms of the Escrow Agreement (the "Remaining Stockholder Escrow
Shares"). Such Remaining Stockholder Amount shall be allocated among the Remaining Stockholder Escrow Shares in the manner set forth in  Section 7.3(e) hereof.
Notwithstanding the omission of the Remaining Stockholders from the indemnity obligations set forth in
Section 7.1(a) hereof, the Remaining Stockholder Escrow Shares shall be considered issued subject to the provisions of this  Section 7.3(f)(ii)
hereof, and release of the Remaining Stockholder Escrow Shares shall extinguish the Sellers' indemnity obligations hereunder
to the extent of the value of such released shares (valued at the Buyer Per Share Value). 

        (g)   Any
indemnification obligations of Buyer under this Article 7 shall be satisfied by Buyer paying to each Seller
and Remaining Stockholder the portion of such Loss which such Seller or Remaining Stockholder is entitled to receive (A) in immediately available funds by wire transfer to a bank account
designated by Buyer or, at Buyer's election, (B) in shares of Buyer Common Stock. The number of shares of Buyer Common Stock to paid by Buyer pursuant to  clause (B) above shall be quotient of
the amount of the Loss for which Buyer is responsible divided by "fair market value" of such shares of
Buyer Common Stock, as defined in the Buyer Stockholders Agreement, as a date not more than 30 days prior to the payment of such shares of Buyer Common Stock. 

        (h)   Payment
of any amounts due pursuant to this Article 7, including any delivery of shares of Buyer Common Stock by a
Seller as permitted under Section 7.3(a) hereof, shall be made within ten (10) Business Days after notice is sent by the Indemnitee. 

        (i)    The
remedies provided for in this Article 7 shall be the sole and exclusive remedy for the indemnified parties
with respect to any claim for money damages resulting from any alleged breach of any representation, warranty or covenant made in this Agreement. 

        7.4    Procedure.    Subject to the limitations set forth in  Article 8 hereof, all claims
for indemnification under this Article 7 shall be asserted
and resolved as follows: 

        (a)   An
Indemnitee shall promptly give the Indemnitor notice of any matter that an Indemnitee has determined has given or could give rise to a right of indemnification under
this Agreement, stating the amount of the Loss, if known, and method of computation thereof, all with reasonable particularity, and stating with particularity the nature of such matter. Failure to
provide such notice shall not affect the right of the Indemnitee to indemnification except to the extent such failure shall have resulted in liability to the Indemnitor that could have been actually
avoided had such notice been provided within such required time period or to the extent such notice shall not have been sent within the time limitations set forth in  Article 8 hereof. 

        (b)   The
obligations and liabilities of an Indemnitor under this Article 7 with respect to Losses arising from claims
or actions of any third party that are subject to the indemnification provided for in this Article 7
("Claims") shall be governed by and contingent upon the following additional terms and conditions: if an Indemnitee shall receive notice of any Claim,
the Indemnitee shall give the Indemnitor prompt notice of such Claim and the Indemnitor may, at its option, assume and control the defense of such Claim at the Indemnitor's expense and through counsel
of the Indemnitor's choice reasonably acceptable to the Indemnitee. In the event the Indemnitor assumes the defense against any such Claim 

36

 

as
provided above, the Indemnitee shall have the right to participate in the defense of such asserted liability, shall cooperate with the Indemnitor in such defense and will attempt to make available
on a reasonable basis to the Indemnitor all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitor.
The Indemnitee shall have the right to employ separate counsel in any such action and participate in the defense thereof; provided, the fees and
expenses of such separate counsel shall be at the expense of the Indemnitee unless (i) the employment of such counsel shall have been specifically authorized in writing by the Indemnitor,
(ii) the named parties to any such Claim (including any impleaded parties) include both the Indemnitee and the Indemnitor, and (iii) the Indemnitee shall have been advised by such
counsel that there is one or more legal defenses available to it that are different from or additional to those available to the Indemnitor. In any such case, the Indemnitor shall not, in connection
with any one action or separate but substantially similar or related action in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (in addition to local counsel) for the Indemnitee. In the event the Indemnitor does not elect to conduct the defense against any such Claim, the Indemnitor
shall pay all reasonable costs and expenses of such defense as incurred and shall cooperate with the Indemnitee (and be entitled to participate) in such defense and attempt to make available to it on
a reasonable basis all such witnesses, records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitee. Except for the settlement
of a Claim that involves the payment of money only and for which the Indemnitee is totally indemnified by the Indemnitor, no Claim may be settled without the written consent of the Indemnitee, which
shall not be unreasonably withheld. 

        7.5    Failure to Pay Indemnification.    If and to the extent the Indemnitee shall make
written demand upon the Indemnitor for indemnification for which amounts are due and payable pursuant to this Article 7 and the Indemnitor shall
refuse or fail to pay in full within ten (10) Business Days of such written demand the amounts demanded pursuant hereto and in accordance herewith, then the Indemnitee may utilize any legal or
equitable remedy to collect from the Indemnitor the amount of its Losses. Nothing contained herein is intended to limit or constrain the Indemnitee's rights against the Indemnitor for indemnity, the
remedies herein being cumulative and in addition to all other rights and remedies of the Indemnitee. 

        7.6    Express Negligence.    THE INDEMNITIES SET FORTH IN THIS ARTICLE 7 ARE INTENDED TO BE
ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT
INDEMNITIES BECAUSE OF THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE,
CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES. 

        7.7    Tax Treatment of Indemnity Payments.    Each party, to the extent permitted by
applicable law, agrees to treat any payments made pursuant to this Article 7 as adjustments to the Purchase Price for all federal and state
income and franchise Tax purposes. 

 
 

ARTICLE 8
  NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
  REPRESENTATIONS, WARRANTIES AND AGREEMENTS    
    

        The representations and warranties of Buyer and the Sellers contained herein shall survive the Closing for ending on the date that is 30 days after the
delivery to Buyer of an audited consolidated balance sheet, statement of income and statement of cash flows of the Company as of and for the year ended December 31, 2003;  provided, however, that
(i) the representations and warranties set forth in Sections 2.18 and  3.18 hereof (Environmental) shall survive until and through December 31,
2005;
 

37

 

(ii) the
representations and warranties set forth in Sections 2.2 and 3.2 hereof (Capitalization;
Title to Shares), Sections 2.3 and 3.3 hereof (Authorization),  Section 2.22 hereof (Seller Individual
Representations), and Sections 2.23 and  3.21 hereof (Finder's Fees) shall survive indefinitely; and (iii) the representations and warranties set forth
in  Sections 2.16 and 3.16 hereof (Taxes) shall survive for a period equal to thirty (30) days after
the expiration of the applicable statute of limitations (including extensions) for each Tax and taxable year. 

