DAWSON PRODUCTION SERVICES INC, S-1, 1997-01-08

DAWSON PRODUCTION SERVICES INC
S-1, 1997-01-08
OIL & GAS FIELD SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1997.

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------------------

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

---------------------

DAWSON PRODUCTION SERVICES, INC.
TAYLOR COMPANIES, INC.
(Exact name of registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
TEXAS 1389 74-2231546
TEXAS 1389 75-2445316
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)

901 N.E. LOOP 410, SUITE 700 MR. MICHAEL E. LITTLE
SAN ANTONIO, TEXAS 78209 PRESIDENT AND CHIEF EXECUTIVE OFFICER
(210) 828-1838 DAWSON PRODUCTION SERVICES, INC.
(Address, including zip code, and 901 N.E. LOOP 410, SUITE 700
telephone number, including area code, SAN ANTONIO, TEXAS 78209
of registrant's principal executive offices) (210) 828-1838
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
</TABLE>

---------------------

Copies to:

<TABLE>
<S> <C>
J. ROWLAND COOK, ESQ. CHARLES L. STRAUSS, ESQ.
DEIDRE L. TREADWELL, ESQ. FULBRIGHT & JAWORSKI L.L.P.
JENKENS & GILCHRIST, P.C. 1301 MCKINNEY STREET, SUITE 5100
600 CONGRESS AVENUE, SUITE 2200 HOUSTON, TEXAS 77010-3095
AUSTIN, TEXAS 78701 (713) 651-5151
(512) 499-3800
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

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, check the following box. [ ]

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. [ ]

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. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=================================================================================================
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE(1) FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Notes due
2007....................... $110,000,000 100% $110,000,000 $33,334
- -------------------------------------------------------------------------------------------------
Guarantee(2)................. (3) (3) (3) (2)(3)
- -------------------------------------------------------------------------------------------------
Common Stock, $.01 par value
per share(2)............... 4,600,000 $14.813 $68,139,800 $20,648(4)
- -------------------------------------------------------------------------------------------------
Total.............. -- -- $178,139,800 $53,982
=================================================================================================
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee.
(2) A Guarantee by Taylor Companies, Inc. is also being registered hereby.
Pursuant to Rule 457(n) under the Securities Act of 1933, no registration
fee is required with respect to the Guarantee.
(3) No separate consideration will be received for the Guarantee from the
purchasers of the Notes.
(4) Estimated pursuant to Rule 457 under the Securities Act of 1933 solely for
the purpose of calculating the amount of the registration fee based upon the
average of the high and low sales prices of the Common Stock as reported on
the Nasdaq National Market on January 7, 1997. Includes 600,000 shares of
Common Stock subject to the Underwriters' over-allotment option.

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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

EXPLANATORY NOTE

This Registration Statement contains two forms of Prospectus, one to be
used in connection with the offering of % Senior Notes due 2007 (the "Debt
Prospectus") and the other to be used in connection with a concurrent offering
of Common Stock (the "Equity Prospectus"). The closing of the offering being
made pursuant to the Debt Prospectus and the closing of the offering being made
pursuant to the Equity Prospectus are conditioned upon the simultaneous closing
of the other and upon the simultaneous closing of the Pride Acquisition (as
defined herein).
<PAGE> 3
********************************************************************************
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
********************************************************************************

SUBJECT TO COMPLETION, DATED JANUARY 8, 1997
PROSPECTUS
$110,000,000

[DAWSON INC. LOGO] DAWSON PRODUCTION SERVICES, INC.

% Senior Notes due 2007
-------------------------

The % Senior Notes due February 1, 2007 (the "Notes") are being
offered (the "Debt Offering") by Dawson Production Services, Inc. ("Dawson" or
the "Company"). The Notes will bear interest from February , 1997 at the rate
per annum set forth above, payable semi-annually on February 1 and August 1 of
each year, commencing August 1, 1997. The Notes will mature on February 1, 2007
and will be redeemable at the option of the Company, in whole or in part, at any
time on or after February 1, 2002, at the redemption prices set forth herein,
together with accrued and unpaid interest to the date of redemption. See
"Description of Notes -- Optional Redemption." Upon a Change of Control (as
defined herein), the holders of the Notes may require the Company to purchase
all or a portion of the Notes at a price equal to 101% of the aggregate
principal amount thereof, together with accrued and unpaid interest to the date
of purchase. See "Description of Notes -- Certain Covenants."

