sv3
As filed with the Securities and Exchange Commission on
October 27, 2008
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-3
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Basic Energy Services,
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction
of
incorporation or organization)
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54-2091194
(I.R.S. Employer
Identification No.)
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Co-Registrants
(see next
page)
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500 W. Illinois, Suite 100
Midland, Texas 79701
(432) 620-5500
(Address, including zip
code, and telephone number, including
area code, of registrants principal executive
offices)
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Kenneth V. Huseman
President
500 W. Illinois, Suite 100
Midland, Texas 79701
(432) 620-5500
(Name, address, including
zip code, and telephone number,
including area code, of agent for service)
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Copy to:
David C. Buck
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200
Approximate date of commencement of proposed sale to the
public: From time to time after the effective
date of this Registration Statement, as determined in light of
market conditions and other factors.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following
box. o
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following
box. þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that
shall become effective upon filing with the Commission pursuant
to Rule 462(e) under the Securities Act, check the
following
box. o
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed
to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Amount of
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Title of Each Class of
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Aggregate Offering
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Registration
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Securities to be Registered
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Price(1)(2)(3)(4)
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Fee
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Common Stock of Basic Energy Services, Inc.(5)
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Preferred Stock of Basic Energy Services, Inc.(6)
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Senior Debt Securities of Basic Energy Services, Inc.(7)
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Subordinated Debt Securities of Basic Energy Services, Inc.(8)
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Warrants of Basic Energy Services, Inc.(9)
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Units of Basic Energy Services, Inc.(10)
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Guarantees of Debt Securities Issued by Basic Energy Services,
Inc.(11)
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Total
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$1,000,000,000
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$39,300
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(Footnotes on next page)
(Continued from table on previous page)
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(1)
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The proposed maximum offering price
per unit will be determined from time to time by Basic Energy
Services, Inc. in connection with, and at the time of, the
issuance of the securities registered hereunder.
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(2)
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Estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(o)
under the Securities Act of 1933, as amended.
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(3)
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In no event will the aggregate
initial offering price of all securities issued from time to
time pursuant to this registration statement exceed
$1,000,000,000. Securities registered hereunder may be sold
separately, together or as units with other securities
registered hereunder. This total amount also includes such
securities as may, from time to time, be issued upon conversion
or exchange of securities registered hereunder, to the extent
any such securities are, by their terms, convertible into or
exchangeable for other securities.
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(4)
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Not specified as to each class of
securities to be registered pursuant to General Instruction
II.D. of
Form S-3
under the Securities Act of 1933, as amended.
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(5)
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Subject to note (3) above, an
indeterminate number of shares of common stock of Basic Energy
Services, Inc. as may be sold from time to time are being
registered hereunder. Also includes such indeterminate number of
shares of common stock as may be (a) issued upon
conversion, redemption or exchange for any debt securities or
preferred stock that provide for conversion or exchange into
common stock or (b) issued upon exercise and settlement of
any warrants. The aggregate amount of common stock registered
under this registration statement is limited to that which is
permissible under Rule 415(a)(4) promulgated under the
Securities Act of 1933, as amended.
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(6)
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Subject to note (3) above, an
indeterminate number of shares of preferred stock of Basic
Energy Services, Inc. as may be sold from time to time are being
registered hereunder. Also includes such indeterminate number of
shares of preferred stock as may be (a) issued upon
conversion, redemption or exchange for any debt securities that
provide for conversion or exchange into preferred stock or
(b) issued upon exercise and settlement of any warrants.
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(7)
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Subject to note (3) above, an
indeterminate principal amount of senior debt securities of
Basic Energy Services, Inc. as may be sold from time to time are
being registered hereunder. If any senior debt securities of
Basic Energy Services, Inc. are issued at an original issue
discount, then the offering price shall be in such greater
principal amount as shall result in an aggregate initial
offering price not to exceed $1,000,000,000, less the dollar
amount of any securities previously issued hereunder.
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(8)
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Subject to note (3) above, an
indeterminate principal amount of subordinated debt securities
of Basic Energy Services, Inc. as may be sold from time to time
are being registered hereunder. If any subordinated debt
securities of Basic Energy Services, Inc. are issued at an
original issue discount, then the offering price shall be in
such greater principal amount as shall result in an aggregate
initial offering price not to exceed $1,000,000,000, less the
dollar amount of any securities previously issued hereunder.
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(9)
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Subject to note (3) above, an
indeterminate number of warrants of Basic Energy Services, Inc.
as may be sold from time to time are being registered hereunder.
Warrants may be exercised to purchase common stock, preferred
stock, debt securities or units.
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(10)
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Subject to note (3) above, an
indeterminate number of units of Basic Energy Services, Inc. as
may be sold from time to time are being registered hereunder.
Units may consist of any combination of common stock, preferred
stock, debt securities or warrants.
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(11)
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No separate consideration will be
received for any guarantee of debt securities. Accordingly,
pursuant to Rule 457(n) of the Securities Act of 1933, as
amended, no separate filing fee is required.
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Co-Registrants
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State or Other
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Primary Standard
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Jurisdiction of
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Industrial
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I.R.S.
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Exact Name of Co-Registrant
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Incorporation or
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Classification
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Employer Identification
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as Specified in its Charter(1)
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Organization
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Code Number
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Number
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Basic Energy Services GP, LLC
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Delaware
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1389
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54-2091197
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Basic Energy Services LP, LLC
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Delaware
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1389
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54-2091195
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Basic Energy Services, L.P.
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Delaware
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1389
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75-2441819
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Basic ESA, Inc.
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Texas
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1389
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75-1772279
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Basic Marine Services, Inc.
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Delaware
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1389
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20-2274888
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First Energy Services Company
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Delaware
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1389
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84-1544437
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LeBus Oil Field Service Co.
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Texas
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4214
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75-2073125
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Oilwell Fracturing Services, Inc.
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Oklahoma
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1311
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73-1142826
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Globe Well Service, Inc.
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Texas
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1389
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75-1634275
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SCH Disposal, L.L.C.
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Texas
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1389
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75-2788335
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JS Acquisition LLC
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Delaware
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1389
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26-2529500
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Acid Services, LLC
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Kansas
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1389
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48-1180455
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JetStar Energy Services, Inc.
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Texas
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1389
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68-0605237
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JetStar Holdings, Inc.
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Delaware
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1389
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74-3144248
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Sledge Drilling Corp.
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Texas
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1381
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20-4223140
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Chaparral Service, Inc.
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New Mexico
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1389
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85-0206424
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Hennessey Rental Tools, Inc.
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Oklahoma
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1389
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73-1435063
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Wildhorse Services, Inc.
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Oklahoma
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1389
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06-1641442
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Xterra Fishing and Rental Tools Co.
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Texas
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1389
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76-0647818
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(1)
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The address for each co-registrant
is 500 W. Illinois, Suite 100, Midland, Texas
79701.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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SUBJECT
TO COMPLETION, DATED OCTOBER 27, 2008
PROSPECTUS
$1,000,000,000
Basic Energy Services,
Inc.
COMMON STOCK
PREFERRED STOCK
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
WARRANTS
UNITS
GUARANTEES
By this prospectus, we may from time to time offer and sell in
one or more offerings up to an aggregate of $1,000,000,000 of
the following securities:
(1) shares of common stock;
(2) shares of preferred stock, in one or more series, which
may be convertible into or exchangeable for debt securities or
common stock;
(3) senior debt securities, which may be convertible into
or exchangeable for common stock or preferred stock;
(4) subordinated debt securities, which may be convertible
into or exchangeable for common stock or preferred stock;
(5) warrants to purchase common stock, preferred stock,
debt securities or units;
(6) units consisting of any combination of common stock,
preferred stock, debt securities or warrants; and/or
(7) guarantees of debt securities issued by Basic Energy
Services, Inc.
This prospectus provides a general description of the securities
we may offer. Supplements to this prospectus will provide the
specific terms of the securities that we actually offer,
including the offering prices. You should carefully read this
prospectus, any applicable prospectus supplement and any
information under the headings Where You Can Find More
Information and Incorporation by Reference
before you invest in any of these securities. This prospectus
may not be used to sell securities unless it is accompanied by a
prospectus supplement that describes those securities.
We may sell these securities to or through underwriters, to
other purchasers
and/or
through agents. Supplements to this prospectus will specify the
names of any underwriters or agents.
Our common stock is listed for trading on the New York Stock
Exchange under the symbol BAS.
Investing in our securities involves risks. Please read
Risk Factors beginning on page 2 of this
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
20 .
TABLE OF
CONTENTS
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or SEC,
utilizing a shelf registration process. Under this
shelf registration process, we may sell any combination of the
securities described in this prospectus in one or more offerings
up to a total offering price of $1,000,000,000. This prospectus
provides you with a general description of the securities we may
offer. Each time we offer to sell securities, we will provide a
prospectus supplement that will contain specific information
about the terms of that offering and the securities offered by
us in that offering. The prospectus supplement may also add,
update or change information contained in this prospectus. If
there is any inconsistency between the information in this
prospectus and any prospectus supplement, you should rely on the
information provided in the prospectus supplement. This
prospectus does not contain all of the information included in
the registration statement. The registration statement filed
with the SEC includes exhibits that provide more details about
the matters discussed in this prospectus. You should carefully
read this prospectus, the related exhibits filed with the SEC
and any prospectus supplement, together with the additional
information described below under the headings Where You
Can Find More Information and Incorporation by
Reference.
You should rely only on the information contained or
incorporated by reference in this prospectus and in any
accompanying prospectus supplement. We have not authorized any
other person to provide you with different information. If
anyone provides you with different or inconsistent information,
you should not rely on it. We are not making an offer of the
securities covered by this prospectus in any state where the
offer is not permitted. You should assume that the information
appearing in this prospectus, any prospectus supplement and any
other document incorporated by reference is accurate only as of
the date on the front cover of those documents. Our business,
financial condition, results of operations and prospects may
have changed since those dates.
Under no circumstances should the delivery to you of this
prospectus or any exchange or redemption made pursuant to this
prospectus create any implication that the information contained
in this prospectus is correct as of any time after the date of
this prospectus.
This prospectus may not be used to sell securities unless it is
accompanied by a prospectus supplement that describes those
securities.
Unless otherwise indicated or unless the context otherwise
requires, all references in this prospectus to
Basic, Basic Energy Services,
we, us, and our mean Basic
Energy Services, Inc. and its wholly owned subsidiaries. In this
prospectus, we sometimes refer to the debt securities, common
stock, preferred stock, warrants, units and guarantees
collectively as the securities.
INCORPORATION
BY REFERENCE
The SEC allows us to incorporate by reference
information into this document. This means that we can disclose
important information to you by referring you to another
document filed separately with the SEC. The information
incorporated by reference is considered to be part of this
prospectus. We incorporate by reference the documents listed
below, other than any portions of the respective filings that
were furnished (pursuant to Item 2.02 or Item 7.01 of
current reports on
Form 8-K
or other applicable SEC rules) rather than filed:
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our annual report on
Form 10-K
for the year ended December 31, 2007, as filed with the SEC
on March 7, 2008, as amended by Amendment No. 1 to
such report, as filed with the SEC on April 29, 2008, which
we refer to collectively as our 2007
Form 10-K;
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our quarterly report on
Form 10-Q
for the quarter ended March 31, 2008, as filed with the SEC
on May 8, 2008, which we refer to as our First Quarter 2008
Form 10-Q;
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our quarterly report on
Form 10-Q
for the quarter ended June 30, 2008, as filed with the SEC
on August 8, 2008, which we refer to as our Second Quarter
2008
Form 10-Q; and
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our current reports on
Form 8-K
and 8-K/A,
as filed with the SEC on March 4, 2008, March 17,
2008, April 22, 2008, May 5, 2008, May 8, 2008,
May 29, 2008 July 2, 2008, July 15, 2008 and
October 14, 2008.
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All documents that we file pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and until our offerings hereunder are completed, or
after the date of the registration statement of which this
prospectus forms a part and prior to effectiveness of the
registration statement, will be deemed to be incorporated by
reference into this prospectus and will be a part of this
prospectus from the date of the filing of the document. Any
statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus will be deemed to
be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or in any
other subsequently filed document that also is or is deemed to
be incorporated by reference in this prospectus modifies or
supersedes that statement. Any statement that is modified or
superseded will not constitute a part of this prospectus, except
as modified or superseded.
We will provide to each person, including any beneficial owner
to whom a prospectus is delivered, a copy of these filings,
other than an exhibit to these filings unless we have
specifically incorporated that exhibit by reference into the
filing, upon written or oral request and at no cost. Requests
should be made by writing or telephoning us at the following
address:
Basic Energy Services, Inc.
500 W. Illinois, Suite 100
Midland, Texas 79701
(432) 620-5500
Attn: Investor Relations
ii
WHERE YOU
CAN FIND MORE INFORMATION
We have filed a registration statement with the SEC under the
Securities Act of 1933, as amended, which we refer to as the
Securities Act, that registers the issuance and sale of the
securities offered by this prospectus. The registration
statement, including the attached exhibits, contains additional
relevant information about us. The rules and regulations of the
SEC allow us to omit some information included in the
registration statement from this prospectus.
We file annual, quarterly, and other reports, proxy statements
and other information with the SEC under the Securities Exchange
Act of 1934, as amended, which we refer to as the Exchange Act.
You may read and copy any materials we file with the SEC at the
SECs public reference room at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings are also available to the public through the SECs
website at
http://www.sec.gov.