        The
covenants and agreements in this Article 8 shall survive the Closing and shall remain in full force and effect for such period
as is necessary to resolve any claim made with respect to any representation, warranty, covenant or agreement contained herein during the survival period thereof, and the covenants and agreements of
Buyer, the Company and each of the Sellers contained in Article 4 hereof shall survive the Closing for (x) the time period(s) set forth in
the respective Sections contained in the Articles, or (y) if no time period is specified, without any contractual limitation on the period of survival. 

        No
party may bring a Claim for indemnification pursuant to Article 7 hereof to the extent notice of such Claim is sent after the
expiration of the survival periods set forth above. 

 
 

ARTICLE 9
  TERMINATION    
    

        9.1    Termination.    The obligation of the parties to close the transactions contemplated by
this Agreement may be terminated: 

        (a)   at
any time, by mutual agreement of Buyer and the Stockholder Agent; 

        (b)   at
any time, by Buyer, (i) if a material default shall be made by any of the Sellers in the observance or in the due and timely performance by any of the Sellers
of any agreements and covenants of the Sellers herein contained or if there shall have been a breach by any of the Sellers of any of the warranties and representations of the Sellers herein contained,
and such default or breach has not been waived or has not been cured to Buyer's reasonable satisfaction within 15 days after receipt by the Stockholder Agent from Buyer of written notice of its
intention to terminate the pursuant to this clause (b)(i), or (ii) if Buyer reasonably believes that it will be unable, despite the
exercise of commercially reasonable efforts, to obtain the waivers, consents or amendments that may be required by the lenders under the Buyer Credit Facility or the Company Credit Facility (including
LaSalle Business Credit and General Electric Capital Corporation); 

        (c)   at
any time, by the Stockholder Agent, if a material default shall be made by Buyer in the observance or in the due and timely performance by Buyer of any agreements and
covenants of Buyer herein contained or if there shall have been a breach by Buyer of any of the warranties and representations of Buyer herein contained and such default or breach has not been waived
or has not been cured to the Stockholder Agent's reasonable satisfaction within 15 days after receipt by Buyer from the Stockholder Agent of written notice of its intention to terminate
pursuant to this clause (c); or 

        (d)   Buyer
or the Stockholder Agent (provided the terminating party has not materially breached any of its agreements, covenants or representations and warranties) if the
Closing shall not have occurred on or before October 31, 2003. 

        9.2    Liability Upon Termination.    If the obligation to close the transactions contemplated
by this Agreement is terminated pursuant to any provision of Section 9.1 hereof, then this Agreement shall forthwith become void and there shall
not be any liability or obligation with respect to the terminated provisions of this Agreement on the part of the Sellers or Buyer except and to the extent such termination results from the willful
breach by a party of any of its representations, warranties or 

38

 

agreements
hereunder. The termination of this Agreement shall not relieve any party of its obligations under this Section 9.2. 

        9.3    Notice of Termination.    The parties hereto may exercise their respective rights of
termination under this Article 9 only by delivering written notice to that effect to the other party or parties, and such notice is received on
or before the Closing Date. 

 
 

ARTICLE 10
  DEFINITIONS OF CERTAIN TERMS    
    

        In addition to terms defined elsewhere in this Agreement, the following terms shall have the meanings assigned to them herein, unless the context otherwise
indicates, both for purposes of this Agreement and all Exhibits hereto and any Disclosure Schedule: 

        "AAA" shall have the meaning given such term in Section 11.10. 

        "AAA Rules" shall have the meaning given such term in Section 11.10. 

        "Acquired Business" shall have the meaning given such term in Section 4.7. 

        "Actual Knowledge" shall have the meaning given such term in Section 7.3(a)(vii). 

        "Affiliate" shall mean, with respect to any specified Person, any officer, director, Seller or any other Person that directly or
indirectly controls, is controlled by or is under common control with such specified Person. 

        "Affiliated Funds" shall have the meaning given such term in Section 4.7. 

        "Agreement" shall have the meaning given such term in the introduction of this Agreement. 

        "Arbitration Notice" shall have the meaning given such term in Section 11.10(a). 

        "Arbitrator" shall have the meaning given such term in Section 11.10(b). 

        "Arbitrator List" shall have the meaning given such term in Section 11.10(b). 

        "Benefit Plan" shall have the meaning given such term in Section 2.15(a). 

        "Buyer Stockholders' Agreement" shall have the meaning given to such term in  Section 3.2(a). 

        "Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Houston, Texas are authorized by
Law to close. 

        "Buyer" shall have the meaning given such term in the introduction to this Agreement. 

        "Buyer Common Stock" shall have the meaning given such term in Section 1.2. 

        "Buyer Credit Facility" shall mean the Credit Agreement, dated January 24, 2003, by and among Basic Energy Services, Inc.,
TAT (Turn Around Trucking), Inc., TAT (Turn Around Trucking), Inc. II and Harrison Well Services, Inc., as borrowers, the other credit parties and lenders signatory thereto, and
General Electric Capital Corporation, as term loan agent and lender, as such agreement may be further supplemented or amended. 

        "Buyer Disclosure Schedule" shall mean the disclosure schedule of even date delivered to the Sellers by Buyer. 

        "Buyer Financial Statements" shall have the meaning given such term in Section 3.6. 

        "Buyer Material Adverse Effect" shall mean a Material Adverse Effect on Buyer and the
Buyer Subsidiaries, taken as a whole. 

        "Buyer Material Contract" shall have the meaning given such term in Section 3.13. 

39

 

        "Buyer Per Share Value" shall have the meaning given such term in  Section 7.3(a)(v). 

        "Buyer Representatives" shall have the meaning given such term in Section 4.1(a). 

        "Buyer's Knowledge" shall mean the knowledge of the executive officers and directors of Buyer. 

        "Buyer Subsidiary" shall the meaning given such term in Section 3.1(b). 

        "Closing" shall have the meaning given such term in Section 1.1(b). 

        "Closing Date" shall have the meaning given such term in Section 1.1(b). 

        "Code" shall mean the Internal Revenue Code of 1986, as amended. 

        "Company" shall hall have the meaning given such term in the introduction to this Agreement. 

        "Company Common Stock" shall have the meaning given such term in the recitals to this Agreement. 