Concurrently with the Debt Offering, the Company is offering 4,000,000
shares, and certain selling shareholders (the "Selling Shareholders") are
offering shares, of common stock of the Company (the "Common Stock")
pursuant to a separate prospectus (the "Equity Offering" and, together with the
Debt Offering, the "Offerings"). The Company will use approximately $135.9
million of the aggregate net proceeds from the Offerings to purchase the U.S.
land-based well servicing operations (the "Pride Acquisition") of Pride
Petroleum Services, Inc. ("Pride"), approximately $12.3 million to prepay
certain indebtedness (including accrued interest) of the Company and the
remainder for fees and expenses of the Pride Acquisition, working capital and
general corporate purposes. See "Use of Proceeds" and "Pride Acquisition." The
closing of the Debt Offering and the Equity Offering are each conditioned upon
the simultaneous closing of the other and upon the simultaneous closing of the
Pride Acquisition.

The Notes will be senior unsecured obligations of the Company, ranking pari
passu in right of payment with all senior Indebtedness (as defined herein) of
the Company and senior to all Subordinated Indebtedness (as defined herein) of
the Company. The Notes will be unconditionally guaranteed (the "Subsidiary
Guarantees") on a senior unsecured basis by the Company's principal operating
subsidiaries (the "Subsidiary Guarantors"), and the Subsidiary Guarantees will
rank pari passu in right of payment with any future senior Indebtedness of the
Subsidiary Guarantors and senior to any future Subordinated Indebtedness of the
Subsidiary Guarantors. The Subsidiary Guarantees may be released under certain
circumstances. The Notes and the Subsidiary Guarantees will be effectively
subordinated to secured Indebtedness of the Company and the Subsidiary
Guarantors, including any Indebtedness under the Credit Facility (as defined
herein), which is secured by liens on certain assets of the Company and its
Subsidiaries (as defined herein). At September 30, 1996, pro forma for the Pride
Acquisition and the Offerings, the Notes and the Subsidiary Guarantees would not
have been subordinated to any secured Indebtedness (excluding letters of credit)
of the Company or the Subsidiary Guarantors. The indenture governing the Notes
(the "Indenture") will permit the Company and its subsidiaries to incur
additional Indebtedness in the future, subject to certain limitations. See "Risk
Factors -- Restrictions Imposed by Lenders."

The Company does not intend to list the Notes on any securities exchange.
No assurance can be given that any market for the Notes will develop or, if any
such market develops, as to the liquidity of such market. See "Risk
Factors -- Absence of Public Market for the Notes."

------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
------------ ------------ ------------
<S> <C> <C> <C>
Per Note.............................................. % % %
Total................................................. $ $ $
</TABLE>

- ---------------

(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company and the Subsidiary Guarantors have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be $700,000.

------------------------

The Notes are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter. The Underwriter reserves
the right to reject orders in whole or in part. It is expected that delivery of
the Notes will be made in book-entry form through the facilities of The
Depository Trust Company in New York, New York, on or about , 1997.

------------------------

JEFFERIES & COMPANY, INC.
, 1997

<PAGE> 4

[GRAPHIC]

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OR THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and the consolidated financial
statements of the Company and notes thereto appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information in this Prospectus
assumes that the Underwriters' over-allotment option in connection with the
Equity Offering will not be exercised. Unless the context otherwise requires,
references in this Prospectus to the "Company" or "Dawson" mean Dawson
Production Services, Inc., its predecessors, and its and their subsidiaries.
Unless the context otherwise requires, pro forma information contained herein
gives effect to the Taylor Acquisition (as defined herein) in July 1996, the
Pride Acquisition and the Offerings.

THE COMPANY

Dawson Production Services, Inc. is a leading provider of a broad range of
workover, liquid and production services used in the production of oil and gas.
The Company's services are utilized by major oil and gas companies as well as
independent producers to optimize performance of oil and gas wells. The Company
recently entered into an agreement to acquire the U.S. land-based well servicing
operations of Pride Petroleum Services, Inc. in a transaction that will position
Dawson as the second largest provider of workover rigs in the United States.

The Company commenced operations in 1951. In 1982, the current management
team joined the Company and initiated a strategy to expand and diversify the
Company's workover rig services. Since 1982, the Company has grown from four
workover rigs in a single yard to 91 workover rigs in 10 yards through a series
of strategic acquisitions of businesses and assets. Upon the closing of the
Pride Acquisition, the Company will own and operate 498 workover rigs. In
addition, in November 1994 the Company broadened the array of services it
provides by acquiring the liquid services and production services businesses of
Well Solutions, Inc. and expanded such businesses in July 1996 with the
acquisition of Taylor Companies, Inc. The Company believes that it generally has
been successful in acquiring businesses and assets and subsequently reducing
overhead, enhancing internal controls, improving marketing and related
operations through management incentives and improving the utilization of its
assets by redeploying equipment.