General information about us, including our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
as well as any amendments and exhibits to those reports, are
available free of charge through our website at
http://www.basicenergyservices.com
as soon as reasonably practicable after we file them with,
or furnish them to, the SEC. Information on our website is not
incorporated into this prospectus or our other securities
filings and is not a part of this prospectus.
CAUTIONARY
STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act regarding our
business, financial condition, results of operations and
prospects. Words such as expects, anticipates, intends, plans,
believes, seeks, estimates and similar expressions or variations
of such words are intended to identify forward-looking
statements. However, these are not the exclusive means of
identifying forward-looking statements. Although forward-looking
statements contained in this prospectus reflect our good faith
judgment, such statements can only be based on facts and factors
currently known to us. Consequently, forward-looking statements
are inherently subject to risks and uncertainties, and actual
outcomes may differ materially from the results and outcomes
discussed in the forward-looking statements. Further information
about the risks and uncertainties that may impact us are
described in Risk Factors beginning on page 2.
You should read that section carefully. You should not place
undue reliance on forward-looking statements, which speak only
as of the date of this prospectus. We undertake no obligation to
update publicly any forward-looking statements in order to
reflect any event or circumstance occurring after the date of
this prospectus or currently unknown facts or conditions or the
occurrence of unanticipated events.
Important factors that may affect our expectations, estimates or
projections include:
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a decline in, or substantial volatility of, oil and gas prices,
and any related changes in expenditures by our customers;
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the effects of future acquisitions on our business;
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changes in customer requirements in markets or industries we
serve;
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competition within our industry;
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general economic and market conditions;
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our access to current or future financing arrangements;
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our ability to replace or add workers at economic rates; and
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environmental and other governmental regulations.
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iii
NON-GAAP FINANCIAL
MEASURES
The SEC has adopted rules to regulate the use of non-GAAP
financial measures such as EBITDA, that are derived on the
basis of methodologies other than in accordance with generally
accepted accounting principles, or GAAP. EBITDA is a non-GAAP
financial measure that complies with the Securities Act
regulations when it is defined as net income (the most directly
comparable GAAP financial measure) before interest, taxes,
depreciation and amortization. We define EBITDA in this
prospectus accordingly.
EBITDA has limitations as an analytical tool and should not be
considered an alternative to net income, operating income, cash
flow from operating activities or any other measure of financial
performance or liquidity presented in accordance with generally
accepted accounting principles, or GAAP. EBITDA excludes some,
but not all, items that affect net income and operating income,
and these measures may vary among other companies.
Limitations to using EBITDA as an analytical tool include:
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EBITDA does not reflect our current or future requirements for
capital expenditures or capital commitments;
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EBITDA does not reflect changes in, or cash requirements
necessary to service interest or principal payments on, our debt;
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EBITDA does not reflect income taxes;
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although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA does not reflect any cash
requirements for such replacements; and
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other companies in our industry may calculate EBITDA differently
than we do, limiting its usefulness as a comparative measure.
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INDUSTRY
AND MARKET DATA
This prospectus (and documents incorporated by reference in this
prospectus) include market share, industry data and forecasts
that we obtained from internal company surveys (including
estimates based on our knowledge and experience in the industry
in which we operate), market research, consultant surveys,
publicly available information, industry publications and
surveys. These sources include World Oil magazine, Baker Hughes
Incorporated, the Association of Energy Service Companies, and
the Energy Information Administration of the
U.S. Department of Energy. Industry surveys, publications,
consultant surveys and forecasts generally state that the
information contained therein has been obtained from sources
believed to be reliable. Although we believe such information is
accurate and reliable as of the date of this prospectus, we have
not independently verified any of the data from third party
sources cited or used for our managements industry
estimates, nor have we ascertained the underlying economic
assumptions relied upon therein. For example, the number of
onshore well servicing rigs in the U.S. could be lower than
our estimate to the extent our two larger competitors have
continued to report as stacked rigs equipment that is not
actually complete or subject to refurbishment. Statements as to
our position relative to our competitors or as to market share
refer to the most recent available data. As a result, you should
be aware that the industry and market data included or
incorporated by reference in this prospectus, and estimates and
beliefs based on that data, may not be reliable. We cannot, and
the underwriters cannot, guarantee the accuracy or completeness
of any such information.
iv
BASIC
ENERGY SERVICES, INC.
We provide a wide range of well site services to oil and gas
drilling and producing companies, including well servicing,
fluid services, contract drilling, completion and remedial
services and well site construction services. These services are
fundamental to establishing and maintaining the flow of oil and
gas throughout the productive life of a well. Our broad range of
services enables us to meet multiple needs of our customers at
the well site. Our operations are managed regionally and are
concentrated in the major United States onshore oil and gas
producing regions in Texas, New Mexico, Oklahoma, Arkansas,
Kansas, Louisiana and the Rocky Mountain states. We provide our
services to a diverse group of oil and gas companies.
The following is a description of our current business segments:
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Well Servicing. Our well servicing segment
operates our fleet of 409 well servicing rigs (as of
June 30, 2008) and related equipment. This business
segment encompasses a full range of services performed with a
mobile well servicing rig, including the installation and
removal of downhole equipment, and elimination of obstructions
in the well bore to facilitate the flow of oil and gas. These
services are performed to establish, maintain and improve
production throughout the productive life of an oil and gas well
and to plug and abandon a well at the end of its productive
life. Our well servicing equipment and capabilities are
essential to facilitate most other services performed on a well.
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Fluid Services. Our fluid services segment
utilizes our fleet of 678 fluid services trucks (as of
June 30, 2008) and related assets, including
specialized tank trucks, storage tanks, water wells, disposal
facilities, construction and related equipment. These assets
provide, transport, store and dispose of a variety of fluids, as
well as provide well site construction and maintenance services.
These services are required in most workover, completion and
remedial projects and are routinely used in daily producing well
operations.
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Completion and Remedial Services. Our
completion and remedial services segment operates our fleet of
pressure pumping units, an array of specialized rental equipment
and fishing tools, air compressor packages specially configured
for underbalanced drilling operations, and cased-hole wireline
units. The largest portion of this business segment consists of
pressure pumping services focused on cementing, acidizing and
fracturing services in niche markets. We entered the rental and
fishing tool business through an acquisition in the first
quarter of 2006.
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Contract Drilling. Our contract drilling
segment operates nine drilling rigs (as of June 30,
2008) and related equipment. We use these assets to
penetrate the earth to a desired depth and initiate production
from a well. We greatly increased our presence in this line of
business through the Sledge Drilling acquisition in the second
quarter of 2007.
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Our primary executive offices are located at
500 W. Illinois, Suite 100, Midland, Texas 79701
and our telephone number is
(432) 620-5500.
Our Internet website is www.basicenergyservices.com. The
information contained on our website or that can be accessed
through our website is not incorporated by reference into this
prospectus, and you should not consider the information
contained on our website to be part of this prospectus.
1
RISK
FACTORS
The securities to be offered by this prospectus may involve a
high degree of risk. When considering an investment in any of
the securities, you should consider carefully all of the risk
factors described below and any similar information contained in
any annual report on
Form 10-K,
quarterly report on
Form 10-Q
or other document filed by us with the SEC after the date of
this prospectus. If applicable, we will include in any
prospectus supplement a description of those significant factors
that could make the offering described in the prospectus
supplement speculative or risky.
Risks
Relating to Our Business
A
decline in or substantial volatility of oil and gas prices could
adversely affect the demand for our services.
The demand for our services is primarily determined by current
and anticipated oil and gas prices and the related general
production spending and level of drilling activity in the areas
in which we have operations. Volatility or weakness in oil and
gas prices (or the perception that oil and gas prices will
decrease) affects the spending patterns of our customers and may
result in the drilling of fewer new wells or lower production
spending on existing wells. This, in turn, could result in lower
demand for our services and may cause lower rates and lower
utilization of our well service equipment. A decline in oil and
gas prices or a reduction in drilling activities could
materially and adversely affect the demand for our services and
our results of operations.
Prices for oil and gas historically have been extremely volatile
and are expected to continue to be volatile. For example,
although oil and natural gas prices have recently hit levels
exceeding $100 per barrel and $7 per mcf, respectively, oil and
natural gas prices fell below $11 per barrel and $2 per mcf,
respectively, in early 1999. The Cushing WTI Spot Oil Price
averaged $56.64, $66.05 and $72.34 per barrel in 2005, 2006 and
2007 respectively, and the average wellhead price for natural
gas, as recorded by the Energy Information Agency, was $7.51,
$6.42 and $6.38 per mcf for 2005, 2006 and 2007 respectively.
Commodity prices have increased significantly in recent years,
and these prices may not remain at their earlier 2008 levels.
Our
business depends on domestic spending by the oil and gas
industry, and this spending and our business may be adversely
affected by industry and financial market conditions that are
beyond our control.
We depend on our customers willingness to make operating
and capital expenditures to explore, develop and produce oil and
gas in the United States. Customers expectations for lower
market prices for oil and gas, as well as the availability of
capital for operating and capital expenditures, may curtail
spending thereby reducing demand for our services and equipment.
Industry conditions are influenced by numerous factors over
which we have no control, such as the supply of and demand for
oil and gas, domestic and worldwide economic conditions,
political instability in oil and gas producing countries and
merger and divestiture activity among oil and gas producers. The
volatility of the oil and gas industry and the consequent impact
on exploration and production activity could adversely impact
the level of drilling and workover activity by some of our
customers. This reduction may cause a decline in the demand for
our services or adversely affect the price of our services. In
addition, reduced discovery rates of new oil and gas reserves in
our market areas also may have a negative long-term impact on
our business, even in an environment of stronger oil and gas
prices, to the extent existing production is not replaced and
the number of producing wells for us to service declines.
Recent adverse changes in capital markets have also caused a
number of oil and gas producers to announce reductions in
capital budgets for future periods. Limitations on the
availability of capital, or higher costs of capital, for
financing expenditures may cause these and other oil and gas
producers to make additional reductions to capital budgets in
the future even if commodity prices remain at historically high
levels.
2
We may
not be able to grow successfully through future acquisitions or
successfully manage future growth, and we may not be able to
effectively integrate the businesses we do
acquire.
Our business strategy includes growth through the acquisitions
of other businesses. We may not be able to continue to identify
attractive acquisition opportunities or successfully acquire
identified targets. In addition, we may not be successful in
integrating our current or future acquisitions into our existing
operations, which may result in unforeseen operational
difficulties or diminished financial performance or require a
disproportionate amount of our managements attention. Even
if we are successful in integrating our current or future
acquisitions into our existing operations, we may not derive the
benefits, such as operational or administrative synergies, that
we expected from such acquisitions, which may result in the
commitment of our capital resources without the expected returns
on such capital. Furthermore, competition for acquisition
opportunities may escalate, increasing our cost of making
further acquisitions or causing us to refrain from making
additional acquisitions. We also must meet certain financial
covenants in order to borrow money under our existing credit
agreement to fund future acquisitions.
We may
require additional capital in the future. We cannot assure you
that we will be able to generate sufficient cash internally or
obtain alternative sources of capital on favorable terms, if at
all. If we are unable to fund capital expenditures our business
may be adversely affected.
We anticipate that we will continue to make substantial capital
investments to purchase additional equipment to expand our
services, refurbish our well servicing rigs and replace existing
equipment. For the year ended December 31, 2006, we
invested approximately $104.6 million in cash for capital
expenditures, excluding acquisitions. For the year ended
December 31, 2007, we invested approximately
$98.5 million in cash for capital expenditures, excluding
acquisitions. Historically, we have financed these investments
through internally generated funds, debt and equity offerings,
our capital lease program and our secured credit facilities.
These significant capital investments require cash that we could
otherwise apply to other business needs. However, if we do not
incur these expenditures while our competitors make substantial
fleet investments, our market share may decline and our business
may be adversely affected. In addition, if we are unable to
generate sufficient cash internally or obtain alternative
sources of capital to fund our proposed capital expenditures,
acquisitions, take advantage of business opportunities or
respond to competitive pressures, it could materially adversely
affect our results of operations, financial condition and
growth. Higher costs of capital may also adversely affect our
ability to obtain sources or capital on favorable terms. In
Addition, if we raise additional funds by issuing equity
securities, dilution to existing stockholders may result.
Competition
within the well services industry may adversely affect our
ability to market our services.
The well services industry is highly competitive and fragmented
and includes numerous small companies capable of competing
effectively in our markets on a local basis as well as several
large companies that possess substantially greater financial and
other resources than we do. Our larger competitors greater
resources could allow those competitors to compete more
effectively than we can. The amount of equipment available may
exceed demand, which could result in active price competition.
Many contracts are awarded on a bid basis, which may further
increase competition based primarily on price. In addition,
recent market conditions have stimulated the reactivation of
well servicing rigs and construction of new equipment, which
could result in excess equipment and lower utilization rates in
future periods.
We
depend on several significant customers, and a loss of one or
more significant customers could adversely affect our results of
operations.
Our customers consist primarily of major and independent oil and
gas companies. During 2006 and 2007, our top five customers
accounted for 15% and 16% of our revenues, respectively, and 17%
of our revenues for the first six months of 2008. The loss of
any one of our largest customers or a sustained decrease in
demand by any of such customers could result in a substantial
loss of revenues and could have a material adverse effect on our
results of operations.