        "Company Credit Facility" shall mean the Amended and Restated Credit Agreement, dated August 30, 2002, by and among First Energy
Services Company and H. B. & R., Inc., as borrowers, the other credit parties and lenders signatory thereto, and General Electric Capital Corporation, as agent and lender, as such
agreement may be further supplemented or amended. 

        "Company Disclosure Schedule" shall mean the disclosure schedule of even date herewith delivered to Buyer by the Company on behalf of the
Sellers. 

        "Company Financial Statements" shall have the meaning given such term in  Section 2.6. 

        "Company Material Adverse Effect" means a Material Adverse Effect on the Company and the Company Subsidiaries, taken as a whole. 

        "Company Material Contract" shall have the meaning given such term in  Section 2.13(a). 

        "Company Subsidiary" shall have the meaning given such term in Section 2.1(b). 

        "Company's Knowledge" means the knowledge of (i) the executive officers and directors of the Company or FESCO, (ii) each
Seller and, (iii) if applicable, the executive officers and directors of such Seller. 

        "Control Investment" shall have the meaning given such term in Section 4.7. 

        "Copyrights" shall have the meaning given such term in Section 2.10(e)(iii). 

        "Covered Employee" shall have the meaning given such term in Section 4.8. 

        "Debt Obligation" shall mean any contract, agreement, indenture, note or other instrument relating to the borrowing of money, any
capitalized lease obligation, any obligation properly classified as indebtedness or debt under GAAP or any guarantee or other contingent liability in respect of any indebtedness or obligation of any
Person (other than the endorsement of negotiable instruments for deposit or collection in the ordinary course of business) and shall specifically include any loans or advances to or from the Sellers
or their respective Affiliates. 

        "Dispute" shall have the meaning given such term in Section 11.10. 

        "Documents and Other Materials" shall have the meaning given such term in  Section 4.5(a). 

        "Encumbrances" shall have the meaning given such term in Section 1.1(a). 

        "Environmental Laws" shall mean all Laws relating to (a) the control of any potential pollutant or protection of the air, water or
land, (b) solid, gaseous or liquid waste generation, handling, treatment, 

40

 

storage,
disposal or transportation and (c) the regulation of or exposure to hazardous, toxic or other substances alleged to be harmful. 

        "Environmental Liabilities" shall mean any and all Losses (including remediation, removal, response, abatement, clean-up,
investigative and/or monitoring costs and any other related costs and expenses) incurred or imposed (a) pursuant to any agreement, order, notice, requirement, responsibility or directive
(including directives embodied in Environmental Laws), injunction, judgment or similar documents (including settlements) arising out of, in connection with or under Environmental Laws, or
(b) pursuant to any claim by a Governmental Entity or other third Person or entity for personal injury, property damage, damage to natural resources, remediation or similar costs or expenses
incurred or asserted by such entity or person pursuant to Law and arising out of or in connection with a release, as such term is defined in Environmental Laws, of Hazardous Materials. 

        "Environmental Permit" shall mean any permit, license, approval, registration, identification number or other authorization with respect
to the Company under any Environmental Law. 

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 

        "ERISA Affiliate" shall mean any entity that is treated as a single employee together with the Company under Section 414 of the
Code. 

        "Escrowed Shares" shall have the meaning given such term in Section 1.2. 

        "FESCO" shall have the meaning given such term in the recitals of this Agreement. 

        "First Reserve Fund" shall have the meaning given such term in the recitals to this Agreement. 

        "First Reserve Entities" shall have the meaning given such term in Section 4.7. 

        "GAAP" shall mean United States generally accepted accounting principles applied on a consistent basis. 

        "Governmental Entity" shall mean any national, state or local government or any subdivision thereof or any arbitrator, court,
administrative or regulatory agency, commission, department, board or bureau or body or other government or authority or instrumentality or any entity or Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government. 

        "Hazardous Materials" shall mean (a) any substance or material that is listed, defined or otherwise designated as a hazardous
substance under any Environmental Law, (b) any petroleum or petroleum products, (c) radioactive materials, urea formaldehyde, asbestos and PCBs, and (d) any other chemical,
substance or waste that is regulated by any Governmental Entity under any Environmental Law. 

        "Indemnitee" shall have the meaning given such term in Section 7.3(b)(i). 

        "Indemnitor" shall have the meaning given such term in Section 7.3(b)(i). 

        "Individual Seller Amount" shall have the meaning given such term in  Section 7.3(f)(i). 

        "Initial Shares" shall have the meaning given such term in the recitals to this Agreement. 

        "Intellectual Property" shall have the meaning given such term in Section 2.10(e). 

        "Law" shall mean any applicable federal, state, municipal, local or foreign statute, law, ordinance, rule, regulation, order, judgment,
writ, injunction or decree enacted, adopted, issued or promulgated by any Governmental Entity. 

        "License" and "Licenses" shall have the meaning given to such terms as set forth in  Section 2.11. 

        "Litigation" shall have the meaning given to such term as set forth in  Section 2.17(b). 

        "Losses" shall have meaning given to such term as set forth in Section 7.1(a). 

41

 

        "Material Adverse Effect" shall mean, with respect to any Person, a material adverse effect on the business, operations, assets,
properties, prospects or material customer relationships of such Person. 

        "Non-Compete Parties" shall have the meaning given such term in  Section 4.7. 

        "Nondisclosure Agreement" shall have the meaning given such term Section 4.1(c). 

        "Over-Accrual Amount" shall have the meaning given such term in  Section 7.3(b)(ii). 

        "Patents" shall have the meaning given such term in Section 2.10(e)(i)). 

        "Pension Plans" shall have the meaning given such term in Section 2.15(b). 

        "Permitted Encumbrances" shall mean (i) Encumbrances for taxes or assessments or other governmental Charges not yet due and payable
or which are being contested in good faith; (ii) pledges or deposits of money securing statutory obligations under workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Encumbrances under ERISA); (iii) inchoate or unperfected workers', mechanics or similar liens arising in the ordinary course of business or if
choate and perfected are being contested in good faith and do not exceed $50,000 at any
one time, so long as such Encumbrances attach only to equipment, fixtures and real estate; (iv) carrier's, warehousemen's, suppliers' or other similar possessory liens arising in the ordinary
course of business and securing liabilities which are not yet due or, if past due are being contested in good faith and do not in the aggregate, exceed $50,000 at any time, as long as such
Encumbrances attach only to inventory; (v) zoning restrictions, easements, licenses or other restrictions on the use of any real estate or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not materially impair the use, value or marketability of such real estate; and (vi) with respect to the Company, liens under the Company Credit
Facility and equipment financing liens incurred in the ordinary course of business consistent with past practice. 