BUSINESS STRATEGY

The Company's strategy emphasizes diversification and expansion through
acquisitions and internal growth. In recent years, there has been significant
industry consolidation activity in the Company's principal businesses. The
Company has been an active participant in this industry consolidation and plans
to continue to pursue strategic acquisitions of businesses and assets which
enhance or expand its market presence or complement its existing businesses.
Upon the closing of the Pride Acquisition, the Company intends to expand the
range of services offered at its locations and increase its presence, through
redeployment of underutilized assets, within the geographic regions in which the
Company will then operate. The Company believes that its ability to offer a wide
range of services over a large operating base will provide it with a competitive
advantage by allowing its customers to consolidate their procurement of
workover, liquid and production services by utilizing fewer vendors. The Company
believes that this consolidation may allow customers to lower their costs by
streamlining production decisions and increasing operational efficiencies. The
Company also believes that its strategy will allow it to take advantage of
cross-marketing opportunities for its services and to appeal to a broader
customer base by enhancing its position as a one-stop source for workover,
liquid and production services.

PRIDE ACQUISITION

Consistent with its business strategy, on December 23, 1996 the Company
entered into a purchase agreement to acquire substantially all of Pride's U.S.
land-based well servicing operations for approximately $135.9 million in cash.
The Pride Acquisition will significantly increase the size and geographic scope
of the Company's workover rig services business. Pride's U.S. land-based fleet
consists of 407 workover rigs and related operations in 28 locations in the
Texas and Louisiana Gulf Coasts, the Permian Basin areas of West

3
<PAGE> 6

Texas and New Mexico, and California. Upon completion of the Pride Acquisition,
the Company will be the largest provider of workover rigs in Texas and the
second largest provider in the United States. The Company will seek to generate
improved profit margins for the acquired assets through increased operating
efficiencies and cost savings resulting from overhead reductions and the
consolidation of certain overlapping yard locations. In addition, the Company
will seek to expand its liquid and production services businesses into new
markets through certain of the acquired yard locations and to redeploy certain
of the acquired workover rigs to areas with greater rig demand. See "Pride
Acquisition."

For the year ended March 31, 1996, the Company's pro forma revenue and
EBITDA (as defined herein) were approximately $182.2 million and $26.5 million,
respectively, compared to historical revenue and EBITDA of approximately $52.4
million and $9.1 million, respectively. For the six months ended September 30,
1996, the Company's pro forma revenue and EBITDA were approximately $100.2
million and $14.9 million, respectively, compared to historical revenue and
EBITDA of approximately $33.8 million and $6.6 million, respectively.

MOBLEY ACQUISITION

On November 1, 1996, Dawson signed a letter of intent to acquire the
oilfield service assets of Mobley Environmental Services, Inc. for $5.5 million
(the "Mobley Acquisition"). These are primarily liquid services assets that
generated revenues of approximately $4.4 million and $3.2 million for the 12
months ended December 31, 1995 and the nine months ended September 30, 1996,
respectively. Pending fulfillment of certain conditions, the Company expects to
close this acquisition during January 1997.

OPERATIONS

Workover Rig Services. The Company provides workover rig services to oil
and gas exploration and production companies through the use of mobile well
servicing workover rigs together with crews of three to four workers. As of
December 31, 1996, the Company operated 89 land workover rigs, two barge-mounted
workover rigs and ancillary equipment from 10 yards in Texas and Louisiana. Upon
the closing of the Pride Acquisition, the Company will expand its workover rig
fleet to 498 rigs located in Texas, Louisiana, California and New Mexico.

Workover rig services are used throughout the life of a well and are
categorized by the type of job performed: completion, maintenance, workover and
plugging and abandonment. Completion services prepare newly drilled wells for
production. Newly drilled wells are frequently completed by well servicing rigs
to minimize the use of higher cost drilling rigs. Maintenance services are
required on producing oil and gas wells to ensure efficient and continuous
operation. In addition to periodic maintenance, producing oil and gas wells
occasionally require major repairs or modifications called "workovers." Workover
rigs are also used in the plugging and abandonment of oil and gas wells no
longer capable of producing in economic quantities. For the six months ended
September 30, 1996, workover rig services contributed approximately 46% of the
Company's revenues (75% on a pro forma basis).

