Contingent Earn Out Agreement

Exhibit 10.2 CONTINGENT EARN OUT AGREEMENT This Contingent Earn Out Agreement (" Agreement" ) is made and entered into as of the 28 th day of February 2006 by and between Basic Energy Services, L.P., a Delaware limited partnership (" Basic" ) and G & L Tool, Ltd., a Texas limited partnership (" G & L" ).RECITATIONS Basic as Purchaser and G & L as Seller have entered into an Asset Purchase Agreement dated as of February 21, 2006 (the " Acquisition Agreement" ), which provides for, among other things, the purchase by Basic from the Sellers of the Assets (as defined in the Acquisition Agreement); Pursuant to the Acquisition Agreement, Basic has agreed with G & L that Basic will enter into a Contingent Earn Out Agreement with G & L at the time of Closing under the Acquisition Agreement, pursuant to which G & L will be paid up to the maximum amount of Twenty One Million and No/100 Dollars ($21,000,000.00) over a five year period under the conditions and subject to the terms set out in this Agreement. NOW THEREFORE, in consideration of the mutual covenants herein contained, Basic and G & L agree as follows: 1. Basic agrees to pay G & L a contingent earn out amount (the " CEA" ) for each of the twelve calendar month periods beginning with the twelve consecutive month period commencing March 1, 2006 and extending through the fifth twelve month period ending February 28, 2011 (for purposes of this Agreement, each separate twelve month period will be referred to as a " CEA Year" ). The CEA payable to G & L will not exceed (a) $21,000,000.00 in the aggregate, (b) 1,312,500.00 during any 3 month period of a CEA Year other than the last three months period of a CEA Year or (c) $5,250,000.00 for any CEA Year. Notwithstanding the foregoing, if G & L does not earn the maximum amount payable for any CEA Year, the amount not earned will be carried over to future CEA Years and the maximum CEA payable during each future CEA Year will be increased until such deficiency is made up. 2. The CEA payable to G & L for each CEA Year will be an amount equal to fifty percent (50%)of the amount by which the annual EBITDA (as defined below) earned by Basic during a CEA Year from the operation of the assets purchased by Basic from G & L pursuant to the Acquisition Agreement exceeds $14,500,000.00 (the " Annual Targeted EBITDA" ). The Annual EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and Amortization generated by the Assets purchased from G & L and other similar assets operated in conjunction with such assets during the five (5) CEA Years commencing March 1, 2006 and ending February 28, 2011 (the " Payout Period" ). Annual EBITDA for the purposes of determining the annual CEA payable to G & L, if any, will be calculated in accordance with Basic' s standard accounting practices for area and division level operations, including allocations for insurance and employee benefits but will not include allocations for corporate overhead.


3. Basic and G & L agree that if Basic makes an investment during the term hereof in equipment that expands the capacity of the income generating assets on which the Annual EBITDA is calculated, the Annual Targeted EBITDA will be increased by an amount necessary to insure a pay back to Basic based on a purchase price of such additional equipment to EBITDA ratio of 4:1. Equipment added during a CEA Year period will result in the targeted EBITDA being increased prorata for the portion of the year the equipment is available for use on a customer' s location. As an example, if an additional rental tool with a total cost of $400,000.00 is added to the fleet in the seventh month of a CEA Year, then the Annu ...