        "Person" shall mean a corporation, an association, a partnership, an organization, a business, an individual or a Governmental Entity. 

        "Preferred Stock" shall have the meaning given such term in Section 3.2. 

        "Preferred Stock Exchange" shall have the meaning given such term in Section 3.2. 

        "Purchase Price" shall have the meaning such term is given in Section 1.2. 

        "Remaining Shares" shall have the meaning given such term in the recitals to this Agreement. 

        "Remaining Stockholders" shall have the meaning such term is given in the recitals to this Agreement. 

        "Remaining Stockholder Amount" shall have the meaning given such term in  Section 7.3(f)(ii). 

        "Remaining Stockholder Escrow Shares" shall have the meaning given such term in  Section 7.3(f)(ii). 

        "Schedule Freeze Date" shall have the meaning given such term in Section 4.4(b). 

        "Seller" or "Sellers" shall have the meaning given such terms in the recitals to this
Agreement. 

        "Seller Agreement" shall have the meaning given such tem in the recitals of this Agreement. 

        "Seller Representatives" shall have the meaning given such term in Section 4.1(b). 

        "Shares" shall have the meaning given such term in the recitals to this Agreement. 

        "Stockholder Agent" shall have the meaning given such term in Section 11.1. 

        "Tax or Taxes" shall have the meaning given such term in Section 2.16. 

        "Tax Returns" shall have the meaning given such term in Section 2.16. 

42

 

        "Welfare Plans" shall have the meaning given such term in Section 2.15(b). 

 
 

ARTICLE 11
  MISCELLANEOUS    
    

        11.1    Stockholder Agent.    Each of the Sellers hereby irrevocably appoints First Reserve
Corporation to be the representative (the "Stockholder Agent") of the Sellers following the Closing Date in any matter arising out of this Agreement.
For any matter in which Buyer is entitled to rely on or otherwise deal with the Sellers, Buyer shall be entitled to communicate solely with the Stockholder Agent and shall be entitled to rely on any
such communications as being the desire and will of the Sellers. Notice delivered to the Stockholder Agent in accordance with Section 11.2 hereof
shall be deemed notice to all of the Sellers. For purposes of this Agreement, each Seller, without any further action on its part, shall be deemed to have consented to the appointment of First Reserve
Corporation as the attorney-in-fact for and on behalf of each such Seller, and the taking by the Stockholder Agent of any and all actions and the making of any decisions
required or permitted to be taken by him under this Agreement. Accordingly, the Stockholder Agent has unlimited authority and power to act on behalf of each Seller with respect to this Agreement and
the disposition, settlement or other handling of all indemnification claims, amendments, waivers, and other rights or obligations arising from and taken pursuant to this Agreement. The Sellers will be
bound by all actions taken by
the Stockholder Agent in connection with this Agreement, and Buyer shall be entitled to rely on any action or decision of the Stockholder Agent. The Stockholder Agent will not incur any liability with
respect to any action taken or suffered by it in reliance upon any notice, direction, instruction, consent, statement or other document believed by it to be genuine and to have been signed by the
proper person (and shall have no responsibility to determine the authenticity thereof), nor for any other action or inaction, except its own willful misconduct, bad faith or gross negligence. In all
questions arising under this Agreement, the Stockholder Agent may rely on the advice of counsel, and the Stockholder Agent will not be liable to the Sellers for anything done, omitted or suffered in
good faith by the Stockholder Agent based on such advice. Notwithstanding the foregoing, Buyer will not incur any liability to any Seller with respect to any action taken or suffered by it in reliance
upon any notice, direction, instruction, consent, statement, in each case whether written or oral, or other document provided by the Stockholder Agent, and no action or inaction on the part to
Stockholder Agent shall relieve any Seller of its obligations to Buyer hereunder. 

        11.2    Notices.    All notices, requests, consents, directions and other instruments and
communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered (a) in person, (b) by courier,
(c) by overnight delivery service with proof of delivery or (d) by prepaid registered or certified first-class mail, return receipt requested, in each such case addressed to the
respective party at the address set forth below, or (e) if sent by facsimile or other similar form of communication (with receipt confirmed) to the respective party at the facsimile number set
forth below: 

If
to the Seller or the Stockholder Agent, to: 

First
Reserve Fund VIII, L.P.

One Lafayette Place

Greenwich, Connecticut 06830

Attention: Thomas R. Denison

Facsimile: (203) 661-6729

Confirm: (203) 661-6601 

43

 

With
a copy to: 

Gibson,
Dunn & Crutcher LLP

1801 California, Suite 4100

Denver, Colorado 80202

Attention: Steven K. Talley

Facsimile: (303) 296-5310

Confirm: (303) 298-5700 

If
to Buyer, to: 

BES
Holding Co.

400 W. Illinois, Suite 800

Midland, Texas 79701

Attention: President

Facsimile: (432) 620-5501

Confirm: (432) 620-5500 

With
a copy to: 

Andrews &
Kurth L.L.P.

600 Travis, Suite 4200

Houston, Texas 77002

Attention: Bill Cooper

Facsimile: (713) 220-4285

Confirm: (713) 220-4200 

or
to such other address or facsimile number and to the attention of such other Person as either party may designate by written notice. Any notice mailed shall be deemed to have been given and
received on the third Business Day following the day of mailing. 

        11.3    Specific Performance.    It is specifically understood and agreed that any breach by
the Sellers of the provisions of this Agreement is likely to result in irreparable harm to Buyer and that an action at Law for damages alone will be an inadequate remedy for such breach. Accordingly,
in addition to any other remedy that may be available to it, in the event of breach or threatened breach by any of the Sellers of the provisions of this Agreement, including, without limitation,  Sections 4.7 and 4.8 hereof, Buyer shall be entitled to enforce the specific performance of this
Agreement by the Sellers and to seek both temporary and permanent injunctive relief (to the extent permitted by law), without the necessity of providing actual damages, and such other relief as the
court may allow. 

        11.4    Assignment and Successors.    Except as specifically contemplated by this Agreement,
no party hereto shall assign this Agreement or any part hereof without the prior written consent of the other party; provided, however, that Buyer may
assign its rights and obligations in this Agreement to an Affiliate of Buyer. This Agreement shall inure to the benefit of, be binding upon and be enforceable by the parties hereto and their
respective successors and assigns. 

