8. Incentive Plan

In May 2003, Basic's board of directors and stockholders approved the Basic Energy Services, Inc. 2003 Incentive Plan (as amended, the "Plan"), which provides 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 Plan assumed awards of the plans of Basic's predecessors that were awarded and remained outstanding prior to adoption of the Plan. The Plan provides for the issuance of 8,350,000 shares. The Plan is administered by the Plan committee, and in the absence of a Plan committee, by the Board of Directors, which determines the awards and the associated terms of the awards and interprets its provisions and adopts policies for implementing the Plan. The number of shares authorized under the Plan and the number of shares subject to an award under the Plan will be adjusted for stock splits, stock dividends, recapitalizations, mergers and other changes affecting the capital stock of Basic.

During the three months ended March 31, 2012 and 2011, compensation expense related to share-based arrangements was approximately $2.2 million and $1.7 million, respectively. For compensation expense recognized during the three months ended March 31, 2012 and 2011, Basic recognized a tax benefit of approximately $816,000 and $744,000, respectively.

As of March 31, 2012, there was approximately $27.6 million of total unrecognized compensation related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.65 years. The total fair value of share-based awards vested during the three months ended March 31, 2012 and 2011 was approximately $11.6 million and $8.2 million, respectively. The actual tax benefit realized for the tax deduction from vested share-based awards was $2.9 million for the three months ended March 31, 2011. During the three months ended March 31, 2012, there was no excess tax benefit due to the net operating loss carryforwards ("NOL"). If there was no NOL, the excess tax benefit would have been $1.5 million.

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. Basic is required to estimate the expected forfeiture rate and only recognize expense for those options expected to vest. Options granted under the Plan expire 10 years from the date they are granted, and generally vest over a three- to five-year service period.

The following table reflects the summary of stock options outstanding at March 31, 2012 and the changes during the three months then ended:


	Number of Options Granted			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (000's)
Non-statutory stock options:
Outstanding, beginning of period		787,450		$	14.55
Options granted		—		$	—
Options forfeited		—		$	—
Options exercised		(10,000	)	$	6.98
Options expired		—		$	—

Outstanding, end of period		777,450		$	14.64		3.22	$	4,855


Exercisable, end of period		777,450		$	14.64		3.22	$	4,855


Vested or expected to vest, end of period		777,450		$	14.64		3.22	$	4,855

The total intrinsic value of share options exercised during the three months ended March 31, 2012 and 2011 was approximately $130,000 and $2.7 million, respectively.

Cash received from share option exercises under the Plan was approximately $70,000 and $950,000 for the three months ended March 31, 2012 and 2011, respectively. The actual tax benefit realized for the tax deductions from options exercised was $1.2 million for the three months ended March 31, 2011. During the three months ended March 31, 2012, there was no excess tax benefit due to the NOL. If there was no NOL, the excess tax benefit would have been $26,000.

Basic has a history of issuing treasury and newly issued shares to satisfy share option exercises.

Restricted Stock Awards

On March 8, 2012, the Compensation Committee of Basic's Board of Directors approved grants of performance-based stock awards to certain members of management. The performance-based awards are tied to Basic's achievement of total stockholder return over the performance period from January 1, 2012 through December 31, 2012, as compared to other members of a defined peer group. The number of shares to be issued will range from 0% to 150% of the 190,126 target number of shares depending on the performance noted above. Any shares earned at the end of the performance period will then remain subject to vesting over a three-year period, with the first shares vesting March 15, 2014. As of March 31, 2012, Basic estimated that 58% of the target number of performance-based awards will be earned.

A summary of the status of Basic's non-vested share grants at March 31, 2012 and changes during the three months ended March 31, 2012 is presented in the following table:


Nonvested Shares	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Nonvested at beginning of period		1,962,171		$	13.41
Granted during period		932,058			18.10
Vested during period		(621,444	)		13.92
Forfeited during period		(29,530	)		16.53

Nonvested at end of period		2,243,255		$	15.18