Liquid Services. The Company uses its vacuum trucks, frac tanks and salt
water injection wells to provide an integrated mix of liquid services to well
site customers. The Company owns and operates 141 vacuum trucks and will acquire
an additional 44 vacuum trucks in connection with the Pride Acquisition and the
Mobley Acquisition. Vacuum trucks are used to extract fluids from pits, tanks
and other storage facilities and to transport water for frac tanks, produced
salt water to injection wells and brine and other drilling fluids to and from
well locations. Vacuum truck services are generally provided to oilfield
operators within a 30-mile radius of the Company's nearest yard. The Company
owns 549 frac tanks and will acquire an additional 147 frac tanks in connection
with the Mobley Acquisition. Frac tanks are used during all phases of the life
of a producing well to store various fluids at the well site. The Company also
owns or leases 19 salt water injection wells and will acquire three additional
salt water injection wells in connection with the Mobley Acquisition. In Texas
and Arkansas, salt water produced from oil and gas wells is generally required
by law to be disposed of in salt water injection wells. For the six months ended
September 30, 1996, liquid services contributed approximately 38% of the
Company's revenues (20% on a pro forma basis).

4
<PAGE> 7

Production Services. The Company's production services consist of
production testing services, slickline wireline services, fishing and rental
tool services and pipe testing. The Company owns 21 gas production testing units
which are used to perform deliverability tests required upon the initial
completion of a well and periodically during the productive life of a gas well.
In addition, the Company offers slickline wireline services which are used to
simplify completion operations and in connection with regular maintenance on
producing wells. The Company also provides a complete line of cased hole fishing
and rental tools to oilfield operators and service companies, and operates nine
pipe testing units along the Texas Gulf Coast. This testing equipment is used
during completion and recompletion operations for leak detection in the internal
pipe systems of oil and gas wells. For the six months ended September 30, 1996,
production services contributed approximately 16% of the Company's revenues (5%
on a pro forma basis).

THE DEBT OFFERING

Securities Offered......... $110,000,000 principal amount of % Senior
Notes due 2007.

Maturity Date.............. February 1, 2007.

Interest Rate and Payment
Dates.................... The Notes will bear interest at a rate of %
per annum. Interest on the Notes will accrue from
the date of issuance thereof and will be payable
semi-annually on February 1 and August 1 of each
year, commencing August 1, 1997.

Optional Redemption........ The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after February 1, 2002, at the redemption prices
set forth herein, together with accrued and unpaid
interest to the date of redemption. In the event
the Company consummates a Public Equity Offering
(as defined herein) on or prior to February 1,
2000, the Company may at its option use all or a
portion of the proceeds from such offering to
redeem up to $38.5 million principal amount of the
Notes at a redemption price equal to % of the
aggregate principal thereof, together with accrued
and unpaid interest to the date of redemption,
provided that at least $71.5 million in aggregate
principal amount of Notes remain outstanding
immediately after such redemption. See "Description
of Notes -- Optional Redemption."

Repurchase Obligation
Upon Change of Control... Upon the occurrence of a Change of Control, each
holder of Notes will have the right to require the
Company to purchase all or a portion of such
holder's Notes at a price equal to 101% of the
aggregate principal amount thereof, together with
accrued and unpaid interest to the date of
purchase. See "Description of Notes -- Repurchase
at the Option of Holders -- Change of Control."

Guarantees................. The Notes will be unconditionally guaranteed on a
senior unsecured basis by each of the Company's
principal operating subsidiaries, and such
Subsidiary Guarantees will rank pari passu in right
of payment with all senior Indebtedness of the
Subsidiary Guarantors. The Subsidiary Guarantees
may be released under certain circumstances. See
"Description of Notes -- Subsidiary Guarantees."

Ranking.................... The Notes will be senior unsecured obligations of
the Company, ranking pari passu in right of payment
with all senior Indebtedness of the Company and
senior to all Subordinated Indebtedness of the
Company. The Notes and the Subsidiary Guarantees
will be effectively subordinated to secured
Indebtedness of the Company and the Subsidiary
Guarantors, including any Indebtedness under the
Credit Facility which

5
<PAGE> 8

is secured by liens on certain assets of the
Company. At September 30, 1996, on a pro forma
basis, the Notes and the Subsidiary Guarantees
would not have been subordinated to any secured
Indebtedness (excluding letters of credit) of the
Company or the Subsidiary Guarantors. Subject to
certain limitations, the Company may incur
additional indebtedness in the future. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity
and Capital Resources" and "Description of
Notes -- General."

Certain Covenants.......... The Indenture relating to the Notes will contain
certain covenants, including covenants that limit:
(i) indebtedness; (ii) restricted payments; (iii)
issuances and sales of capital stock of restricted
subsidiaries; (iv) sale/leaseback transactions; (v)
transactions with affiliates; (vi) liens; (vii)
asset sales; (viii) dividends and other payment
restrictions affecting restricted subsidiaries;
(ix) conduct of business; and (x) mergers,
consolidations or sales of assets. See "Description
of Notes -- Certain Covenants."