        11.5    Entire Agreement; Amendment.    This Agreement, the Exhibits hereto, the Company
Disclosure Schedule, the Buyer Disclosure Schedule and the Confidentiality Agreement constitute the entire agreement and understanding between the parties relating to the subject matter hereof and
thereof and supersede all prior representations, endorsements, premises, agreements, memoranda communications, negotiations, discussions, understandings and arrangements, whether oral, written or
inferred, between the parties relating to the subject matter hereof. This Agreement (or any provision hereof) may not be modified, amended, rescinded, canceled, altered or supplemented, in whole or in
part, except upon the execution and delivery of a written instrument executed by a duly authorized 

44

 

representative
of Buyer and Sellers holding a majority of the outstanding shares of Company Common Stock. 

        11.6    Governing Law.    This Agreement shall be governed by, construed and interpreted in
accordance with the internal laws of the State of New York, without regard to choice of law rules (other than New York General Obligations Law Section 5-1401), except to the extent,
if any, that mandatory choice of law rules in effect in the State of New York require that any provision hereof be governed by and construed in accordance with the laws of the State of Delaware. 

        11.7    Waiver.    The waiver of any breach of any term or condition of this Agreement shall
not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 

        11.8    Severability.    Any provision hereof that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

        11.9    No Third Party Beneficiaries.    Any agreement contained, expressed or implied in this
Agreement shall be only for the benefit of the parties hereto and their respective legal representatives, successors and assigns, and such agreements shall not inure to the benefit of the obligees of
any indebtedness of any party hereto, it being the intention of the parties hereto that no Person shall be deemed a third party beneficiary of this Agreement, except to the extent a third party is
expressly given rights herein. 

        11.10    Arbitration.    Except for injunctive relief that a party may seek in any court
having jurisdiction, any and all disputes, controversies or claims (legal, equitable, tort, or statutory) between the parties that arise out of or relate to this Agreement or the other agreements
contemplated hereby (collectively "Disputes") shall be resolved by binding arbitration administered by the American Arbitration Association
("AAA") in accordance with, to the extent permitted by applicable law, the following, which shall have controlling priority in the order listed:
(i) the arbitration provisions in this Agreement, (ii) the AAA Commercial Arbitration Rules ("AAA Rules"), (iii) the Federal
Arbitration Act (Title 9 of the United States Code); and (iv) to the extent (i), (ii) or (iii) are inapplicable, unenforceable or invalid, the laws of the State of New York. 

        (a)    Commencement of Arbitration.    An arbitration proceeding is commenced by serving a notice
("Arbitration Notice") on the other party (with a copy to the AAA in accordance with the AAA Rules) in accordance with the notice provisions set forth
in Section 11.3 hereof. The Arbitration Notice shall contain a reasonably detailed description of the Dispute and the remedy sought. 

        (b)    Selection of Arbitrator.    The arbitration shall be conducted by one (1) neutral arbitrator whom the
parties will choose, via the "alternate strike" process set forth below, from an initial list the AAA provides of eleven (11) persons whom the AAA deems meet the criteria of being a practicing
attorney with experience in the area of mergers and acquisitions of domestic oil and gas or oilfield services companies (the "Arbitrator List"). By
5:00 p.m. Houston, Texas time on the fifth (5) business day after receipt of the Arbitrator List from the AAA, the responding party shall strike one arbitrator by faxed letter or email
to the claiming party in accordance with the notice provisions set forth in Section 11.3 hereof. By 5:00 p.m. Houston, Texas time the
following business day, the claiming party shall strike one arbitrator by faxed letter or email to the responding party in accordance with the notice provisions set forth in  Section 11.3 hereof.
Thereafter, the parties similarly shall continue alternating striking one arbitrator from the Arbitrator List each business
day by 5:00 p.m. Houston, Texas time until remaining is one person, whom will be the parties' chosen arbitrator for the arbitration (the
"Arbitrator"). If a party fails to communicate a strike timely, that strike is forfeited and it shall be made by the other party by its making two
strikes by its deadline for its next strike. If the arbitrator selected by this process cannot serve for any reason, then within five (5) business days of being notified the selected 

45

 

arbitrator
cannot serve the parties will attempt to agree on an alternative method for selecting an arbitrator. If no agreement is reached within the five days, the parties will request the AAA to
issue a new list of eleven (11) arbitrators and the striking process set forth herein will be repeated to select the Arbitrator. 

        (c)    Governing Law And Rules.    The Arbitrator is empowered to resolve Disputes by summary rulings in accordance
with the standards followed by New York courts for motions to dismiss or summary judgments. Except for claims brought under federal law, in which event federal laws and federal common laws and statute
of limitations shall govern, all Disputes shall be governed by and the Arbitrator shall resolve all Disputes in accordance with the internal laws of the State of New York (including the statutes of
limitations governing under New York laws), without regard to choice of law rules (other than New York General Obligations Law Section 5-1401), except to the
extent, if any, that mandatory choice of law rules in effect in the State of New York require that any Dispute be governed by and construed in accordance with the laws of the State of Delaware. The
Arbitrator may grant any remedy or relief available under the applicable law that the Arbitrator deems just and equitable or that the Arbitrator deems necessary to make effective the award,  provided
that in no event may the Arbitrator award special, incidental, consequential, punitive or exemplary damages, and the parties agree they waive
their right to all special, incidental, consequential, punitive or exemplary damages that may arise from circumstances giving rise to a Dispute. The Arbitrator shall award pre- and
post-decision interest on all amounts awarded in accordance with pre- and post-judgment interest rules and statutes of the State of New York. 

        (d)    Discovery.    After appointment of the Arbitrator, the parties may conduct discovery, including taking of
depositions and requesting production of documents, that is directly relevant to the Dispute. The Arbitrator and AAA are empowered to enforce this discovery provision and impose sanctions for or
provide protection against discovery abuses as the Arbitrator or AAA deem just and necessary. 

        (e)    Commencement of Hearing.    To the maximum extent possible, the parties, the AAA and the Arbitrator shall take
all action necessary to require that an arbitration proceeding and hearing be concluded within 180 days of the Arbitration Notice being filed with the AAA. 

        (f)    Venue: Unless the parties agree in writing otherwise, arbitration of Disputes shall be conducted in Houston, Harris
County, Texas. 

        (g)   Decision: The Arbitrator shall have thirty (30) days from the conclusion of the hearing or any
post-hearing motions in which to render a decision. Unless the parties agree in writing or on the record otherwise, the decision shall be a written opinion and shall be in the form of a
findings of fact and conclusions of law setting forth the bases for the opinion reached. 