3
Our
industry has experienced a high rate of employee turnover. Any
difficulty we experience replacing or adding personnel could
adversely affect our business.
We may not be able to find enough skilled labor to meet our
needs, which could limit our growth. Our business activity
historically decreases or increases with the price of oil and
gas. We may have problems finding enough skilled and unskilled
laborers in the future if the demand for our services increases.
We have raised wage rates to attract workers from other fields
and to retain or expand our current work force during the past
year. If we are not able to increase our service rates
sufficiently to compensate for wage rate increases, our
operating results may be adversely affected.
Other factors may also inhibit our ability to find enough
workers to meet our employment needs. Our services require
skilled workers who can perform physically demanding work. As a
result of our industry volatility and the demanding nature of
the work, workers may choose to pursue employment in fields that
offer a more desirable work environment at wage rates that are
competitive with ours. We believe that our success is dependent
upon our ability to continue to employ and retain skilled
technical personnel. Our inability to employ or retain skilled
technical personnel generally could have a material adverse
effect on our operations.
We are
dependent on particular suppliers for our newbuild rig program
and are vulnerable to delayed deliveries and future price
increases.
We currently purchase our well servicing rigs from a single
supplier as part of a 134-rig commitment for rigs to be
delivered through the end of December 2008, of which 127 have
been delivered as of September 30, 2008. There are also a
limited number of suppliers that manufacture this type of
equipment. Although pricing is generally fixed for this newbuild
contract and program, future price increases could affect our
ability to continue to increase the number of newbuild rigs in
our fleet at economic levels. In addition, the failure of our
current supplier to timely deliver the remaining newbuild rigs
could adversely affect our budgeted or projected financial and
operational data.
Our
success depends on key members of our management, the loss of
any of whom could disrupt our business operations.
We depend to a large extent on the services of some of our
executive officers. The loss of the services of Kenneth V.
Huseman, our President and Chief Executive Officer, or other key
personnel could disrupt our operations. Although we have entered
into employment agreements with Mr. Huseman and our other
executive officers that contain, among other provisions,
non-compete agreements, we may not be able to enforce the
non-compete provisions in the employment agreements.
Our
operations are subject to inherent risks, some of which are
beyond our control. These risks may be self-insured, or may not
be fully covered under our insurance policies.
Our operations are subject to hazards inherent in the oil and
gas industry, such as, but not limited to, accidents, blowouts,
explosions, craterings, fires and oil spills. These conditions
can cause:
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personal injury or loss of life;
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damage to or destruction of property, equipment and the
environment; and
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suspension of operations.
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The occurrence of a significant event or adverse claim in excess
of the insurance coverage that we maintain or that is not
covered by insurance could have a material adverse effect on our
financial condition and results of operations. In addition,
claims for loss of oil and gas production and damage to
formations can occur in the well services industry. Litigation
arising from a catastrophic occurrence at a location where our
equipment and services are being used may result in us being
named as a defendant in lawsuits asserting large claims.
4
We maintain insurance coverage that we believe to be customary
in the industry against these hazards. However, we do not have
insurance against all foreseeable risks, either because
insurance is not available or because of the high premium costs.
As such, not all of our property is insured. We are also
self-insured up to retention limits with regard to workers
compensation and medical and dental coverage. We maintain
accruals in our consolidated balance sheets related to
self-insurance retentions by using third-party data and
historical claims history. The occurrence of an event not fully
insured against, or the failure of an insurer to meet its
insurance obligations, could result in substantial losses. In
addition, we may not be able to maintain adequate insurance in
the future at rates we consider reasonable. Insurance may not be
available to cover any or all of these risks, or, even if
available, it may be inadequate, or insurance premiums or other
costs could rise significantly in the future so as to make such
insurance prohibitive. It is likely that, in our insurance
renewals, our premiums and deductibles will be higher, and
certain insurance coverage either will be unavailable or
considerably more expensive than it has been in the recent past.
In addition, our insurance is subject to coverage limits and
some policies exclude coverage for damages resulting from
environmental contamination.
We are
subject to federal, state and local regulation regarding issues
of health, safety and protection of the environment. Under these
regulations, we may become liable for penalties, damages or
costs of remediation. Any changes in laws and government
regulations could increase our costs of doing
business.
Our operations are subject to federal, state and local laws and
regulations relating to protection of natural resources and the
environment, health and safety, waste management, and
transportation of waste and other materials. Our fluid services
segment includes disposal operations into injection wells that
pose some risks of environmental liability, including leakage
from the wells to surface or subsurface soils, surface water or
groundwater. Liability under these laws and regulations could
result in cancellation of well operations, fines and penalties,
expenditures for remediation, and liability for property damage
and personal injuries. Sanctions for noncompliance with
applicable environmental laws and regulations also may include
assessment of administrative, civil and criminal penalties,
revocation of permits and issuance of corrective action orders.
Laws protecting the environment generally have become more
stringent over time and are expected to continue to do so, which
could lead to material increases in costs for future
environmental compliance and remediation. The modification or
interpretation of existing laws or regulations, or the adoption
of new laws or regulations, could curtail exploratory or
developmental drilling for oil and gas and could limit well
servicing opportunities. Some environmental laws and regulations
may impose strict liability, which means that in some situations
we could be exposed to liability as a result of our conduct that
was lawful at the time it occurred or conduct of, or conditions
caused by, prior operators or other third parties.
Clean-up
costs and other damages arising as a result of environmental
laws, and costs associated with changes in environmental laws
and regulations could be substantial and could have a material
adverse effect on our financial condition. Please read
Business Environmental Regulation
included in our 2007
Form 10-K
for more information on the environmental laws and government
regulations that are applicable to us.
Our
indebtedness could restrict our operations and make us more
vulnerable to adverse economic conditions.
We now have, and will continue to have, a significant amount of
indebtedness. As of June 30, 2008, our total debt was
$433.4 million, including the aggregate principal amount
due under our Senior Notes and capital lease obligations in the
aggregate amount of $58.4 million. For the year ended
December 31, 2007, we made cash interest payments totaling
$25.6 million. For the six months ended June 30, 2008,
we made cash interest payments totaling $12.9 million.
Our current and future indebtedness could have important
consequences to you. For example, it could:
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impair our ability to make investments and obtain additional
financing for working capital, capital expenditures,
acquisitions or other general corporate purposes;
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limit our ability to use operating cash flow in other areas of
our business because we must dedicate a substantial portion of
these funds to make principal and interest payments on our
indebtedness;
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make us more vulnerable to a downturn in our business, our
industry or the economy in general as a substantial portion of
our operating cash flow will be required to make principal and
interest payments on our indebtedness, making it more difficult
to react to changes in our business and in industry and market
conditions;
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limit our ability to obtain additional financing that may be
necessary to operate or expand our business;
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put us at a competitive disadvantage to competitors that have
less debt; and
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increase our vulnerability to interest rate increases to the
extent that we incur variable rate indebtedness.
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If we are unable to generate sufficient cash flow or are
otherwise unable to obtain the funds required to make principal
and interest payments on our indebtedness, or if we otherwise
fail to comply with the various covenants in our senior credit
facility or other instruments governing any future indebtedness,
we could be in default under the terms of our senior credit
facility or such instruments. In the event of a default, the
holders of our indebtedness could elect to declare all the funds
borrowed under those instruments to be due and payable together
with accrued and unpaid interest, the lenders under our credit
facilities could elect to terminate their commitments thereunder
and we or one or more of our subsidiaries could be forced into
bankruptcy or liquidation. Any of the foregoing consequences
could restrict our ability to grow our business and cause the
value of our common stock to decline.
Our
revolving credit facility and the indenture governing our Senior
Notes impose restrictions on us that may affect our ability to
successfully operate our business.
Our revolving credit facility and the indenture governing our
Senior Notes limit our ability to take various actions, such as:
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limitations on the incurrence of additional indebtedness;
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restrictions on mergers, sales or transfer of assets without the
lenders consent; and
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limitation on dividends and distributions.
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In addition, our revolving credit facility requires us to
maintain certain financial ratios and to satisfy certain
financial conditions, several of which become more restrictive
over time and may require us to reduce our debt or take some
other action in order to comply with them. The failure to comply
with any of these financial conditions, such as financial ratios
or covenants would cause a default under our revolving credit
facility. A default, if not waived, could result in acceleration
of the outstanding indebtedness under our revolving credit
facility, in which case the debt would become immediately due
and payable. In addition, a default or acceleration of
indebtedness under our revolving credit facility could result in
a default or acceleration of our Senior Notes or other
indebtedness with cross-default or cross-acceleration
provisions. If this occurs, we may not be able to pay our debt
or borrow sufficient funds to refinance it. Even if new
financing is available, it may not be available on terms that
are acceptable to us. These restrictions could also limit our
ability to obtain future financings, make needed capital
expenditures, withstand a downturn in our business or the
economy in general, or otherwise conduct necessary corporate
activities. We also may be prevented from taking advantage of
business opportunities that arise because of the limitations
imposed on us by the restrictive covenants under our revolving
credit facility. In February 2007, we amended and restated our
2005 Credit Facility by entering into a Fourth Amended and
Restated Credit Agreement. Please read Managements
Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources Credit Facilities included in our
2007
Form 10-K,
our First Quarter 2008
Form 10-Q
and our Second Quarter 2008
Form 10-Q
for a discussion of our Credit Facilities.
6
One of
our directors may have a conflict of interest because he is also
currently an affiliate, director or officer of a private equity
firm that makes investments in the energy sector. The resolution
of this conflict of interest may not be in our or our
stockholders best interests.
Steven A. Webster, the Chairman of our Board of Directors, is
the Co-Managing Partner of Avista Capital Holdings, L.P., a
private equity firm that makes investments in the energy sector.
This relationship may create a conflict of interest because of
his responsibilities to Avista and its owners. His duties as a
partner in, or director or officer of, Avista or its affiliates
may conflict with his duties as a director of our company
regarding corporate opportunities and other matters. The
resolution of this conflict may not always be in our or our
stockholders best interest.
Risks
Relating to Our Relationship with DLJ Merchant Banking
Affiliates
of DLJ Merchant Banking will have a substantial influence on the
outcome of stockholder voting and may exercise this voting power
in a manner that may not be in the best interest of our other
stockholders.
As of September 30, 2008, DLJ Merchant Banking Partners
III, L.P. and affiliated funds (DLJ Merchant
Banking), which are managed by affiliates of Credit
Suisse, a Swiss Bank, and Credit Suisse Securities (USA) LLC,
beneficially owned approximately 43.3% of our outstanding common
stock. Accordingly, DLJ Merchant Banking is in a position to
have a substantial influence on the outcome of matters requiring
a stockholder vote, including the election of directors,
adoption of amendments to our certificate of incorporation or
bylaws or approval of transactions involving a change of
control. The interests of DLJ Merchant Banking may differ from
those of our other stockholders, and DLJ Merchant Banking may
vote its common stock in a manner that may adversely affect our
other stockholders.
Risks
Relating to Ownership of Our Common Stock
Our
certificate of incorporation and bylaws, as well as Delaware
law, contain provisions that could discourage acquisition bids
or merger proposals, which may adversely affect the market price
of our common stock.
Our certificate of incorporation authorizes our board of
directors to issue preferred stock without stockholder approval.
If our board of directors elects to issue preferred stock, it
could be more difficult for a third party to acquire us. In
addition, some provisions of our certificate of incorporation
and bylaws could make it more difficult for a third party to
acquire control of us, even if the change of control would be
beneficial to our stockholders, including:
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a classified board of directors, so that only approximately
one-third of our directors are elected each year;
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limitations on the removal of directors;
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the prohibition of stockholder action by written
consent; and
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limitations on the ability of our stockholders to call special
meetings and establish advance notice provisions for stockholder
proposals and nominations for elections to the board of
directors to be acted upon at meetings of stockholders.
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Delaware law prohibits us from engaging in any business
combination with any interested stockholder, meaning
generally that a stockholder who beneficially owns more than 15%
of our stock cannot acquire us for a period of three years from
the date this person became an interested stockholder, unless
various conditions are met, such as approval of the transaction
by our board of directors.
7
Because
we have no plans to pay dividends on our common stock, investors
must look solely to stock appreciation for a return on their
investment in us.
We do not anticipate paying any cash dividends on our common
stock in the foreseeable future. We currently intend to retain
all future earnings to fund the development and growth of our
business. Any payment of future dividends will be at the
discretion of our board of directors and will depend on, among
other things, our earnings, financial condition, capital
requirements, level of indebtedness, statutory and contractual
restrictions applying to the payment of dividends and other
considerations that the board of directors deems relevant. The
terms of our existing senior credit facility restrict the
payment of dividends without the prior written consent of the
lenders. Investors must rely on sales of their common stock
after price appreciation, which may never occur, as the only way
to realize a return on their investment. Investors seeking cash
dividends should not purchase our common stock.
8
USE OF
PROCEEDS
Unless otherwise specified in an accompanying prospectus
supplement, we expect to use the net proceeds from the sale of
the securities offered by this prospectus to fund:
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working capital needs; and
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expenditures related to general corporate purposes.
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The actual application of proceeds from the sale of any
particular tranche of securities issued hereunder will be
described in the applicable prospectus supplement relating to
such tranche of securities. We may invest funds not required
immediately for these purposes in marketable securities and
short-term investments. The precise amount and timing of the
application of these proceeds will depend upon our funding
requirements and the availability and cost of other funds.