Use of Proceeds............ The net proceeds to the Company from the sale of
the Notes are estimated to be approximately $106.0
million. The Company will use the net proceeds from
the sale of the Notes, together with the estimated
net proceeds to the Company from the Equity
Offering of approximately $55.2 million, to fund
the approximately $135.9 million purchase price of
the Pride Acquisition, to prepay certain existing
indebtedness (including accrued interest) of the
Company, and for fees and expenses of the Pride
Acquisition, working capital and general corporate
purposes. See "Use of Proceeds."

Equity Offering............ Concurrently with the Debt Offering, the Company
and the Selling Shareholders are offering
shares ( shares if the underwriters'
over-allotment option is exercised in full) of
Common Stock for sale to the public, of which
4,000,000 shares will be sold by the Company. The
Company will not receive any proceeds from the sale
of shares of Common Stock by the Selling
Shareholders in the Equity Offering. The closing of
the Debt Offering and the Equity Offering are each
conditioned upon the simultaneous closing of the
other and upon the simultaneous closing of the
Pride Acquisition.

6
<PAGE> 9

SUMMARY OF CONSOLIDATED FINANCIAL DATA

The following table presents for the periods indicated certain historical
consolidated and certain pro forma combined financial data for the Company. The
following information should be read together with "Pro Forma Condensed
Consolidated Financial Statements," "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements, including the notes thereto, included
elsewhere in this Prospectus. The results for the six months ended September 30,
1996 are not necessarily indicative of results for the full year. The pro forma
information is presented for illustrative purposes only and is not necessarily
indicative of the results of operations and financial position that would have
been achieved had the transactions reflected therein been consummated on the
dates indicated.

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................... $15,784 $20,822 $27,942 $36,005 $52,391 $182,219 $25,888 $33,811 $100,229
Costs and expenses:
Operating.................. 11,440 14,772 19,937 24,241 34,320 131,052 16,875 21,893 71,994
General and
administrative........... 2,443 3,040 3,854 5,574 8,937 24,676 4,238 5,339 13,350
Depreciation and
amortization............. 1,062 1,374 1,707 2,608 4,396 19,144 2,016 2,876 9,662
------- ------- ------- ------- ------- -------- ------- ------- --------
Operating income............. 839 1,636 2,444 3,582 4,738 7,347 2,759 3,703 5,223
Interest expense............. 352 301 282 789 1,848 11,810 953 296 5,905
Other (income) expense....... (8) 84 (61) (41) (129) (1,490) (27) (122) (71)
Minority interest............ -- 358 902 1,092 937 937 787 -- --
------- ------- ------- ------- ------- -------- ------- ------- --------
Income (loss) before income
taxes and extraordinary
item....................... 495 893 1,321 1,742 2,082 (3,910) 1,046 3,529 (611)
Provision for income taxes... 236 320 525 681 709 (1,525) 398 1,354 (239)
------- ------- ------- ------- ------- -------- ------- ------- --------
Income (loss) before
extraordinary item......... 259 573 796 1,061 1,373 (2,385) 648 2,175 (372)
Extraordinary item(2)........ 38 -- (92) -- (514) (514) -- -- --
------- ------- ------- ------- ------- -------- ------- ------- --------
Net income (loss)............ 297 573 704 1,061 859 (2,899) 648 2,175 (372)
Preferred stock dividends.... 101 101 101 101 88 88 50 -- --
------- ------- ------- ------- ------- -------- ------- ------- --------
Net income (loss) applicable
to common stock............ $ 196 $ 472 $ 603 $ 960 $ 771 $ (2,987) $ 598 $ 2,175 $ (372)
======= ======= ======= ======= ======= ======== ======= ======= ========
Primary earnings (loss) per
share...................... $ .11 $ .23 $ .29 $ .45 $ .27 $ (.43) $ .25 $ .33 $ (.04)
Fully diluted earnings (loss)
per share.................. $ .11 $ .23 $ .29 $ .42 $ .27 $ (.43) $ .23 $ .33 $ (.04)
Average number of shares
outstanding --
primary.................... 1,768,613 2,020,664 2,052,168 2,155,380 2,931,234 6,882,896 2,384,359 6,510,428 10,390,984
Average number of shares
outstanding -- fully
diluted.................... 1,768,613 2,020,664 2,450,791 2,648,740 3,207,622 6,882,896 3,095,826 6,527,796 10,390,984
BALANCE SHEET DATA:
Cash and cash equivalents.... $ 400 $ 1,139 $ 2,172 $ 2,797 $13,863 $ 9,364 $ 20,860
Net property and equipment... 6,261 8,625 8,978 25,321 29,115 39,209 145,859
Total assets................. 11,685 15,828 16,714 40,525 56,368 74,092 226,938
Long-term debt and other
obligations, net of current
portion.................... 1,938 1,722 1,623 15,989 3,695 4,609 112,750
Total shareholders' equity... 5,487 6,009 6,720 10,098 45,694 47,933 103,093
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges(3)................. 2.3x 3.6x 5.0x 3.1x 2.1x 0.7x 2.1x 10.9x 0.9x
EBITDA(4).................... $ 1,901 $ 3,010 $ 4,151 $ 6,190 $ 9,134 $ 26,491 $ 4,775 $ 6,579 $ 14,885
EBITDA interest
coverage(5)................ 5.4x 10.0x 14.7x 7.9x 4.9x 2.2x 5.0x 22.2x 2.5x
Long-term debt/EBITDA(6)..... 1.0x 0.6x 0.4x 2.6x 0.4x
</TABLE>