        (h)    Fees and Costs.    The Arbitrator shall award the substantially prevailing party the reasonable and necessary
attorneys' fees and expenses the substantially prevailing party incurred in connection with resolving the Dispute, and the Arbitrator shall assess all arbitration costs, including the Arbitrator's
fees and costs, against the party not substantially prevailing. If the Arbitrator deems neither party substantially prevailed on the Disputes submitted, the Arbitrator may decide that each party shall
bear its own attorneys' fees and costs and that each party shall pay equally the arbitration expenses and the Arbitrator's fees and expenses. 

        (i)    Finality.    All decisions by the Arbitrator or AAA shall be binding on the parties and shall not be subject to
review or appeal. All Disputes decided shall have res judicata or collateral estoppel effect in accordance with the governing law. 

        (j)    Survival.    Unless the parties agree in writing otherwise, the arbitration provisions in this  Section 11.10 shall
survive any termination, amendment or expiration of this Agreement and they shall be effective and binding upon a party and
its successors and assigns notwithstanding a bankruptcy filing. 

46

 

        (k)    Confidentiality.    Each party agrees that all Disputes and all matters conducted, decided or settled in
connection with arbitrating a Dispute, including discovery and arbitration hearing, shall be kept strictly confidential, except to the extent applicable law, a party's legal obligations or a party's
legal position asserted in an action requires disclosure of such information. 

        11.11    Counterparts.    This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

        11.12    Headings.    Each statement set forth in the Disclosure Schedule with respect to a
particular section herein shall be deemed made solely with respect to such section and not with respect to any other section hereof unless specifically set forth in the Disclosure Schedule as also
being made with respect to such other section. The headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof or affect in any way the meaning or interpretation of this Agreement. 

        11.13    Negotiated Transaction.    The provisions of this Agreement were negotiated by the
parties hereto, and this Agreement shall be deemed to have been drafted by all of the parties hereto. 

47

  

        IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. 

	 	 	COMPANY:
	

 	
 	
FESCO Holdings, Inc.
	

 	
 	

By:	

/s/  RANDY SPAUR      

	 	 	Name:	Randy Spaur
	 	 	Title:	Interim CEO
	

 	
 	
BUYER:
	

 	
 	
BES HOLDING CO.
	

 	
 	

By:	

/s/  KENNETH V. HUSEMAN      

	 	 	Name:	Kenneth V. Huseman
	 	 	Title:	President

	

 	
 	
SELLERS:
	

 	
 	
First Reserve Fund VIII, L.P.
	

 	
 	

By:	

First Reserve GP VIII, L.P., its general partner
	

 	
 	

 	

By:	

First Reserve Corporation, its general partner
	

 	
 	

By:	

/s/  THOMAS R. DENISON      

	 	 	Name:	Thomas R. Denison
	 	 	Title:	 	 

48

 

	 	 	Sterling Trust FBO Randy Spaur
	

 	
 	

By:	

Sterling Trust Company

as Trustee
	

 	
 	

By:	

/s/  SHARON HIABAL      

	 	 	Name:	Sharon Hiabal
	 	 	Title:	 
	

 	
 	

Randy D. Spaur
	

 	
 	

/s/  RANDY D. SPAUR      

	

 	
 	
Spouse Acknowledgement
	

 	
 	
I, the spouse of Randy D. Spaur, have read and hereby approve the foregoing Agreement. In consideration of Buyer granting my spouse the right to purchase the number of shares of Buyer Common
Stock set forth on Exhibit A hereto on terms set forth in the Agreement, I hereby agree to be bound irrevocably by the Agreement (and the Amended and Restated Stockholders' Agreement of Buyer and
the Escrow Agreement referred to in the Agreement) and further agree that any community property or similar interest that I may have in such shares of Buyer Common Stock shall hereby be similarly bound. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any right under the Agreement.
	

 	
 	

/s/  CAROLYN A. SPAUR      
 Name: Carolyn A. Spaur

49

 

	

 	
 	
Peter O. Kane
	

 	
 	

/s/  PETER O. KANE      

	

 	
 	
Spouse Acknowledgement
	

 	
 	

I, the spouse of Peter O. Kane, have read and hereby approve the foregoing Agreement. In consideration of Buyer granting my spouse the right to purchase the number of shares of Buyer Common Stock set forth on Exhibit A hereto on terms set forth in the Agreement, I hereby agree to be bound irrevocably by the Agreement (and the Amended and Restated Stockholders' Agreement of Buyer and the Escrow Agreement referred to
in the Agreement) and further agree that any community property or similar interest that I may have in such shares of Buyer Common Stock shall hereby be similarly bound. I hereby appoint my spouse as my attorney-in-fact with respect to any amendment
or exercise of any right under the Agreement.
	

 	
 	

/s/  SANDY KANE      
 Name: Sandy Kane

50

 
 

AMENDMENT TO STOCK PURCHASE AGREEMENT    
    

        THIS AMENDMENT (this "Amendment") is made and entered into as of
October 1, 2003, by and among FESCO Holdings, Inc., a Delaware corporation (the "Company"), BES Holding Co., a Delaware corporation
("Buyer"), and First Reserve Fund VIII, L.P., a Delaware limited partnership (the "First Reserve Fund"),
and amends that certain Stock Purchase Agreement, dated as of September 18, 2003 (the "Stock Purchase Agreement"), by and among the Company, each
of the "Sellers" named on Exhibit A thereto (each a "Seller" and collectively the
"Sellers") and Buyer. The Stock Purchase Agreement as amended by this Amendment is referred to herein as the "Amended Stock
Purchase Agreement"). 

R E C I T A L S:  

        WHEREAS, Section 11.5 of the Stock Purchase Agreement provides that the Stock Purchase Agreement may be
amended by delivery of a written instrument executed by a duly authorized representative of Buyer and Sellers holding a majority of the outstanding shares of Company Common Stock (as defined in the
Stock Purchase Agreement); 

        WHEREAS, the Company, Buyer and the First Reserve Fund, as the holder of a majority of the outstanding shares of Company Common Stock,
desire to amend the Stock Purchase Agreement as provided in this Amendment to account for the fact that (x) Sterling Trust FBO Randy Spaur has effected a distribution of all of its assets to
Randy Spaur ("Spaur") and is therefore no longer the holder of 1,100 shares of Company Common Stock (the "Spaur
Shares"), which shares are now held directly by Spaur in his own name and (y) Sterling Trust FBO William L. Hubbell has effected a distribution of all of its assets to
William L. Hubbell ("Hubbell") and is therefore no longer the holder of 3,000 shares of Company Common Stock (the "Hubbell
Shares"), which shares are now held directly by Hubbell in his own name; and 

        WHEREAS, Spaur desires to become, and the Company, Buyer and the First Reserve Fund desire that Spaur become, a party to this Amendment in
place of Sterling Trust FBO Randy Spaur to reflect Spaur's agreement to transfer the Spaur Shares to Buyer on the same terms and subject to the same conditions as Sterling Trust FBO Randy Spaur was
previously to have transferred such shares to Buyer pursuant to the Stock Purchase Agreement. 

