Predecessor Incentive Plan

In May 2003, Basic’s board of directors and stockholders approved the Basic 2003 Incentive Plan (as amended effective May 22, 2013) (the “Predecessor Plan”), which provided for granting of incentive awards in the form of stock options, restricted stock, performance awards, bonus shares, phantom shares, cash awards and other stock-based awards to officers, employees, directors and consultants of Basic. The Predecessor Plan provided for the issuance of 11,350,000 shares of Predecessor Common Stock. Of these shares, approximately 2,095,334 shares of Predecessor Common Stock were available for grant as of December 31, 2015.

There were no options granted under the Predecessor Plan during 2016, 2015 or 2014.

During the years ended December 31, 2016, 2015 and 2014, compensation expense related to share-based arrangements including both restricted stock awards and stock option awards was approximately $17.7 million, $13.7 million and $14.7 million, respectively. For compensation expense recognized under the Predecessor Plan during the years ended December 31, 2016, 2015 and 2014, Basic recognized a tax benefit of approximately $0, $4.8 million and $5.3 million, respectively.

As of December 31, 2016, there was no unrecognized compensation related to non-vested share-based compensation arrangements granted under the Predecessor Plan.

The total fair value of share-based awards under the Predecessor Plan vested during the years ended December 31, 2016, 2015 and 2014 was approximately $2.5 million, $5.4 million and $20.6 million, respectively. During 2016, 2015 and 2014 there was no excess tax benefit due to the net operating loss. In the event of a net operating gain the tax benefits would have been $0 $11,000 and $4.5 million, respectively.

On December 23, 2016, as part of the Prepackaged Plan, the Predecessor Plan was cancelled.

Predecessor Stock Option Awards

The fair value of each option award under the Predecessor Plan is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Options granted under the Plan expire 10 years from the date they are granted, and generally vest over periods ranging from three to 5 years.

The following table reflects the summary of stock options outstanding at December 31, 2016 and the changes during the twelve months then ended:



	Predecessor Stock Option Awards
					Weighted
			Weighted		Average	Aggregate
	Number of		Average		Remaining	Intrinsic
	Options		Exercise		Contractual	Value
	Granted		Price		Term (Years)	(000's)
Non-statutory stock options:
Outstanding, beginning of period	175,000		$	26.29
Options granted	—		—
Options forfeited	—		$	—
Options exercised	—		$	—
Options expired	(152,000	)	$	26.84
Outstanding, end of period	23,000		$	22.66	0.19	—
Exercisable, end of period	23,000		$	22.66	0.19	—
Vested or expected to vest, end of period	23,000		$	22.66	0.19	—

The total intrinsic value of share options exercised during the years ended December 31, 2015 and 2014 was approximately $37,000 and $2.2 million, respectively. There were no share option exercises in 2016.

Cash received from option exercises under the Predecessor Plan was approximately $724,000 and $4.3 million for the years ended December 31, 2015 and 2014, respectively. During 2014 there was no tax benefit due to the net operating loss. In the event of a net operating gain the tax benefit would have been $535,000.

The Company has historically issued treasury and newly-issued shares to satisfy share option exercises.

On December 23, 2016, as part of the Prepackaged Plan all outstanding stock options under the Predecessor Plan were cancelled.

Predecessor Restricted Stock Awards

A summary of the status of Basic’s non-vested share grants at December 31, 2015 and changes during the year ended December 31, 2016 is presented in the following table:



	Predecessor Plan
			Weighted Average
	Number of		Grant Date Fair
	Shares		Value Per Share
Nonvested at beginning of period	1,967,376		$	14.34
Granted during period	790,263		2.73
Vested during period	(860,104	)	15.04
Forfeited during period	(9,044	)	24.05
Nonvested at end of period	1,888,491		$	9.12

On December 23, 2016, all nonvested restricted stock were subject to a 570 to 1 reverse stock split and immediately converted into Successor Company stock.

Predecessor Phantom Stock Awards

On March 18, 2015, the Compensation Committee of Basic’s Board of Directors approved grants of performance-based phantom stock awards to certain members of management. The performance-based phantom stock awards were tied to Basic’s achievement of total stockholder return (“TSR”) relative to the TSR of a peer group of energy services companies over the performance period (defined as the one-year calculation period starting on the 20th NYSE trading day prior to and including the last NYSE trading day of 2014 and ending on the last NYSE trading day of 2015). The number of phantom shares to be issued could range from 0% to 150% of the 704,089 target number of phantom shares, depending on the performance noted above. Any phantom shares earned at the end of the performance period then remained subject to vesting in one-third increments on March 15, 2016, 2017 and 2018 (subject to accelerated vesting in certain circumstances). As of December 31, 2015, Basic estimated that 66.7% of the target number of performance-based awards will be earned. On December 23, 2016 as part of the Prepackaged Plan all outstanding performance-based phantom stock awards were cancelled.

On March 24, 2016 the Compensation Committee approved 705,263 shares of performance-based phantom stock awards to certain members of management. The performance-based phantom stock awards were tied to Basic’s achievement of total stockholder return relative to the TSR of a peer group of energy services companies over the performance period (defined as the one-year calculation period starting on the 20th NYSE trading day prior to and including the last NYSE trading day of 2015 and ending on the last NYSE trading day of 2017). The number of phantom shares to be issued ranged from 0% to 150% of the 705,263 target number of phantom shares, depending on the performance noted above. On December 23, 2016 as part of the Prepackaged Plan all outstanding performance-based phantom stock awards were cancelled.