- ---------------

(1) Adjusted, in the case of the income statement data, to reflect the
consummation of the Pride Acquisition, the Taylor Acquisition and the
Offerings, as if each had occurred on April 1, 1995, and in the case of
balance sheet data at September 30, 1996, to reflect the consummation of the
Pride Acquisition and the Offerings as if they had been completed at such
date. See "The Company."

(2) Includes a $92,000 charge in fiscal 1994 to reflect the cumulative effect of
change in accounting principle.

(3) For purposes of computing the ratio of earnings to fixed charges, earnings
are computed as income before income taxes, extraordinary item and
cumulative effect of a change in accounting principle, plus fixed charges.
Fixed charges consist of interest, whether expensed or capitalized,
amortization of debt issuance costs and an estimated portion of rentals
representing interest costs. On a pro forma basis, earnings were inadequate
to cover fixed charges for the periods ended March 31, 1996 and September
30, 1996 by $3.9 million and $0.6 million, respectively.

(4) EBITDA is defined as earnings before interest expense, taxes, depreciation
and amortization, minority interest and other (income) expense and is
presented because it is a widely accepted financial indication of a
company's ability to incur and service debt. EBITDA should not be considered
as an alternative to earnings as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.

(5) Represents the ratio of EBITDA to interest expense for the period presented.

(6) Represents the ratio of total long-term debt and other obligations, net of
current portion, to EBITDA for the period presented.

7
<PAGE> 10

RISK FACTORS

Prospective purchasers of the securities offered hereby should carefully
consider the following factors in addition to the other information in this
Prospectus. See "Disclosure Regarding Forward-Looking Statements."

INCURRENCE OF SUBSTANTIAL INDEBTEDNESS

At September 30, 1996, on a pro forma basis and giving effect to
application of the net proceeds of the Offerings as set forth herein under "Use
of Proceeds," the Company would have had approximately $113.3 million in total
indebtedness, compared with total actual indebtedness of $15.6 million at such
date. The Company historically has operated at substantially lower levels of
debt than will be outstanding after giving effect to the Offerings. The
Company's level of indebtedness will have several important effects on its
future operations, including, without limitation, (i) a substantial portion of
the Company's cash flow from operations must be dedicated to the payment of
interest and principal on its indebtedness, (ii) the Company's leveraged
position will substantially increase its vulnerability to adverse changes in
general economic and industry conditions, as well as to competitive pressure,
and (iii) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate and other
purposes may be limited. The Company's ability to meet its debt service
obligations and to reduce its total indebtedness will be dependent upon the
Company's future performance, which will be subject to general economic
conditions, industry cycles and financial, business and other factors affecting
the operations of the Company, many of which are beyond its control. There can
be no assurance that the Company's business will continue to generate cash flow
at or above current levels. If the Company is unable to generate sufficient cash
flow from operations in the future to service its debt, it may be required,
among other things, to seek additional financing in the debt or equity markets,
to refinance or restructure all or a portion of its indebtedness, including the
Notes, or to sell selected assets or reduce or delay planned capital
expenditures or acquisitions. There can be no assurance that any such measures
would be sufficient to enable the Company to service its debt or that any such
financing, refinancing or sale of assets would be available on economically
favorable terms.

EFFECTIVE SUBORDINATION

The Notes will be effectively subordinated in right of payment to all
existing and future senior Indebtedness of the Company, which will include any
future draws under the Credit Facility. As of September 30, 1996, after giving
pro forma effect to the Offerings and the application of the net proceeds
therefrom, the Company would have no senior Indebtedness outstanding but would
have up to $70.0 million available under the Credit Facility (comprised of a
$50.0 million working capital line of credit and a $20.0 million acquisition
line of credit) which, if borrowed, would be included as senior Indebtedness.
The Credit Facility is secured by liens on certain assets of the Company.
Accordingly, the lenders under the Credit Facility have claims with respect to
the assets constituting collateral for any indebtedness thereunder that will be
satisfied prior to the unsecured claims of holders of the Notes. See
"Description of Notes -- General." In the event of a default on the Notes or a
bankruptcy, liquidation or reorganization of the Company, such assets will be
available to satisfy obligations with respect to the indebtedness secured
thereby before any payment therefrom could be made on the Notes. Thus, the Notes
and the Subsidiary Guarantees will be effectively subordinated to claims of the
lenders under the Credit Facility to the extent of such pledged collateral. At
September 30, 1996, pro forma for the Pride Acquisition and the Offerings, the
Notes and the Subsidiary Guarantees would not have been subordinated to any
secured Indebtedness (excluding letters of credit) of the Company or the
Subsidiary Guarantors.