RATIOS OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed
charges on a consolidated basis for the periods shown. You
should read these ratios of earnings to fixed charges in
connection with our consolidated financial statements, including
the notes to those statements, incorporated by reference into
this prospectus.
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Six Months
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Ended
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Years Ended December 31,
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June 30,
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2003
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2004
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2005
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2006
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2007
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2008
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Ratio of earnings to fixed charges(1)
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2.1
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x
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3.2
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x
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6.5
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x
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9.8
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x
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6.1
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x
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5.5
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x
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(1) |
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For these ratios, earnings means the sum of income
before income taxes and fixed charges exclusive of capitalized
interest and fixed charges means interest expensed
and capitalized, amortized premiums, discounts and capitalized
expenses relating to indebtedness and an estimate of the portion
of annual rental expense on capital leases that represents the
interest factor. |
9
DESCRIPTION
OF CAPITAL STOCK
Our authorized capital stock consists of:
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80,000,000 shares of common stock, $0.01 par
value; and
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5,000,000 shares of preferred stock, $0.01 par value,
none of which are currently designated.
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The following summary of the rights, preferences and privileges
of our capital stock and certificate of incorporation and bylaws
does not purport to be complete and is qualified in its entirety
by reference to the provisions of applicable law and to our
certificate of incorporation and bylaws.
Common
Stock
Holders of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. Because
holders of common stock do not have cumulative voting rights,
the holders of a majority of the shares of common stock can
elect all of the members of the board of directors standing for
election. The holders of common stock are entitled to receive
dividends as may be declared by the board of directors. Upon our
liquidation, dissolution or winding up, and subject to any prior
rights of outstanding preferred stock, the holders of our common
stock will be entitled to share pro rata in the distribution of
all of our assets available for distribution to our stockholders
after satisfaction of all of our liabilities and the payment of
the liquidation preference of any preferred stock that may be
outstanding. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common
stock are fully paid and non-assessable. The holders of our
common stock have no preemptive or other subscription rights to
purchase our common stock.
Preferred
Stock
Subject to the provisions of the certificate of incorporation
and limitations prescribed by law, the board of directors has
the authority to issue up to 5,000,000 shares of preferred
stock in one or more series and to fix the rights, preferences,
privileges and restrictions of the preferred stock, including
dividend rights, dividend rates, conversion rates, voting
rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or
the designation of the series, which may be superior to those of
the common stock, without further vote or action by the
stockholders. We have no present plans to issue any shares of
preferred stock.
One of the effects of undesignated preferred stock may be to
enable the board of directors to render more difficult or to
discourage an attempt to obtain control of us by means of a
tender offer, proxy contest, merger or otherwise, and, as a
result, protect the continuity of our management. The issuance
of shares of the preferred stock under the board of
directors authority described above may adversely affect
the rights of the holders of common stock. For example,
preferred stock issued by us may rank prior to the common stock
as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares
of common stock. Accordingly, the issuance of shares of
preferred stock may discourage bids for the common stock or may
otherwise adversely affect the market price of the common stock.
Delaware
Anti-Takeover Law and Charter and Bylaw Provisions
We are subject to the provisions of Section 203 of the
Delaware General Corporation Law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in
a business combination with an interested
stockholder for a period of three years after the date of
the transaction in which the person became an interested
stockholder, unless the business combination is approved in a
prescribed manner.
Section 203 defines a business combination as a
merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholders. Section 203 defines
an interested stockholder as a person who, together
with affiliates and associates, owns, or, in some cases, within
three years prior, did own, 15% or
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more of the corporations voting stock. Under
Section 203, a business combination between us and an
interested stockholder is prohibited unless:
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our board of directors approved either the business combination
or the transaction that resulted in the stockholders becoming an
interested stockholder prior to the date the person attained the
status;
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upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of our voting stock outstanding
at the time the transaction commenced, excluding, for purposes
of determining the number of shares outstanding, shares owned by
persons who are directors and also officers and issued employee
stock plans, under which employee participants do not have the
right to determine confidentially whether shares held under the
plan will be tendered in a tender or exchange offer; or
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the business combination is approved by our board of directors
on or subsequent to the date the person became an interested
stockholder and authorized at an annual or special meeting of
the stockholders by the affirmative vote of the holders of at
least
662/3%
of the outstanding voting stock that is not owned by the
interested stockholder.
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This provision has an anti-takeover effect with respect to
transactions not approved in advance by our board of directors,
including discouraging takeover attempts that might result in a
premium over the market price for the shares of our common
stock. With approval of our stockholders, we could amend our
certificate of incorporation in the future to elect not to be
governed by the anti-takeover law. This election would be
effective 12 months after the adoption of the amendment and
would not apply to any business combination between us and any
person who became an interested stockholder on or before the
adoption of the amendment.
Provisions
of Our Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws provide that any
action required or permitted to be taken by our stockholders
must be taken at a duly called meeting of stockholders and not
by written consent. Under Delaware law, the power to adopt,
amend or repeal bylaws is conferred upon the stockholders. A
corporation may, however, in its certificate of incorporation
also confer upon the board of directors the power to adopt,
amend or repeal its bylaws. Our charter and bylaws grant our
board the power to adopt, amend and repeal our bylaws on the
affirmative vote of a majority of the directors then in office.
Our stockholders may adopt, amend or repeal our bylaws but only
at any regular or special meeting of stockholders by the holders
of not less than
662/3%
of the voting power of all outstanding voting stock. Also, our
bylaws preclude the ability of our stockholders to call special
meetings of stockholders. Advance notice is required for
stockholders to nominate directors or to submit proposals for
consideration at meetings of stockholders. In addition, the
ability of our stockholders to remove directors without cause is
precluded.
Our board of directors is divided into three classes, and
directors serve staggered three-year terms. Any vacancies on the
board of directors shall be filled by vote of the board of
directors until the next meeting of stockholders when the
election of directors is in the regular course of business, and
until a successor has been duly elected and qualified.
The foregoing provisions of our certificate of incorporation and
bylaws and the provisions of Section 203 of the Delaware
General Corporation Law could have the effect of delaying,
deferring or preventing a change of control of our company.
Liability
and Indemnification of Officers and Directors
Our certificate of incorporation and bylaws provide that
indemnification shall be to the fullest extent permitted by the
Delaware General Corporation Law, or DGCL, for all current or
former directors or officers of Basic Energy Services. As
permitted by the DGCL, the certificate of incorporation provides
that directors of Basic Energy Services shall have no personal
liability to Basic Energy Services or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except (1) for any breach of the directors duty of
loyalty to Basic Energy Services or its stockholders,
(2) for acts or omissions not in good faith or which
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involve intentional misconduct or knowing violation of law,
(3) under Section 174 of the DGCL or (4) for any
transaction from which a director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to
authorize the further elimination or limitation of
directors liability, then the liability of our directors
will automatically be limited to the fullest extent provided by
law.
We have also entered into indemnification agreements with all of
our directors and some of our executive officers (including each
of our named executive officers). These indemnification
agreements are intended to permit indemnification to the fullest
extent now or hereafter permitted by the General Corporation Law
of the State of Delaware. It is possible that the applicable law
could change the degree to which indemnification is expressly
permitted. The indemnification agreements cover expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement incurred as a result of the fact that such
person, in his or her capacity as a director or officer, is made
or threatened to be made a party to any suit or proceeding. The
indemnification agreements generally cover claims relating to
the fact that the indemnified party is or was an officer,
director, employee or agent of us or any of our affiliates, or
is or was serving at our request in such a position for another
entity. The indemnification agreements also obligate us to
promptly advance all reasonable expenses incurred in connection
with any claim. The indemnitee is, in turn, obligated to
reimburse us for all amounts so advanced if it is later
determined that the indemnitee is not entitled to
indemnification. The indemnification provided under the
indemnification agreements is not exclusive of any other
indemnity rights; however, double payment to the indemnitee is
prohibited.
We have also agreed to obtain and maintain director and officer
liability insurance for the benefit of each of the above
indemnitees. These policies include coverage for losses for
wrongful acts and omissions and to ensure our performance under
the indemnification agreements. Each of the indemnitees are
named as an insured under such policies and provided with the
same rights and benefits as are accorded to the most favorably
insured of our directors and officers.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, or the Act, may be permitted to
directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, we have been informed that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
Transfer
Agent and Registrar
The transfer agent and registrar for the common stock is
American Stock Transfer & Trust Company.
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DESCRIPTION
OF DEBT SECURITIES
Any debt securities that we offer under a prospectus supplement
will be direct, unsecured general obligations. The debt
securities will be either senior debt securities or subordinated
debt securities. The debt securities will be issued under one or
more separate indentures between us and The Bank of New York
Mellon Trust Company, N.A., as trustee. Senior debt securities
will be issued under a senior indenture and subordinated debt
securities will be issued under a subordinated indenture.
Together, the senior indenture and the subordinated indenture
are called indentures. The indentures will be
supplemented by supplemental indentures, the material provisions
of which will be described in a prospectus supplement.
As used in this description, the words Basic,
Basic Energy Services, we,
us and our refer to Basic Energy
Services, Inc., and not to any of its subsidiaries or affiliates.
We have summarized some of the material provisions of the
indentures below. This summary does not restate those agreements
in their entirety. A form of senior indenture and a form of
subordinated indenture have been filed as exhibits to the
registration statement of which this prospectus is a part. We
urge you to read each of the indentures because each one, and
not this description, defines the rights of holders of debt
securities.
Capitalized terms defined in the indentures have the same
meanings when used in this prospectus.
General
The debt securities issued under the indentures will be our
direct, unsecured general obligations. The senior debt
securities will rank equally with all of our other senior and
unsubordinated debt. The subordinated debt securities will have
a junior position to all of our senior debt.
The following description sets forth the general terms and
provisions that could apply to debt securities that we may offer
to sell. A prospectus supplement relating to any series of debt
securities being offered will include specific terms relating to
the offering. These terms will include some or all of the
following, among others:
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the title and type of the debt securities;
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the total principal amount of the debt securities;
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the percentage of the principal amount at which the debt
securities will be issued and any payments due if the maturity
of the debt securities is accelerated;
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the dates on which the principal of the debt securities will be
payable;
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the interest rate which the debt securities will bear and the
interest payment dates for the debt securities;
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any conversion or exchange features;
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any optional redemption periods;
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any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem some or all of the debt
securities;
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any provisions granting special rights to holders when a
specified event occurs;
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any changes to or additional events of default or covenants;
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any special tax implications of the debt securities, including
provisions for original issue discount securities, if
offered; and
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any other terms of the debt securities.
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Neither of the indentures will limit the amount of debt
securities that may be issued. Each indenture will allow debt
securities to be issued up to the principal amount that may be
authorized by us and may be in any currency or currency unit
designated by us.
Debt securities of a series may be issued in registered or
global form.
Subsidiary
Guarantees
If the applicable prospectus supplement relating to a series of
our senior debt securities provides that those senior debt
securities will have the benefit of a guarantee by any or all of
our operating subsidiaries, payment of the principal, premium,
if any, and interest on those senior debt securities will be
unconditionally guaranteed on an unsecured, unsubordinated basis
by such subsidiary or subsidiaries. The guarantee of senior debt
securities will rank equally in right of payment with all of the
unsecured and unsubordinated indebtedness of such subsidiary or
subsidiaries.
If the applicable prospectus supplement relating to a series of
our subordinated debt securities provides that those
subordinated debt securities will have the benefit of a
guarantee by any or all of our operating subsidiaries, payment
of the principal, premium, if any, and interest on those
subordinated debt securities will be unconditionally guaranteed
on an unsecured, subordinated basis by such subsidiary or
subsidiaries. The guarantee of the subordinated debt securities
will be subordinated in right of payment to all of such
subsidiarys or subsidiaries existing and future
senior indebtedness (as defined in the related prospectus
supplement), including any guarantee of the senior debt
securities, to the same extent and in the same manner as the
subordinated debt securities are subordinated to our senior
indebtedness (as defined in the related prospectus supplement).
See Subordination below.
The obligations of our operating subsidiaries under any such
guarantee will be limited as necessary to prevent the guarantee
from constituting a fraudulent conveyance or fraudulent transfer
under applicable law.
Covenants
Under the indentures, we:
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will pay the principal of, and interest and any premium on, the
debt securities when due;
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will maintain a place of payment;
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will deliver a certificate to the trustee at the end of each
fiscal year reviewing our compliance with our obligations under
the indentures;
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will preserve our corporate existence; and
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will segregate or deposit with any paying agent sufficient funds
for the payment of any principal, interest or premium on or
before the due date of such payment.
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Mergers
and Sale of Assets
Each of the indentures will provide that we may not consolidate
with or merge into any other Person or sell, convey, transfer or
lease all or substantially all of our properties and assets (on
a consolidated basis) to another Person, unless:
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either: (a) we are the surviving Person; or (b) the
Person formed by or surviving any such consolidation,
amalgamation or merger or resulting from such conversion (if
other than us) or to which such sale, assignment, transfer,
conveyance or other disposition has been made is a corporation,
limited liability company or limited partnership organized or
existing under the laws of the United States, any State thereof
or the District of Columbia;
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the Person formed by or surviving any such conversion,
consolidation, amalgamation or merger (if other than us) or the
Person to which such sale, assignment, transfer, conveyance or
other disposition has been made assumes all of our obligations
under such indenture and the debt securities governed
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thereby pursuant to agreements reasonably satisfactory to the
trustee, which may include a supplemental indenture;
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we or the successor will not immediately be in default under
such indenture; and
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we deliver an officers certificate and opinion of counsel
to the trustee stating that such consolidation, amalgamation,
merger, conveyance, sale, transfer or lease and any supplemental
indenture comply with such indenture and that all conditions
precedent set forth in such indenture have been complied with.