        NOW, THEREFORE, in consideration of the premises, covenants and agreements contained herein, and for other good and valuable
consideration, the legal sufficiency of which are hereby acknowledged, the Company, Buyer and the First Reserve Fund hereby amend the Stock Purchase Agreement as provided herein, and the Company,
Buyer, the First Reserve Fund and Spaur hereby agree as follows: 

 
 

ARTICLE 1
  PURCHASE AND SALE    
    

        1.1    Agreement to Sell and to Purchase; Assumption of Rights and Obligations.    

        (a)   On
the Closing Date (as defined in the Stock Purchase Agreement), upon the terms and subject to conditions contained in the Stock Purchase Agreement and this Amendment,
Spaur shall transfer, sell, assign and convey to Buyer, and Buyer shall purchase from Spaur, the Spaur Shares free and clear of any Encumbrances (as defined in the Stock Purchase Agreement). In
consideration of the transfer to Buyer of the Spaur Shares, Buyer shall issue to Spaur an aggregate of 1,975 shares of Buyer Common Stock (as defined in the Stock Purchase Agreement). 

        (b)   The
purchase and sale provided for in Section 1.1(a) of this Amendment (the "Spaur Exchange") shall occur at the
Closing referenced in Section 1.1(b) of the Stock Purchase Agreement. The Spaur Exchange shall be in lieu of the purchase and sale by Sterling Trust FBO Randy Spaur provided for in
Section 1.1 of the Stock Purchase Agreement (the "Sterling Exchange"), and pursuant to this Amendment, the Sterling Exchange shall be cancelled,
vacated and rendered null and void. 

Except
for the substitution of the Spaur Exchange for the Sterling Exchange, the Spaur Exchange shall be in addition to, and not in lieu of, the remaining purchases and sales provided for in
Section 1.1 of the Stock Purchase Agreement. Exhibit A to the Stock Purchase Agreement shall be amended and restated in its entirety to
reflect Spaur replacing Sterling Trust FBO Randy Spaur as a Seller and to provide for (x) the purchase and sale of shares of Company Common Stock and (y) the holding of shares of Buyer
Common Stock issued in consideration therefor in escrow, in each case in the manner specified in Exhibit A to this Amendment. 

        (c)   Any
obligations under the Stock Purchase Agreement from Buyer to Sterling Trust FBO Randy Spaur or Sterling Trust FBO William L. Hubbell, on the one hand, or from
Sterling Trust FBO Randy Spaur or Sterling Trust FBO William L. Hubbell to Buyer, on the other hand, shall be voided and shall have no further force or effect. 

        (d)   With
respect to the Spaur Shares, Spaur hereby makes all of the representations and warranties to Buyer as were made by Sellers to Buyer under Article 2 of the
Stock Purchase Agreement. Other than the representations and warranties contained in Section 2.22 of the Stock Purchase Agreement, Spaur hereby makes each such representation and warranty
jointly and severally with the other Sellers as if Spaur occupied the position of Sterling Trust FBO Randy Spaur under the Stock Purchase Agreement. Spaur further represents and warrants to Buyer that
as of the date hereof and as of the Closing Date (as defined in the Stock Purchase Agreement) he (i) is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue
Code of 1986, as amended, (ii) has reached the age of majority, (iii) is a United States citizen or resident, (iv) is an "accredited investor" as such term is defined in
Rule 501(a) of Regulation D under the Securities Act of 1933, as amended, (v) has such knowledge of Buyer and its business and such experience in financial and business matters as
to enable him to evaluate the risks and merits of an investment in the Buyer Common Stock, (vi) owns the Spaur Shares of record and beneficially, free and clear of any Encumbrances and
(vii) has full power and legal right to sell, assign, transfer and deliver the Spaur Shares to Buyer. 

        (e)   The
definition of Sellers set forth in the Stock Purchase Agreement is expressly amended to include Spaur and to exclude Sterling Trust FBO Randy Spaur. Spaur hereby
agrees that he shall be subject to all of the rights and obligations that Sterling Trust FBO Randy Spaur was subject to under the Stock Purchase Agreement. 

        1.2    Deliveries at Closing.    At Closing (as defined in the Stock Purchase Agreement): 

        (a)   Spaur
shall deliver to Buyer: 

        (i)    a
duly executed certificate(s), countersigned by the appropriate officers of the Company, representing the Spaur Shares in the name of Buyer, (ii) a copy of a
letter from Spaur addressed to and acknowledged by the Company, as registrar with respect to the Company Common Stock, instructing such registrar to cancel the certificates representing the Spaur
Shares and to reissue new certificates representing the same number of shares of Company Common Stock in the name of Buyer and (iii) a copy of the cancelled certificates representing the Spaur
Shares; 

        (ii)   a
duly executed Amended and Restated Stockholders' Agreement of Buyer, in the form attached as Exhibit C to the
Stock Purchase Agreement; and 

        (iii)  a
duly executed Escrow Agreement, in the form attached as Exhibit D to the Stock Purchase Agreement. 

        (b)   Buyer
shall deliver to Spaur duly executed certificate(s) representing the number of shares of Buyer Common Stock set forth opposite his name on  Exhibit A to this Amendment. 

        (c)   The
deliveries made pursuant to this Section 1.2 shall be in addition to, and not in lieu of, the deliveries contemplated by Section 1.3 of the Stock
Purchase Agreement; provided, however, that no deliveries shall be made from Buyer to Sterling Trust FBO
Randy Spaur or Sterling Trust FBO William L. Hubbell, on the one hand, or from Sterling Trust FBO Randy Spaur or Sterling Trust FBO William L. Hubbell to Buyer, on the other hand. 