PAYMENT UPON A CHANGE OF CONTROL

Upon the occurrence of a Change of Control, each holder of the Notes may
require the Company to repurchase all or a portion of such holder's Notes at
101% of the principal amount of the Notes, together with accrued and unpaid
interest, if any, to the date of repurchase. The Indenture will require that
prior to such a repurchase, the Company must either prepay all outstanding
senior Indebtedness or obtain any required consents to such repurchase. The
occurrence of a Change of Control may result in a default under the Credit

8
<PAGE> 11

Facility. If a Change of Control were to occur, the Company may not have the
financial resources to prepay all of the senior Indebtedness, the Notes and the
other Indebtedness that would become payable upon the occurrence of such Change
of Control or may be prohibited from repurchasing the Notes. See "Description of
Notes -- Repurchase at the Option of Holders -- Change of Control."

RESTRICTIONS IMPOSED BY LENDERS

The Credit Facility and the Indenture will contain a number of covenants
that will restrict the ability of the Company to dispose of assets, merge or
consolidate with another entity, incur additional indebtedness, create liens,
make capital expenditures or other investments or acquisitions and otherwise
restrict corporate activities. The Credit Facility will also contain
requirements that the Company maintain certain financial ratios and may restrict
the Company from prepaying the Company's other indebtedness. The ability of the
Company to comply with such provisions may be affected by events that are beyond
the Company's control. The breach of any of these covenants could result in a
default under the Credit Facility and the Indenture and a subsequent
acceleration of such indebtedness. In addition, as a result of these covenants,
the ability of the Company to respond to changing business and economic
conditions and to secure additional financing, if needed, may be significantly
restricted, and the Company may be prevented from engaging in transactions that
might otherwise be considered beneficial to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Notes -- Certain Covenants."

FRAUDULENT CONVEYANCE

Management of the Company believes that the indebtedness represented by the
Notes and the Subsidiary Guarantees is being incurred for proper purposes and in
good faith, and that, based on present forecasts, asset valuations and other
financial information, after the consummation of the Offerings, the Company will
be solvent, will have sufficient capital for carrying on its business and will
be able to pay its debts as they mature. See, however, "-- Incurrence of
Substantial Indebtedness." Notwithstanding management's belief, if a court of
competent jurisdiction in a suit by an unpaid creditor or a representative of
creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to
find that, at the time of the incurrence of such indebtedness, the Company or
any of the Subsidiary Guarantors was insolvent, was rendered insolvent by reason
of such incurrence, was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, or intended to hinder, delay or defraud its creditors, and that the
indebtedness was incurred for less than reasonably equivalent value, then such
court could, among other things, (i) void all or a portion of the Company's or
the Subsidiary Guarantors' obligations to the holders of the Notes, the effect
of which would be that the holders of the Notes may not be repaid in full,
and/or (ii) subordinate the Company's or the Subsidiary Guarantors' obligations
to the holders of the Notes to other existing and future indebtedness of the
Company to a greater extent than would otherwise be the case, the effect of
which would be to entitle such other creditors to be paid in full before any
payment could be made on the Notes or the Subsidiary Guarantees. See
"Description of Notes -- Subsidiary Guarantees."

DEPENDENCE ON VOLATILE OIL AND GAS INDUSTRY

Demand for the Company's services depends substantially upon the level of
activity in the oil and gas industry, which in turn depends in part on oil and
gas prices, expectations about future prices, the cost of exploring for,
producing and delivering oil and gas, the discovery rate of new oil and gas
reserves in land areas, the level of drilling and workover activity, domestic
and international political, military, regulatory and economic conditions and
the ability of oil and gas companies to raise capital. Prices for oil and gas
historically have been extremely volatile and have reacted to changes in the
supply of and demand for oil and natural gas, domestic and worldwide economic
conditions and political instability in oil producing countries. No assurance
can be given that current levels of oil and gas activities will be maintained or
that demand for the Company's services will reflect the level of such
activities. Prices for oil and natural gas are expected to continue to be
volatile and affect the demand for and pricing of the Company's services. A
material decline in oil or natural gas prices or activities could materially
adversely affect the demand for the Company's services and the

9
<PAGE> 12

Company's results of operations. Industry conditions will continue to be
influenced by numerous factors over which the Company has no control. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Customers."