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Upon the assumption of our obligations under each indenture by a
successor, we will be discharged from all obligations under such
indenture.
As used in the indenture and in this description, the word
Person means any individual, corporation,
company, limited liability company, partnership, limited
partnership, joint venture, association, joint-stock company,
trust, other entity, unincorporated organization or government
or any agency or political subdivision thereof.
Events of
Default
Event of default, when used in the indentures
with respect to debt securities of any series, will mean any of
the following:
(1) default in the payment of any interest upon any debt
security of that series when it becomes due and payable, and
continuance of such default for a period of 30 days;
(2) default in the payment of the principal of (or premium,
if any, on) any debt security of that series at its maturity;
(3) default in the performance, or breach, of any covenant
set forth in Article Ten of the applicable indenture (other
than a covenant a default in the performance of which or the
breach of which is elsewhere specifically dealt with as an event
of default or which has expressly been included in such
indenture solely for the benefit of one or more series of debt
securities other than that series), and continuance of such
default or breach for a period of 90 days after there has
been given, by registered or certified mail, to Basic by the
trustee or to Basic and the trustee by the holders of at least
25% in principal amount of the then-outstanding debt securities
of that series a written notice specifying such default or
breach and requiring it to be remedied and stating that such
notice is a Notice of Default thereunder;
(4) default in the performance, or breach, of any covenant
in the applicable indenture (other than a covenant set forth in
Article Ten of such indenture or any other covenant a
default in the performance of which or the breach of which is
elsewhere specifically dealt with as an event of default or
which has expressly been included in such indenture solely for
the benefit of one or more series of debt securities other than
that series), and continuance of such default or breach for a
period of 180 days after there has been given, by
registered or certified mail, to Basic by the trustee or to
Basic and the trustee by the holders of at least 25% in
principal amount of the then-outstanding debt securities of that
series a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a
Notice of Default thereunder;
(5) Basic, pursuant to or within the meaning of any
bankruptcy law, (i) commences a voluntary case,
(ii) consents to the entry of any order for relief against
it in an involuntary case, (iii) consents to the
appointment of a custodian of it or for all or substantially all
of its property, or (iv) makes a general assignment for the
benefit of its creditors;
(6) a court of competent jurisdiction enters an order or
decree under any bankruptcy law that (i) is for relief
against Basic in an involuntary case, (ii) appoints a
custodian of Basic or for all or substantially all of its
property, or (iii) orders the liquidation of Basic, and the
order or decree remains unstayed and in effect for 60
consecutive days;
(7) default in the deposit of any sinking fund payment when
due; or
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(8) any other event of default provided with respect to
debt securities of that series in accordance with provisions of
the indenture related to the issuance of such debt securities.
An event of default for a particular series of debt securities
does not necessarily constitute an event of default for any
other series of debt securities issued under an indenture. The
trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal, interest or any
premium) if it considers the withholding of notice to be in the
interests of the holders.
If an event of default for any series of debt securities occurs
and continues, the trustee or the holders of 25% in aggregate
principal amount of the debt securities of the series may
declare the entire principal of all of the debt securities of
that series to be due and payable immediately. If this happens,
subject to certain conditions, the holders of a majority of the
aggregate principal amount of the debt securities of that series
can void the declaration.
Other than its duties in case of a default, a trustee is not
obligated to exercise any of its rights or powers under any
indenture at the request, order or direction of any holders,
unless the holders offer the trustee reasonable indemnity. If
they provide this reasonable indemnification, the holders of a
majority in principal amount outstanding of any series of debt
securities may direct the time, method and place of conducting
any proceeding or any remedy available to the trustee, or
exercising any power conferred upon the trustee, for any series
of debt securities.
Amendments
and Waivers
Subject to certain exceptions, the indentures, the debt
securities issued thereunder or the subsidiary guarantees may be
amended or supplemented with the consent of the holders of a
majority in aggregate principal amount of the then-outstanding
debt securities of each series affected by such amendment or
supplemental indenture, with each such series voting as a
separate class (including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange
offer for, debt securities) and, subject to certain exceptions,
any past default or compliance with any provisions may be waived
with respect to each series of debt securities with the consent
of the holders of a majority in principal amount of the
then-outstanding debt securities of such series voting as a
separate class (including consents obtained in connection with a
purchase of, or tender offer or exchange offer for, debt
securities).
Without the consent of each holder of the outstanding debt
securities affected, an amendment, supplement or waiver may not,
among other things:
(1) change the stated maturity of the principal of, or any
installment of principal of or interest on, any debt security,
or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or
reduce the amount of the principal of an original issue discount
security that would be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the applicable
indenture, or change the coin or currency in which, any debt
security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any
such payment on or after the stated maturity thereof (or, in the
case of redemption, on or after the redemption date therefor);
(2) reduce the percentage in principal amount of the
then-outstanding debt securities of any series, the consent of
the holders of which is required for any such amendment or
supplemental indenture, or the consent of the holders of which
is required for any waiver of compliance with certain provisions
of the applicable indenture or certain defaults thereunder and
their consequences provided for in the applicable indenture;
(3) modify any of the provisions set forth in (i) the
provisions of the applicable indenture related to the
holders unconditional right to receive principal, premium,
if any, and interest on the debt securities or (ii) the
provisions of the applicable indenture related to the waiver of
past defaults under such indenture;
(4) waive a redemption payment with respect to any debt
security; provided, however, that any purchase or
repurchase of debt securities shall not be deemed a redemption
of the debt securities;
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(5) release any guarantor from any of its obligations under
its guarantee or the applicable indenture, except in accordance
with the terms of such indenture (as amended or
supplemented); or
(6) make any change in the foregoing amendment and waiver
provisions, except to increase any percentage provided for
therein or to provide that certain other provisions of the
applicable indenture cannot be modified or waived without the
consent of the holder of each then-outstanding debt security
affected thereby.
Notwithstanding the foregoing, without the consent of any holder
of debt securities, Basic, the guarantors and the trustee may
amend each of the indentures or the debt securities issued
thereunder to:
(1) cure any ambiguity or defect or to correct or
supplement any provision therein that may be inconsistent with
any other provision therein;
(2) evidence the succession of another Person to Basic and
the assumption by any such successor of the covenants of Basic
therein and, to the extent applicable, of the debt securities;
(3) provide for uncertificated debt securities in addition
to or in place of certificated debt securities; provided
that the uncertificated debt securities are issued in
registered form for purposes of Section 163(f) of the
Internal Revenue Code of 1986, as amended (the
Code), or in the manner such that the
uncertificated debt securities are described in Section
163(f)(2)(B) of the Code;
(4) add a guarantee and cause any Person to become a
guarantor,
and/or to
evidence the succession of another Person to a guarantor and the
assumption by any such successor of the guarantee of such
guarantor therein and, to the extent applicable, endorsed upon
any debt securities of any series;
(5) secure the debt securities of any series;
(6) add to the covenants of Basic such further covenants,
restrictions, conditions or provisions as Basic shall consider
to be appropriate for the benefit of the holders of all or any
series of debt securities (and if such covenants, restrictions,
conditions or provisions are to be for the benefit of less than
all series of debt securities, stating that such covenants are
expressly being included solely for the benefit of such series)
or to surrender any right or power therein conferred upon Basic
and to make the occurrence, or the occurrence and continuance,
of a default in any such additional covenants, restrictions,
conditions or provisions an event of default permitting the
enforcement of all or any of the several remedies provided in
the applicable indenture as set forth therein; provided,
that in respect of any such additional covenant, restriction,
condition or provision, such amendment or supplemental indenture
may provide for a particular period of grace after default
(which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate
enforcement upon such an event of default or may limit the
remedies available to the trustee upon such an event of default
or may limit the right of the holders of a majority in aggregate
principal amount of the debt securities of such series to waive
such an event of default;
(7) make any change to any provision of the applicable
indenture that does not adversely affect the rights or interests
of any holder of debt securities issued thereunder;
(8) provide for the issuance of additional debt securities
in accordance with the provisions set forth in the applicable
indenture on the date of such indenture;
(9) add any additional defaults or events of default in
respect of all or any series of debt securities;
(10) add to, change or eliminate any of the provisions of
the applicable indenture to such extent as shall be necessary to
permit or facilitate the issuance of debt securities in bearer
form, registrable or not registrable as to principal, and with
or without interest coupons;
(11) change or eliminate any of the provisions of the
applicable indenture; provided that any such change or
elimination shall become effective only when there is no debt
security outstanding of any series created prior to the
execution of such amendment or supplemental indenture that is
entitled to the benefit of such provision;
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(12) establish the form or terms of debt securities of any
series as permitted thereunder, including to reopen any series
of any debt securities as permitted thereunder;
(13) evidence and provide for the acceptance of appointment
thereunder by a successor trustee with respect to the debt
securities of one or more series and to add to or change any of
the provisions of the applicable indenture as shall be necessary
to provide for or facilitate the administration of the trusts
thereunder by more than one trustee, pursuant to the
requirements of such indenture;
(14) conform the text of the applicable indenture (and/or
any supplemental indenture) or any debt securities issued
thereunder to any provision of a description of such debt
securities appearing in a prospectus or prospectus supplement or
an offering memorandum or offering circular to the extent that
such provision was intended to be a verbatim recreation of a
provision of such indenture (and/or any supplemental indenture)
or any debt securities issued thereunder; or
(15) modify, eliminate or add to the provisions of the
applicable indenture to such extent as shall be necessary to
effect the qualification of such indenture under the
Trust Indenture Act of 1939, as amended (the
Trust Indenture Act), or under any
similar federal statute subsequently enacted, and to add to such
indenture such other provisions as may be expressly required
under the Trust Indenture Act.
The consent of the holders is not necessary under either
indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the
substance of the proposed amendment. After an amendment with the
consent of the holders under an indenture becomes effective,
Basic is required to mail to the holders of debt securities
thereunder a notice briefly describing such amendment. However,
the failure to give such notice to all such holders, or any
defect therein, will not impair or affect the validity of the
amendment.
Legal
Defeasance and Covenant Defeasance
Each indenture provides that Basic may, at its option and at any
time, elect to have all of its obligations discharged with
respect to the debt securities outstanding thereunder and all
obligations of any guarantors of such debt securities discharged
with respect to their guarantees (Legal
Defeasance), except for:
(1) the rights of holders of outstanding debt securities to
receive payments in respect of the principal of, or interest or
premium, if any, on, such debt securities when such payments are
due from the trust referred to below;
(2) Basics obligations with respect to the debt
securities concerning temporary debt securities, registration of
debt securities, mutilated, destroyed, lost or stolen debt
securities, the maintenance of an office or agency for payment
and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of
the trustee, and Basics and each guarantors
obligations in connection therewith; and
(4) the Legal Defeasance and Covenant Defeasance (as
defined below) provisions of the applicable indenture.
In addition, Basic may, at its option and at any time, elect to
have the obligations of Basic released with respect to certain
provisions of each indenture, including certain provisions
described in any prospectus supplement (such release and
termination being referred to as Covenant
Defeasance), and thereafter any failure to comply with
such obligations or provisions will not constitute a default or
event of default. In addition, in the event Covenant Defeasance
occurs in accordance with the applicable indenture, any
defeasible event of default will no longer constitute an event
of default.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) Basic must irrevocably deposit with the trustee, in
trust, for the benefit of the holders of the debt securities,
cash in U.S. dollars, non-callable government securities,
or a combination of cash in U.S. dollars and non-callable
U.S. government securities, in amounts as will be
sufficient, in the opinion of a nationally recognized investment
bank, appraisal firm or firm of independent public accountants,
to
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pay the principal of, and interest and premium, if any, on, the
outstanding debt securities on the stated date for payment
thereof or on the applicable redemption date, as the case may
be, and Basic must specify whether the debt securities are being
defeased to such stated date for payment or to a particular
redemption date;
(2) in the case of Legal Defeasance, Basic must deliver to
the trustee an opinion of counsel reasonably acceptable to the
trustee confirming that (a) Basic has received from, or
there has been published by, the Internal Revenue Service a
ruling or (b) since the issue date of the debt securities,
there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such
opinion of counsel will confirm that, the holders of the
outstanding debt securities will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same time as would have
been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Basic must deliver
to the trustee an opinion of counsel reasonably acceptable to
the trustee confirming that the holders of the outstanding debt
securities will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no default or event of default shall have occurred and
be continuing on the date of such deposit (other than a default
or event of default resulting from the borrowing of funds to be
applied to such deposit);
(5) the deposit must not result in a breach or violation
of, or constitute a default under, any other instrument to which
Basic or any guarantor is a party or by which Basic or any
guarantor is bound;
(6) such Legal Defeasance or Covenant Defeasance must not
result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than the
applicable indenture) to which Basic or any of its subsidiaries
is a party or by which Basic or any of its subsidiaries is bound;
(7) Basic must deliver to the trustee an officers
certificate stating that the deposit was not made by Basic with
the intent of preferring the holders of debt securities over the
other creditors of Basic with the intent of defeating,
hindering, delaying or defrauding creditors of Basic or others;
(8) Basic must deliver to the trustee an officers
certificate stating that all conditions precedent set forth in
clauses (1) through (6) of this paragraph have been
complied with; and
(9) Basic must deliver to the trustee an opinion of counsel
(which opinion of counsel may be subject to customary
assumptions, qualifications, and exclusions) stating that all
conditions precedent set forth in clauses (2), (3) and
(6) of this paragraph have been complied with.