The Compensation Committee also approved grants of phantom restricted stock awards to certain key employees in 2015 and 2016. The number of phantom shares issued in 2015 were 654,500. These grants were subject to vesting over a three-year period, with the first portion vesting on March 15, 2016. The number of phantom shares issued in 2016 were 552,100. These grants were subject to vesting over a three-year period, with the first portion vesting on March 15, 2017. There was $314,000 outstanding unamortized expense related to unvested phantom shares granted to key employees as of December 31, 2016. This plan was cancelled in February 2017.

Successor Incentive Plan

On the Effective Date, the Basic Energy Services, Inc. Management Incentive Plan (the “MIP”) became effective pursuant to the Prepackaged Plan. The MIP provides for the issuance of incentive awards in the form of stock options, restricted stock, and performance awards denominated in Successor Common Stock. The MIP provides for the issuance of up to 3,237,671 shares of Successor Common Stock. Of these authorized shares, approximately 2,428,255 shares were available for grant as of December 31, 2016. The board of directors of the Company (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”) administers the MIP. The number of shares of Successor Common Stock authorized under the MIP and the number of shares subject to an award under the MIP, are subject to adjustment in the event of certain recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split or other distribution with respect to the Successor Common Stock or any merger, reorganization, consolidation, combination, spin-off or other similar corporate change or any other change affecting the Successor Common Stock.

On the Effective Date, the Company issued time-based restricted stock unit awards ("RSUs") for 809,416 shares and stock option awards for 323,770 shares, which awards vest in one third tranches on each of the Effective Date, and the first and second anniversaries of the Effective Date. The Company issued 269,810 shares of Successor Common Stock in connection with the immediately vested RSUs on the Effective Date. The remainder of the authorized awards under the MIP as of December 31, 2016, including 809,416 performance-based RSUs and 323,770 performance-based stock options contemplated by the Prepackaged Plan, may be awarded in the future at the discretion of the Company's board of directors.

During the year ended December 31, 2016, compensation expense related to share-based arrangements under the MIP, including restricted stock, RSU and stock option awards, was approximately $10.1 million. For compensation expense recognized during the year ended December 31, 2016, Basic did not recognize a tax benefit.

As of December 31, 2016, there was $19.5 million unrecognized compensation related to non-vested share-based compensation arrangements granted under the MIP. That cost is expected to be recognized over a weighted average period of 2.0 years.

The total fair value of share-based awards vested during the years ended December 31, 2016 (including under the Predecessor Plan and the MIP) was approximately $9.9 million. During 2016 there was no excess tax benefit.

Successor Stock Option Awards

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Options granted under the MIP expire 10 years from the date they are granted, and generally vest over a period of three years.

The following table reflects the summary of stock options outstanding at December 31, 2016:



				Weighted
		Weighted		Average	Aggregate
	Number of	Average		Remaining	Intrinsic
	Options	Exercise		Contractual	Value
	Granted	Price		Term (Years)	(000's)
Non-statutory stock options:
Outstanding, beginning of period	—	$	—
Options granted	323,770	36.55
Options forfeited	—	$	—
Options exercised	—	$	—
Options expired	—	$	—
Outstanding, end of period	323,770	$	36.55	9.98	—
Exercisable, end of period	—				—
Vested or expected to vest, end of period	323,770	$	36.55	9.98	—

There were no stock option exercises in 2016.

Successor Restricted Stock Unit Awards

A summary of the status of Basic’s non-vested RSU grants at December 31, 2016 and changes during the year ended December 31, 2016 is presented in the following table:



			Weighted Average
	Number of		Grant Date Fair
	Units		Value Per Unit
Nonvested at beginning of period	—		$	—
Granted during period	809,416		36.55
Vested during period	(269,810	)	36.55
Forfeited during period	—		—
Nonvested at end of period	539,606		$	36.55

Warrant Agreement

On the Effective Date, the Company entered into a warrant agreement (the “Warrant Agreement”) with American Stock Transfer & Trust Company, LLC, as warrant agent. Pursuant to the terms of the Prepackaged Plan, the Company issued warrants (the “Warrants,” and holders thereof “Warrantholders”), which in the aggregate, are exercisable to purchase up to approximately 2,066,627 shares of Successor Common Stock. In accordance with the Prepackaged Plan, the Company issued Warrants to the holders of the old common stock, totaling approximately 2,066,627 Warrants outstanding, exercisable until December 23, 2023, to purchase up to an aggregate of approximately 2,066,627 shares of Successor Common Stock at an initial exercise price of $55.25 per share, subject to adjustment as provided in the Warrant Agreement. At issuance, the warrants were recorded at fair value, which was determined using the Black-Scholes option pricing model. The warrants are equity classified and, at issuance, were recorded as an increase to additional paid-in capital in the amount of $8.4 million. All unexercised Warrants will expire, and the rights of the Warrantholder to purchase Successor Common Stock will terminate on December 23, 2023, which is the seventh anniversary of the Effective Date.