 
 

ARTICLE 2
  SCOPE OF AMENDMENT    
    

        2.1    Effect of Amendment.    

        Except
(x) as expressly set forth in this Amendment, (y) for Exhibit A to the Stock Purchase Agreement which is
amended and restated in its entirety to read as provided in Exhibit A to this Amendment and (z) for those representations and warranties
made by Spaur to Buyer under Section 1.1(c) of this Amendment which are made in addition to, and not in lieu of, the representations and warranties made by the First Reserve Fund and Peter O.
Kane to Buyer under Article 2 of the Stock Purchase Agreement, this Amendment only amends the Stock Purchase Agreement to the extent (A) that the provisions of this Amendment and the
provisions of the Stock Purchase Agreement are inconsistent and (B) necessary to substitute Spaur for Sterling Trust FBO Randy Spaur under the Stock Purchase Agreement. Other than
(i) the removal of Sterling Trust FBO Randy Spaur as a party to the Amended Stock Purchase Agreement, (ii) the elimination of Sterling Trust FBO William L. Hubbell as a Remaining
Stockholder (as defined in the Stock Purchase Agreement), (iii) the termination of any obligations on the part of Buyer to Sterling Trust FBO Randy Spaur as Seller or Sterling Trust FBO William
L. Hubbell as Remaining Stockholder and (iv) the termination of any obligations on the part of Sterling Trust FBO Randy Spaur or Sterling Trust FBO William L. Hubbell to Buyer, the rights,
duties, obligations and commitments of the parties to the Stock Purchase Agreement shall continue under the Amended Stock Purchase Agreement. 

        2.2    Definitions.    

        Capitalized
terms used but not defined in this Amendment have the meanings assigned to such terms in the Stock Purchase Agreement. 

 
 

ARTICLE 3
  MISCELLANEOUS    
    

        3.1    Amendment.    

        This
Amended Stock Purchase Agreement cannot be further amended, modified, cancelled, rescinded, altered or modified, in whole or in part, except upon the execution and delivery of a
written instrument executed by a duly authorized representative of the Company, a duly authorized representative of Buyer, a duly authorized representative of the First Reserve Fund and Spaur. 

        3.2    Governing Law.    

        This
Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to choice of law rules (other than New York General
Obligation Law Section 5-1401), except to the extent, if any, that mandatory choice of law rules in effect in the State of New York require that any provision hereof be governed by
and construed in accordance with the laws of the State of Delaware. 

        3.3    Waiver.    

        The
waiver of any breach of any term or condition of this Amendment shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 

        3.4    Severability.    

        Any
provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Amendment, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. 

        3.5    No Third Party Beneficiaries.    

        Any
agreement contained, expressed or implied in this Amendment shall be only for the benefit of the parties hereto and their respective legal representatives, successors and assigns,
and such 

agreements
shall not inure to the benefit of the obligees of any indebtedness of any party hereto, it being the intention of the parties hereto that no Person shall be deemed a third party beneficiary
of this Amendment, except to the extent a third party is expressly given rights herein. 

        3.6    Specific Performance.    

        It
is specifically understood and agreed that any breach by Spaur or Hubbell of the provisions of this Amendment is likely to result in irreparable harm to Buyer and that an action at
Law for damages alone will be an inadequate remedy for such breach. Accordingly, in addition to any other remedy that may be available to it, in the event of breach or threatened breach by Spaur or
Hubbell of the provisions of this Amendment, Buyer shall be entitled to enforce the specific performance of this Amendment by Spaur or Hubbell and to seek both temporary and permanent injunctive
relief (to the extent permitted by law), without the necessity of providing actual damages, and such other relief as the court may allow. 

        3.7    Arbitration.    

        The
parties to this Amendment agree that any and all disputes, controversies or claims (legal, equitable, tort or statutory) between such parties that arise out of or relate to this
Amendment shall be resolved by binding arbitration administrated in the manner contemplated by Section 11.10 of the Stock Purchase Agreement. 

        3.8    Counterparts.    

        This
Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

        3.9    Headings.    

        The
headings of the Articles and Sections of this Amendment have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or
provisions hereof or affect in any way the meaning or interpretation of this Amendment. 

        3.10    Negotiated Transaction.    

        The
provisions of this Amendment were negotiated by the parties hereto, and this Amendment shall be deemed to have been drafted by all of the parties hereto. 

        IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. 

	 	 	COMPANY:
	

 	
 	

FESCO Holdings, Inc.
	

 	
 	

By:	

/s/  RANDY SPAUR      

	 	 	Name:	Randy Spaur
	 	 	Title:	Interim CEO
	

 	
 	
BUYER:
	

 	
 	

BES Holding Co.
	

 	
 	

By:	

/s/  KENNETH V. HUSEMAN      

	 	 	Name:	Kenneth V. Huseman
	 	 	Title:	President
	

 	
 	
THE FIRST RESERVE FUND:
	

 	
 	

First Reserve Fund VIII, L.P.
	

 	
 	

By:	

First Reserve Fund GP VIII, L.P., its general partner
	

 	
 	

 	

By:	

First Reserve Corporation, its general partner
	

 	
 	

By:	

/s/  THOMAS R. DENISON      

	 	 	Name:	Thomas R. Denison
	 	 	Title:	Managing Director

	 	 	SPAUR:
	

 	
 	

Randy D. Spaur
	

 	
 	

/s/  RANDY D. SPAUR      
 Randy D. Spaur
	

 	
 	
Spouse Acknowledgement
	

 	
 	

I, Carolyn Spaur, the spouse of Randy D. Spaur, have read and hereby approve the foregoing Amendment. I hereby agree to be bound irrevocably by the Amendment. I hereby appoint my spouse as my attorney- in-fact with respect to any amendment or the
exercise of any right under the Amendment.
	

 	
 	

Carolyn Spaur
	

 	
 	

/s/  CAROLYN A. SPAUR      
 Carolyn Spaur

QuickLinks

TABLE OF CONTENTS

DISCLOSURE SCHEDULES

EXHIBITS

STOCK PURCHASE AGREEMENT

ARTICLE 1 PURCHASE AND SALE

ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER

ARTICLE 4 ADDITIONAL AGREEMENTS

ARTICLE 5 BUYER'S CONDITIONS

ARTICLE 6 SELLERS' CONDITIONS

ARTICLE 7 INDEMNIFICATION

ARTICLE 8 NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS, REPRESENTATIONS, WARRANTIES AND AGREEMENTS

ARTICLE 9 TERMINATION

ARTICLE 10 DEFINITIONS OF CERTAIN TERMS

ARTICLE 11 MISCELLANEOUS

AMENDMENT TO STOCK PURCHASE AGREEMENT

ARTICLE 1 PURCHASE AND SALE

ARTICLE 2 SCOPE OF AMENDMENT

ARTICLE 3 MISCELLANEOUS

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