Satisfaction
and Discharge
Each of the indentures will be discharged and will cease to be
of further effect (except as to surviving rights of registration
of transfer or exchange of debt securities and certain rights of
the trustee, as expressly provided for in such indenture) as to
all outstanding debt securities issued thereunder and the
guarantees issued thereunder when:
(1) either (a) all of the debt securities theretofore
authenticated and delivered under such indenture (except lost,
stolen or destroyed debt securities that have been replaced or
paid and debt securities for the payment of which money has
theretofore been deposited in trust or segregated and held in
trust by Basic and thereafter repaid to Basic or discharged from
such trust) have been delivered to the trustee for cancellation
or (b) all debt securities not theretofore delivered to the
trustee for cancellation have become due and payable, will
become due and payable at their stated maturity within one year,
or are to be called for redemption within one year under
arrangements satisfactory to the trustee for the giving of
notice of redemption by the trustee in the name, and at the
expense, of Basic, and Basic has irrevocably deposited or caused
to be deposited with the trustee funds, in an amount sufficient
to pay and discharge the entire
19
indebtedness on the debt securities not theretofore delivered to
the trustee for cancellation, for principal of and premium, if
any, and interest on the debt securities to the date of deposit
(in the case of debt securities that have become due and
payable) or to the stated maturity or redemption date, as the
case may be, together with instructions from Basic irrevocably
directing the trustee to apply such funds to the payment thereof
at maturity or redemption, as the case may be;
(2) Basic has paid all other sums then due and payable
under such indenture by Basic; and
(3) Basic has delivered to the trustee an officers
certificate and an opinion of counsel, which, taken together,
state that all conditions precedent under such indenture
relating to the satisfaction and discharge of such indenture
have been complied with.
No
Personal Liability of Directors, Managers, Officers, Employees,
Partners, Members and Stockholders
No director, manager, officer, employee, incorporator, partner,
member or stockholder of Basic or any guarantor, as such, shall
have any liability for any obligations of Basic or the
guarantors under the debt securities, the indentures, the
guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of
debt securities, upon Basics issuance of the debt
securities and execution of the indentures, waives and releases
all such liability. The waiver and release are part of the
consideration for issuance of the debt securities. Such waiver
may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver
is against public policy.
Denominations
Unless stated otherwise in the prospectus supplement for each
issuance of debt securities, the debt securities will be issued
in denominations of $1,000 each or integral multiples of $1,000.
Paying
Agent and Registrar
The trustee will initially act as paying agent and registrar for
the debt securities. Basic may change the paying agent or
registrar without prior notice to the holders of the debt
securities, and Basic may act as paying agent or registrar.
Transfer
and Exchange
A holder may transfer or exchange debt securities in accordance
with the applicable indenture. The registrar and the trustee may
require a holder, among other things, to furnish appropriate
endorsements and transfer documents, and Basic may require a
holder to pay any taxes and fees required by law or permitted by
the applicable indenture. Basic is not required to transfer or
exchange any debt security selected for redemption. In addition,
Basic is not required to transfer or exchange any debt security
for a period of 15 days before a selection of debt
securities to be redeemed.
Subordination
The payment of the principal of and premium, if any, and
interest on subordinated debt securities and any other payment
obligations of Basic in respect of subordinated debt securities
(including any obligation to repurchase subordinated debt
securities) is subordinated in certain circumstances in right of
payment, as set forth in the subordinated indenture, to the
prior payment in full in cash of all senior debt.
Basic also may not make any payment, whether by redemption,
purchase, retirement, defeasance or otherwise, upon or in
respect of subordinated debt securities, except from a trust
described under Legal Defeasance and Covenant
Defeasance, if
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a default in the payment of all or any portion of the
obligations on any designated senior debt (payment
default) occurs that has not been cured or
waived, or
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any other default occurs and is continuing with respect to
designated senior debt pursuant to which the maturity thereof
may be accelerated (non-payment default) and,
solely with respect to this clause, the
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trustee for the subordinated debt securities receives a notice
of the default (a payment blockage notice)
from the trustee or other representative for the holders of such
designated senior debt.
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Cash payments on subordinated debt securities will be resumed
(a) in the case of a payment default, upon the date on
which such default is cured or waived, and (b) in case of a
nonpayment default, the earliest of the date on which such
nonpayment default is cured or waived, the termination of the
payment blockage period by written notice to the trustee for the
subordinated debt securities from the trustee or other
representative for the holders of such designated senior debt,
the payment in full of such designated senior debt or
179 days after the date on which the applicable payment
blockage notice is received. No new payment blockage period may
be commenced unless and until 360 days have elapsed since
the date of commencement of the payment blockage period
resulting from the immediately prior payment blockage notice. No
nonpayment default in respect of designated senior debt that
existed or was continuing on the date of delivery of any payment
blockage notice to the trustee for the subordinated debt
securities will be, or be made, the basis for a subsequent
payment blockage notice unless such default shall have been
cured or waived for a period of no less than 90 consecutive days.
Upon any payment or distribution of assets or securities of
Basic (other than with the money, securities or proceeds held
under any defeasance trust established in accordance with the
subordinated indenture) in connection with any dissolution or
winding up or total or partial liquidation or reorganization of
Basic, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings or other
marshalling of assets for the benefit of creditors, all amounts
due or to become due upon all senior debt shall first be paid in
full, in cash or cash equivalents, before the holders of the
subordinated debt securities or the trustee on their behalf
shall be entitled to receive any payment by or on behalf of
Basic on account of the subordinated debt securities, or any
payment to acquire any of the subordinated debt securities for
cash, property or securities, or any distribution with respect
to the subordinated debt securities of any cash, property or
securities. Before any payment may be made by, or on behalf of,
Basic on any subordinated debt security (other than with the
money, securities or proceeds held under any defeasance trust
established in accordance with the subordinated indenture) in
connection with any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets or
securities of Basic, to which the holders of subordinated debt
securities or the trustee on their behalf would be entitled,
shall be made by Basic or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person
making such payment or distribution, or by the holders or the
trustee if received by them or it, directly to the holders of
senior debt or their representatives or to any trustee or
trustees under any indenture pursuant to which any such senior
debt may have been issued, as their respective interests appear,
to the extent necessary to pay all such senior debt in full, in
cash or cash equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the
holders of such senior debt.
As a result of these subordination provisions, in the event of
the liquidation, bankruptcy, reorganization, insolvency,
receivership or similar proceeding or an assignment for the
benefit of the creditors of Basic or a marshalling of assets or
liabilities of Basic, holders of subordinated debt securities
may receive ratably less than other creditors.
Payment
and Transfer
Principal, interest and any premium on fully registered debt
securities will be paid at designated places. Payment will be
made by check mailed to the persons in whose names the debt
securities are registered on days specified in the indentures or
any prospectus supplement. Debt securities payments in other
forms will be paid at a place designated by us and specified in
a prospectus supplement.
Fully registered debt securities may be transferred or exchanged
at the office of the trustee or at any other office or agency
maintained by us for such purposes, without the payment of any
service charge except for any tax or governmental charge.
21
Global
Securities
The debt securities of a series may be issued in whole or in
part in the form of one or more global certificates that we will
deposit with a depositary identified in the applicable
prospectus supplement. Unless and until it is exchanged in whole
or in part for the individual debt securities that it
represents, a global security may not be transferred except as a
whole:
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by the applicable depositary to a nominee of the depositary;
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by any nominee to the depositary itself or another
nominee; or
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by the depositary or any nominee to a successor depositary or
any nominee of the successor.
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We will describe the specific terms of the depositary
arrangement with respect to a series of debt securities in the
applicable prospectus supplement. We anticipate that the
following provisions will generally apply to depositary
arrangements.
When we issue a global security in registered form, the
depositary for the global security or its nominee will credit,
on its book-entry registration and transfer system, the
respective principal amounts of the individual debt securities
represented by that global security to the accounts of persons
that have accounts with the depositary
(participants). Those accounts will be
designated by the dealers, underwriters or agents with respect
to the underlying debt securities or by us if those debt
securities are offered and sold directly by us. Ownership of
beneficial interests in a global security will be limited to
participants or persons that may hold interests through
participants. For interests of participants, ownership of
beneficial interests in the global security will be shown on
records maintained by the applicable depositary or its nominee.
For interests of persons other than participants, that ownership
information will be shown on the records of participants.
Transfer of that ownership will be effected only through those
records. The laws of some states require that certain purchasers
of securities take physical delivery of securities in definitive
form. These limits and laws may impair our ability to transfer
beneficial interests in a global security.
As long as the depositary for a global security, or its nominee,
is the registered owner of that global security, the depositary
or nominee will be considered the sole owner or holder of the
debt securities represented by the global security for all
purposes under the applicable indenture. Except as provided
below, owners of beneficial interests in a global security:
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will not be entitled to have any of the underlying debt
securities registered in their names;
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will not receive or be entitled to receive physical delivery of
any of the underlying debt securities in definitive
form; and
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will not be considered the owners or holders under the indenture
relating to those debt securities.
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Payments of the principal of, any premium on and any interest on
individual debt securities represented by a global security
registered in the name of a depositary or its nominee will be
made to the depositary or its nominee as the registered owner of
the global security representing such debt securities. Neither
we, the trustee for the debt securities, any paying agent nor
the registrar for the debt securities will be responsible for
any aspect of the records relating to or payments made by the
depositary or any participants on account of beneficial
interests in the global security.
We expect that the depositary or its nominee, upon receipt of
any payment of principal, any premium or interest relating to a
global security representing any series of debt securities,
immediately will credit participants accounts with the
payments. Those payments will be credited in amounts
proportional to the respective beneficial interests of the
participants in the principal amount of the global security as
shown on the records of the depositary or its nominee. We also
expect that payments by participants to owners of beneficial
interests in the global security held through those participants
will be governed by standing instructions and customary
practices. This is now the case with securities held for the
accounts of customers registered in street name.
Those payments will be the sole responsibility of those
participants.
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If the depositary for a series of debt securities is at any time
unwilling, unable or ineligible to continue as depositary and we
do not appoint a successor depositary within 90 days, we
will issue individual debt securities of that series in exchange
for the global security or securities representing that series.
In addition, we may at any time in our sole discretion determine
not to have any debt securities of a series represented by one
or more global securities. In that event, we will issue
individual debt securities of that series in exchange for the
global security or securities. Furthermore, if we specify, an
owner of a beneficial interest in a global security may, on
terms acceptable to us, the trustee and the applicable
depositary, receive individual debt securities of that series in
exchange for those beneficial interests. The foregoing is
subject to any limitations described in the applicable
prospectus supplement. In any such instance, the owner of the
beneficial interest will be entitled to physical delivery of
individual debt securities equal in principal amount to the
beneficial interest and to have the debt securities registered
in its name. Those individual debt securities will be issued in
any authorized denominations.
Governing
Law
Each indenture and the debt securities will be governed by and
construed in accordance with the laws of the State of New York.
Information
Concerning the Trustee
The Bank of New York Mellon Trust Company, N.A. will be the
trustee under the indentures. A successor trustee may be
appointed in accordance with the terms of the indentures.
The indentures and the provisions of the Trust Indenture
Act incorporated by reference therein will contain certain
limitations on the rights of the trustee, should it become a
creditor of us, to obtain payment of claims in certain cases, or
to realize on certain property received in respect of any such
claim as security or otherwise. The trustee will be permitted to
engage in other transactions; however, if it acquires any
conflicting interest (within the meaning of the
Trust Indenture Act), it must eliminate such conflicting
interest or resign.
A single banking or financial institution may act as trustee
with respect to both the subordinated indenture and the senior
indenture. If this occurs, and should a default occur with
respect to either the subordinated debt securities or the senior
debt securities, such banking or financial institution would be
required to resign as trustee under one of the indentures within
90 days of such default, pursuant to the
Trust Indenture Act, unless such default were cured, duly
waived or otherwise eliminated.
23
DESCRIPTION
OF GUARANTEES OF DEBT SECURITIES
Our subsidiaries may issue guarantees of debt securities that we
offer in any prospectus supplement. Each guarantee will be
issued under a supplement to an indenture. The prospectus
supplement relating to a particular issue of guarantees will
describe the terms of those guarantees, including the following:
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the series of debt securities to which the guarantees apply;
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whether the guarantees are secured or unsecured;
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whether the guarantees are conditional or unconditional;
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whether the guarantees are senior or subordinate to other
guarantees or debt;
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the terms under which the guarantees may be amended, modified,
waived, released or otherwise terminated, if different from the
provisions applicable to the guaranteed debt securities; and
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any additional terms of the guarantees.
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DESCRIPTION
OF WARRANTS
We may issue warrants to purchase common stock, preferred stock,
debt securities or units. Warrants may be issued independently
or together with any other securities and may be attached to, or
separate from, such securities. Each series of warrants will be
issued under a separate warrant agreement to be entered into
between us and a warrant agent. The terms of any warrants to be
issued and a description of the material provisions of the
applicable warrant agreement will be set forth in the applicable
prospectus supplement.
The applicable prospectus supplement will specify the following
terms of any warrants in respect of which this prospectus is
being delivered:
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the title of such warrants;
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the aggregate number of such warrants;
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the price or prices at which such warrants will be issued;
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the securities purchasable upon exercise of such warrants;
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the price at which, and the currency or currencies in which the
securities purchasable upon exercise of, such warrants may be
purchased;
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the date on which the right to exercise such warrants shall
commence and the date on which such right shall expire;
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if applicable, the minimum or maximum amount of such warrants
which may be exercised at any one time;
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if applicable, the designation and terms of the securities with
which such warrants are issued and the number of such warrants
issued with each such security;
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if applicable, the date on and after which such warrants and the
related securities will be separately transferable;
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information with respect to book-entry procedures, if any;
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if applicable, a discussion of any material U.S. federal
income tax considerations; and
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any other terms of such warrants, including terms, procedures
and limitations relating to the exchange and exercise of such
warrants.
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DESCRIPTION
OF UNITS
As specified in the applicable prospectus supplement, we may
issue units consisting of one or more debt securities, shares of
common stock, shares of preferred stock or warrants or any
combination of such securities.
The applicable prospectus supplement will specify the following
terms of any units in respect of which this prospectus is being
delivered:
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the terms of the units and of any of the debt securities, common
stock, preferred stock and warrants comprising the units,
including whether and under what circumstances the securities
comprising the units may be traded separately;
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a description of the terms of any unit agreement governing the
units; and
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a description of the provisions for the payment, settlement,
transfer or exchange of the units.
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26
PLAN OF
DISTRIBUTION
We may sell the securities through agents, underwriters or
dealers, or directly to one or more purchasers without using
underwriters or agents.
We may designate agents to solicit offers to purchase our
securities. We will name any agent involved in offering or
selling our securities, and any commissions that we will pay to
the agent, in the applicable prospectus supplement. Unless we
indicate otherwise in our prospectus supplement, our agents will
act on a best efforts basis for the period of their appointment.
If underwriters are used in the sale, the securities will be
acquired by the underwriters for their own account. The
underwriters may resell the securities in one or more
transactions (including block transactions), at negotiated
prices, at a fixed public offering price or at varying prices
determined at the time of sale. We will include the names of the
managing underwriter(s), as well as any other underwriters, and
the terms of the transaction, including the compensation the
underwriters and dealers will receive, in our prospectus
supplement. If we use an underwriter, we will execute an
underwriting agreement with the underwriter(s) at the time that
we reach an agreement for the sale of our securities. The
obligations of the underwriters to purchase the securities will
be subject to certain conditions contained in the underwriting
agreement. The underwriters will be obligated to purchase all
the securities of the series offered if any of the securities
are purchased. Any public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be
changed from time to time. The underwriters will use a
prospectus supplement to sell our securities.
If we use a dealer, we, as principal, will sell our securities
to the dealer. The dealer will then sell our securities to the
public at varying prices that the dealer will determine at the
time it sells our securities. We will include the name of the
dealer and the terms of our transactions with the dealer in the
applicable prospectus supplement.
We may directly solicit offers to purchase our securities, and
we may directly sell our securities to institutional or other
investors. In this case, no underwriters or agents would be
involved. We will describe the terms of our direct sales in the
applicable prospectus supplement.
Underwriters, dealers and agents that participate in the
distribution of the securities may be underwriters as defined in
the Securities Act and any discounts or commissions received by
them from us and any profit on their resale of the securities
may be treated as underwriting discounts and commissions under
the Securities Act. In connection with the sale of the
securities offered by this prospectus, underwriters may receive
compensation from us or from the purchasers of the securities,
for whom they may act as agents, in the form of discounts,
concessions or commissions, which will not exceed 7% of the
proceeds from the sale of the securities. Any underwriters,
dealers or agents will be identified and their compensation
described in the applicable prospectus supplement. We may have
agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including
liabilities under the Securities Act, or to contribute with
respect to payments which the underwriters, dealers or agents
may be required to make. Underwriters, dealers and agents may
engage in transactions with, or perform services for, us or our
subsidiaries in the ordinary course of their business.
Unless otherwise specified in the applicable prospectus
supplement, all securities offered under this prospectus will be
a new issue of securities with no established trading market,
other than the common stock, which is currently listed and
traded on the New York Stock Exchange. We may elect to list any
other class or series of securities on a national securities
exchange or a foreign securities exchange but are not obligated
to do so. Any common stock sold by this prospectus will be
listed for trading on the New York Stock Exchange subject to
official notice of issuance. We cannot give you any assurance as
to the liquidity of the trading markets for any of the
securities.
Any underwriter to whom securities are sold by us for public
offering and sale may engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the
Exchange Act. Over-allotment transactions involve sales by the
underwriters of the securities in excess of the offering size,
which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified
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maximum. Syndicate covering transactions involve purchases of
the securities in the open market after the distribution has
been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the securities
originally sold by the syndicate member are purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions. These activities may cause the price of the
securities to be higher than it would otherwise be. The
underwriters will not be obligated to engage in any of the
aforementioned transactions and may discontinue such
transactions at any time without notice.
LEGAL
MATTERS
The validity of the securities offered in this prospectus will
be passed upon for us by Andrews Kurth LLP, Houston, Texas. Any
underwriter will be advised about other issues relating to any
offering by its own legal counsel. If such counsel to
underwriters passes on legal matters in connection with an
offering of securities made by this prospectus, and a related
prospectus supplement, that counsel will be named in the
applicable prospectus supplement related to that offering.
EXPERTS
The consolidated financial statements and schedule of Basic as
of December 31, 2007 and 2006, and for each of the years in
the three-year period ended December 31, 2007, and
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2007
have been incorporated by reference herein in reliance upon the
reports of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing. The audit
report covering the December 31, 2007 consolidated
financial statements refers to a change in accounting for
share-based payments effective January 1, 2006. The audit
report on the effectiveness of internal control over financial
reporting as of December 31, 2007, contains an explanatory
paragraph that states that Basic acquired JetStar Consolidated
Holdings, Inc., Sledge Drilling Holding Corp., and Wildhorse
Services, Inc. (collectively the 2007 Excluded Acquisitions)
during 2007, and management excluded from its assessment of the
effectiveness of Basics internal control over financial
reporting as of December 31, 2007, the 2007 Excluded
Acquisitions internal control over financial reporting
associated with total assets of $236.1 million and total
revenues of $85.8 million included in the consolidated
financial statements of Basic and subsidiaries as of and for the
year ended December 31, 2007. The audit of internal control
over financial reporting of Basic also excluded an evaluation of
the internal control over financial reporting of the 2007
Excluded Acquisitions.
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PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 14.
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Other
Expenses of Issuance and Distribution.
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The following table sets forth the costs and expenses, other
than selling or underwriting discounts and commissions, to be
incurred by us in connection with the issuance and distribution
of the securities being registered hereby. With the exception of
the SEC registration fee, all fees and expenses set forth below
are estimates.
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SEC registration fee
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$
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39,300
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Blue Sky expenses, including legal fees*
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Printing and engraving expenses*
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30,000
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Legal fees and expenses*
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75,000
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Trustee fees and expenses*
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30,000
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Rating agency fees*
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20,000
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Accounting fees and expenses*
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50,000
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Miscellaneous*
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6,700
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Total
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$
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250,000
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* |
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Estimated solely for purposes of this item. Actual expenses may
vary. |
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Item 15.
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Indemnification
of Directors and Officers.
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Delaware
Corporations
Basic Energy Services, Inc., Basic Marine Services, Inc., First
Energy Services Company and JetStar Holdings, Inc. are
incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law
(DGCL) provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. Section 145
further provides that a corporation similarly may indemnify any
such person serving in any such capacity who was or is a party
or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys fees)
actually and reasonably incurred in connection with the defense
or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem
proper. Basic Energy Services certificate of incorporation
and bylaws provide that indemnification shall be to the fullest
extent permitted by the DGCL for all current or former directors
or officers of Basic Energy Services. As permitted by the DGCL,
the certificate of incorporation
II-1
provides that directors of Basic Energy Services shall have no
personal liability to Basic Energy Services or its stockholders
for monetary damages for breach of fiduciary duty as a director,
except (1) for any breach of the directors duty of
loyalty to Basic Energy Services or its stockholders,
(2) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violation of II-1 law,
(3) under Section 174 of the DGCL or (4) for any
transaction from which a director derived an improper personal
benefit.
We have also entered into indemnification agreements with all of
our directors and some of our executive officers (including each
of our named executive officers). These indemnification
agreements are intended to permit indemnification to the fullest
extent now or hereafter permitted by the General Corporation Law
of the State of Delaware. It is possible that the applicable law
could change the degree to which indemnification is expressly
permitted.
The indemnification agreements cover expenses (including
attorneys fees), judgments, fines and amounts paid in
settlement incurred as a result of the fact that such person, in
his or her capacity as a director or officer, is made or
threatened to be made a party to any suit or proceeding. The
indemnification agreements generally cover claims relating to
the fact that the indemnified party is or was an officer,
director, employee or agent of us or any of our affiliates, or
is or was serving at our request in such a position for another
entity. The indemnification agreements also obligate us to
promptly advance all reasonable expenses incurred in connection
with any claim. The indemnitee is, in turn, obligated to
reimburse us for all amounts so advanced if it is later
determined that the indemnitee is not entitled to
indemnification. The indemnification provided under the
indemnification agreements is not exclusive of any other
indemnity rights; however, double payment to the indemnitee is
prohibited.
We are not obligated to indemnify the indemnitee with respect to
claims brought by the indemnitee against:
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us, except for:
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claims regarding the indemnitees rights under the
indemnification agreement;
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claims to enforce a right to indemnification under any statute
or law; and
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counter-claims against us in a proceeding brought by us against
the indemnitee; or
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any other person, except for claims approved by our board of
directors.
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We have also agreed to obtain and maintain director and officer
liability insurance for the benefit of each of the above
indemnitees. These policies will include coverage for losses for
wrongful acts and omissions and to ensure our performance under
the indemnification agreements. Each of the indemnitees will be
named as an insured under such policies and provided with the
same rights and benefits as are accorded to the most favorably
insured of our directors and officers.
Delaware
Limited Liability Company Guarantors
Basic Energy Services GP, LLC, Basic Energy Services LP, LLC and
JS Acquisition LLC are organized under the laws of the State of
Delaware. Under the Delaware Limited Liability Company Act, a
limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other
person from and against any and all claims and demands
whatsoever.
Each of the Agreements of Limited Liability Company of these
subsidiaries provides that a member shall not be liable to such
subsidiary for any act or omission based upon errors of judgment
or other fault in connection with the business or affairs of
such subsidiary if such members conduct does not
constitute gross negligence or willful misconduct. Furthermore,
a member shall be indemnified and held harmless by such
subsidiary to the fullest extent permitted by law, from and
against any and all losses, claims, damages and settlements
arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or
investigative, in which the member is involved, as a party or
otherwise, by reason of the management of the affairs of such
subsidiary, provided that no member shall be entitled to
indemnification for
II-2
such losses, claims, damages and settlements arising as a result
of the gross negligence or willful misconduct of such member.
Texas
Guarantors
Basic ESA, Inc., LeBus Oil Field Service Co., Globe Well
Service, Inc., JetStar Energy Services, Inc., Sledge Drilling
Corp. and Xterra Fishing and Rental Tools Co. are incorporated
under the laws of the State of Texas.
Article 2.02-1
of the Texas Business Corporation Act provides that any director
or officer of a Texas corporation may be indemnified against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by the person in connection with or in
defending any action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, in which
he was, is, or is threatened to be made a named defendant by
reason of his position as a director or officer of the
corporation, provided that (i) he conducted himself in good
faith, (ii) he reasonably believed that, in the case of
conduct in his official capacity as a director or officer of the
corporation, such conduct was in the corporations best
interests; and, in all other cases, that such conduct was at
least not opposed to the corporations best interests, and
(iii) in the case of a criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. If a
director or officer is wholly successful, on the merits or
otherwise, in connection with such a proceeding, such
indemnification is mandatory. In connection with any action,
suit or proceeding in which a director or officer is
(x) found liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted
from an action taken in his official capacity, or (y) found
liable to the corporation, the indemnification is limited to
reasonable expenses actually incurred by him in connection with
the proceeding and will not be made in respect of any proceeding
in which he is found liable for willful or intentional
misconduct in the performance of his duty to the corporation.
The Articles of Incorporation of each of these subsidiaries
generally provides that it will indemnify its directors and its
former directors and may indemnify its officers and its former
officers against any losses, damages, claims or liabilities to
which they may become subject or which they may incur as a
result of being or having been an officer or director, and shall
advance to them or reimburse them for expenses incurred in
connection therewith, to the maximum extent permitted by law.
Directors and officers may be indemnified against judgments,
penalties (including excise and similar taxes), fines,
settlements and reasonable expenses actually incurred by the
person in connection with a proceeding; but if the person is
found liable to such subsidiary or is found liable on the basis
that personal benefit was improperly received by the person, the
indemnification (i) is limited to reasonable expenses
actually incurred by the person in connection with the
proceeding and (ii) shall not be made in respect of any
proceeding in which the person shall have been found liable for
willful or intentional misconduct in the performance of his duty
to such subsidiary.
Oklahoma
Guarantors
Oilwell Fracturing Services, Inc., Hennessey Rental Tools, Inc.
and Wildhorse Services, Inc. are incorporated under the laws of
the State of Oklahoma. Section 1031 of the Oklahoma General
Corporation Act authorizes a court to award, or a
corporations board of directors to grant, indemnity under
certain circumstances to directors, officers employees or agents
in connection with actions, suits or proceedings, by reason of
the fact that the person is or was a director, officer, employee
or agent, against expenses and liabilities incurred in such
actions, suits or proceedings so long as they acted in good
faith and in a manner the person reasonable believed to be in,
or not opposed to, the best interests of the company, and with
respect to any criminal action if they had no reasonable cause
to believe their conduct was unlawful. With respect to suits by
or in the right of such corporation, however, indemnification is
generally limited to attorneys fees and other expenses and
is not available if such person is adjudged to be liable to such
corporation unless the court determines that indemnification is
appropriate.
Texas
Limited Liability Company Guarantors
SCH Disposal, L.L.C. is organized under the laws of the State of
Texas. Section 2.20 of the Texas Limited Liability Company
Act provides that, subject to such standards and restrictions,
if any, as are set forth in its articles of organization or in
its regulations, a limited liability company shall have the
power to
II-3
indemnify members and managers, officers and other persons and
purchase and maintain liability insurance for such persons.
New
Mexico Guarantor
Chaparral Service, Inc. is organized under the laws of the State
of New Mexico.
Section 53-11-4.1
of the New Mexico Business Corporation Act empowers a
corporation to indemnify any officer or director against
judgments, penalties, fines, settlements, and reasonable
expenses actually incurred by the person in connection with any
threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, if
the person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the
corporation, and with respect to a criminal proceeding, had no
reasonable cause to believe the persons conduct was
unlawful. The indemnification authorized by
Section 53-11-4.1
is not exclusive of any other rights to which an officer or
director may be entitled under the articles of incorporation,
the bylaws, an agreement, a resolution of shareholders or
directors or otherwise.
Kansas
Guarantor
Acid Services, LLC is organized under the laws of the State of
Kansas.
Section 17-6305
of the Kansas General Corporation Law provides that a
corporation may indemnify any person who was or is, or is
threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in
the right of the corporation, by reason of the fact that such
person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, including
attorney fees, if such person acted in good faith and in a
manner reasonably believed to be in or not opposed to the best
interests of the corporation; and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such
persons conduct was unlawful.
Section 17-6305
further provides that a corporation similarly may indemnify any
such person serving in any such capacity who was or is a party
or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses
(including attorneys fees) actually and reasonably
incurred in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a
manner reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which the
court shall deem proper.
Section 17-6305
also provides that to the extent that a present or former
director, officer, employee or agent of a corporation has been
successful in defense of any action, suit or proceeding referred
to above, such person shall be indemnified against expenses
actually and reasonably incurred in connection therewith,
including attorney fees and that the indemnification and
advancement of expenses provided by, or granted pursuant to
Section 17-6305
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled.
Reference is also made to the form of underwriting agreements to
be incorporated by reference in this registration statement for
a description of the indemnification arrangements we agree to in
connection with offerings of the securities registered hereby.
The exhibits listed in the accompanying Exhibit Index are
filed (except where otherwise indicated) as part of this
registration statement.
II-4
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(a) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the Calculation of Registration Fee
table in the effective registration statement; and
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in this registration statement;
provided, however, that paragraphs A(l)(a)
and A(l)(b) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the SEC
by the registrant pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser:
(a) Each prospectus filed by the registrant pursuant to
Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed prospectus was
deemed part of and included in the registration
statement: and
(b) Each prospectus required to be filed pursuant to
Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii), or (x) for
the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date.
II-5
(5) That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, the undersigned
registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered
or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
(a) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(b) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(c) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(d) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
B. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants annual report
pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the provisions described under Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
D. The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus or any prospectus supplement filed as part of this
registration statement in reliance on Rule 430A and
contained in a form of prospectus or prospectus supplement filed
by the registrant pursuant to Rule 424(b)( 1) or
(4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus or prospectus supplement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
E. The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of
the trustee to act under subsection (a) of subsection 310
of the Trust Indenture Act (Act) in accordance
with the rules and regulations prescribed by the SEC under
section 305(b)(2) of such Act.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on
Form S-3
and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
City of Midland, State of Texas, on October 24, 2008.
BASIC ENERGY SERVICES, INC.
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By:
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/s/ Kenneth
V. Huseman
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Kenneth V. Huseman
President and Chief Executive Officer
POWER OF
ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
officers and directors of the Registrant hereby constitutes and
appoints Kenneth V. Huseman and Alan Krenek his true and lawful
attorney-in-fact and agent, with full power of substitution, for
him and on his behalf and in his name, place and stead, in any
and all capacities, to sign, execute and file this registration
statement under the Securities Act of 1933, as amended, and any
or all amendments (including, without limitation, post-effective
amendments), with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting
unto such attorney-in-fact and agent, full power and authority
to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he
himself might or could do, if personally present, hereby
ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or
cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Kenneth
V. Huseman
Kenneth
V. Huseman
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President, Chief Executive Officer and Director (Principal
Executive Officer)
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October 24, 2008
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/s/ Alan
Krenek
Alan
Krenek
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Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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October 24, 2008
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/s/ Steven
A. Webster
Steven
A. Webster
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Chairman of the Board
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October 24, 2008
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/s/ James
S. DAgostino
James
S. DAgostino, Jr.
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Director
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October 24, 2008
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/s/ William
E. Chiles
William
E. Chiles
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Director
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October 24, 2008
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/s/ Robert
F. Fulton
Robert
F. Fulton
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Director
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October 24, 2008
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II-7
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Signature
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Title
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Date
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/s/ Sylvester
P. Johnson, IV
Sylvester
P. Johnson, IV
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Director
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October 24, 2008
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/s/ H.H.
Wommack, III
H.H.
Wommack, III
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Director
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October 24, 2008
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/s/ Thomas
P. Moore
Thomas
P. Moore, Jr.
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Director
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October 24, 2008
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II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
of the co-registrants set forth below (the
Co-Registrants) has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Midland, State of
Texas, on October 24, 2008.
Each of the Co-Registrants named on
Schedule A-1
hereto
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By:
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/s/ Kenneth
V. Huseman
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Kenneth V. Huseman
President
POWER OF
ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
officers and directors of the Co-Registrants hereby constitutes
and appoints Kenneth V. Huseman and Alan Krenek his true and
lawful attorney-in-fact and agent, with full power of
substitution, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file
this registration statement under the Securities Act of 1933, as
amended, and any or all amendments (including, without
limitation, post-effective amendments), with all exhibits and
any and all documents required to be filed with respect thereto,
with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorney-in-fact and agent, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same, as fully to all
intents and purposes as he himself might or could do, if
personally present, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Kenneth
V. Huseman
Kenneth
V. Huseman
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President and Director
(Principal Executive Officer)
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October 24, 2008
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/s/ Alan
Krenek
Alan
Krenek
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Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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October 24, 2008
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II-9
Schedule A-1
CO-REGISTRANTS
Basic Energy Services GP, LLC
Basic Energy Services, L.P.
Basic ESA, Inc.
Basic Marine Services, Inc.
First Energy Services Company
LeBus Oil Field Service Co.
Oilwell Fracturing Services, Inc.
Globe Well Service, Inc.
SCH Disposal, L.L.C.
JS Acquisition LLC
Acid Services, LLC
JetStar Energy Services, Inc.
JetStar Holdings, Inc.
Sledge Drilling Corp.
Chaparral Service, Inc.
Hennessey Rental Tools, Inc.
Wildhorse Services, Inc.
Xterra Fishing and Rental Tools Co.
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Farmington, State of New Mexico, on
October 24, 2008.
BASIC ENERGY SERVICES LP, LLC
Jerry Tufly
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Jerry
Tufly
Jerry
Tufly
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President, Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer)
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October 24, 2008
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II-11
EXHIBIT INDEX
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Exhibit No.
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Exhibit
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1
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.1**
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Form of Underwriting Agreement for each of the securities
registered hereby.
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2
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.1
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Agreement and Plan of Merger, dated as of January 8, 2007,
by and among Basic Energy Services, Inc.(the
Company), JS Acquisition LLC and JetStar
Consolidated Holdings, Inc. (Incorporated by reference to
Exhibit 2.1 of the Companys Current Report on
Form 8-K
(SEC File
No. 001-32693),
filed on March 8, 2007)
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2
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.2
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Amendment to Merger Agreement, dated as of March 5, 2007,
by and among Basic Energy Services, Inc., JS Acquisition LLC and
JetStar Consolidated Holdings, Inc. (Incorporated by reference
to Exhibit 2.2 of the Companys Current Report on
Form 8-K
(SEC File
No. 001-32693),
filed on March 8, 2007)
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|
3
|
.1
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|
Amended and Restated Certificate of Incorporation of the
Company, dated September 22, 2005. (Incorporated by
reference to Exhibit 3.1 of the Companys Registration
Statement on
Form S-1
(SEC File
No. 333-127517),
filed on September 28, 2005)
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|
3
|
.2
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|
Amended and Restated Bylaws of the Company, effective as of
December 17, 2007. (Incorporated by reference to
Exhibit 3.1 of the Companys Current Report on
Form 8-K
(SEC File
No. 001-32693),
filed on December 18, 2007)
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3
|
.3
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|
Certificate of Formation of Basic Energy Services GP, LLC, dated
as of January 7, 2003 (Incorporated by reference to
Exhibit 3.3 of the Companys Registration Statement on
Form S-4
(SEC File
No. 333-135807),
filed on July 17, 2006)
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4
|
.1
|
|
Specimen Stock Certificate representing common stock of the
Company. (Incorporated by reference to Exhibit 3.1 of the
Companys Registration Statement on
Form S-1
(SEC File
No. 333-127517),
filed on November 4, 2005)
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4
|
.2**
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|
Form of Certificate of Designations of Preferred Stock of
Registrant.
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|
4
|
.3
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|
Indenture dated April 12, 2006, among Basic Energy
Services, Inc., the guarantors party thereto, and The Bank of
New York Trust Company, N.A., as trustee. (Incorporated by
reference to Exhibit 4.1 of the Companys Current
Report on
Form 8-K
(SEC File
No. 001-32693),
filed on April 13, 2006)
|
|
4
|
.4
|
|
Form of 7.125% Senior Note due 2016. (Incorporated by
reference to Exhibit 4.2 of the Companys Current
Report on
Form 8-K
(SEC File
No. 001-32693),
filed on April 13, 2006)
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|
4
|
.5
|
|
First Supplemental Indenture dated as of July 14, 2006 to
Indenture dated as of April 12, 2006 among the Company, as
Issuer, the Subsidiary Guarantors named therein and The Bank of
New York Trust Company, N.A., as trustee.
(Incorporated by reference to Exhibit 4.1 of the
Companys Current Report on
Form 8-K
(SEC File
No. 001-32693),
filed on July 20, 2006)
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|
4
|
.6
|
|
Second Supplemental Indenture dated as of April 26, 2007
and effective as of March 7, 2007 to Indenture dated as of
April 12, 2006 among the Company as Issuer, the Subsidiary
Guarantors named therein and the Bank of New York
Trust Company, N.A., as trustee. (Incorporated by reference
to Exhibit 4.1 of the Companys Current Report on
Form 8-K
(SEC File
No. 001-32693,
filed on May 1, 2007)
|
|
4
|
.7
|
|
Third Supplement Indenture dated as of April 26, 2007 to
Indenture dated as of April 12, 2006 among the Company as
Issuer, the Subsidiary Guarantors named therein and the Bank of
New York Trust Company, N.A., as trustee.
(Incorporated by reference to Exhibit 4.2 of the
Companys Current Report on
Form 8-K
(SEC File
No. 001-32693),
filed on May 1, 2007)
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|
4
|
.8*
|
|
Form of Senior Indenture (including form of senior debt
security).
|
|
4
|
.9*
|
|
Form of Subordinated Indenture (including form of subordinated
debt security).
|
|
4
|
.10**
|
|
Form of Warrant Agreement (including form of warrant
certificate).
|
|
4
|
.11**
|
|
Form of Unit Agreement (including form of unit certificate).
|
|
5
|
.1*
|
|
Opinion of Andrews Kurth LLP regarding legality of the
securities being registered by the Company
|
|
8
|
.1**
|
|
Opinion of Andrews Kurth LLP regarding material U.S. federal
income tax matters.
|
|
12
|
.1*
|
|
Statement of computation of ratios of earnings to fixed charges.
|
|
23
|
.1*
|
|
Consent of KPMG LLP
|
|
23
|
.2*
|
|
Consent of Andrews Kurth LLP (included in Exhibit 5.1).
|
|
|
|
|
|
Exhibit No.
|
|
Exhibit
|
|
|
24
|
.1*
|
|
Powers of Attorney (included in Part II as a part of the
signature pages of the Registration Statement).
|
|
25
|
.1*
|
|
Form T-1
Statement of Eligibility and Qualification of Trustee under
Trust Indenture Act of 1939 regarding the Senior Debt
Securities.
|
|
25
|
.2*
|
|
Form T-1
Statement of Eligibility and Qualification of Trustee under
Trust Indenture Act of 1939 regarding the Subordinated Debt
Securities.
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
To be filed by amendment or as an exhibit to Current Report on
Form 8-K
filed at a later date in connection with a specific offering. |
|
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|
Compensation plan or arrangement. |