The volatility of the oil and gas industry and the consequent impact
thereof on exploration activity could adversely impact certain of the Company's
customers. The Company, therefore, could be subject to special credit risks as
to certain of its customers. While the Company endeavors not to take unjustified
credit risks, it is necessary from time to time to extend trade credit to
long-term customers and others where some risks of nonpayment or late payment
could exist.

ACQUISITION RISKS

Most of the net proceeds from the Offerings will be used to fund the Pride
Acquisition. See "Use of Proceeds." The Company is also currently negotiating a
definitive agreement for the Mobley Acquisition and recently completed the
Taylor Acquisition in July 1996. Pursuant to the Pride Acquisition, the Company
will acquire 407 workover rigs, which is more than four times the number of
workover rigs Dawson currently operates. As a result of the Pride Acquisition,
the Company will acquire significant operations in California, a market in which
the Company does not currently operate. Furthermore, Pride has advised the
Company that 89 of the 407 workover rigs to be acquired from Pride were not
operated during the 12 months preceding December 23, 1996, the effective date of
the Purchase Agreement. The Company believes that a majority of these 89 rigs
will be reactivated only if market demand justifies the incremental cost, and
the Company does not expect the remainder of such rigs to be restored to
operating condition. There can be no assurance that the Company will be
successful in reactivating or redeploying rigs acquired from Pride. In addition,
no assurance can be given that the Company will be successful in achieving
consolidation savings or managing and incorporating the businesses and assets
acquired in the Pride Acquisition, the Mobley Acquisition or the Taylor
Acquisition into the Company's existing operations or that such activities will
not require a disproportionate amount of management's attention.

In connection with the Pride Acquisition, the Company will purchase
substantially all of Pride's U.S. land-based well servicing operations (the
"Pride Assets") "as is, where is." The Company has undertaken a limited amount
of investigation of the condition of the Pride Assets, particularly the workover
rigs, in an effort to determine that their condition appears to be sufficient to
sustain the operations previously conducted by Pride with those assets. The
Company has not, however, thoroughly investigated all material items of
equipment due to limitations of time, cost and geographic disbursement.

In connection with the Pride Acquisition, it is expected that the Company
will acquire approximately 14 properties in fee simple and will receive an
assignment or sublease of approximately 14 leased properties. With respect to
all parcels of real estate, Dawson has conducted only limited environmental
studies and investigations. There can be no assurance that Dawson will not
acquire properties that have latent environmental risks and concurrent financial
exposure, which could be significant in amount. Moreover, Pride has not made any
warranties and representations concerning the environmental aspects of any
properties that would survive the closing.

The Company's failure to achieve consolidation savings, to incorporate the
acquired businesses and assets into its existing operations successfully, or to
minimize any unexpected costs or liabilities in the acquired businesses, could
have a material adverse effect on the Company. See "Pride Acquisition."

LIQUIDITY NEEDS; ABILITY TO REPAY NOTES

The Company may from time to time fund a portion of its working capital
needs and capital expenditure requirements from external financing. In addition,
the Company expects that in order to repay the principal amount of the Notes at
maturity or upon acceleration, or to purchase the Notes upon a Change of
Control, it will likely be required to seek additional financing or engage in
asset sales or similar transactions. There can be no assurance that sufficient
funds for any of the foregoing purposes would be available to the Company at the
time they are required on favorable terms. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Notes."

10
<PAGE> 13

SUBSTANTIAL COMPETITION

The Company experiences intense competition in its markets. Such markets
are highly competitive and no one competitor is dominant. Some of the Company's
competitors have greater financial and other resources than the Company. See
"Business -- Competition."

OPERATING RISKS AND INSURANCE

The Company's operations are subject to hazards inherent in the oil and gas
industry, such as blowouts, explosions, craterings, fires and oil spills, that
can cause personal injury or loss of life, damage to or destruction of property,
equipment, the environment and marine life and suspension of operations. In
addition, claims for loss of oil and gas production and damage to formations can
occur in the workover business. Litigation arising from a catastrophic
occurrence at a location where the Company's equipment and services are used may
in the future result in the Company being named as a defendant in lawsuits
asserting potentially large claims.

The Company maintains insurance coverage that it believes to be customary
in the industry against these hazards. However, there can be no assurance that
the Company will be able to maintain adequate insurance in the future at rates
it considers reasonable or that insurance will continue to be available on terms
as favorable as the Company's existing arrangements. In addition, the insurance
is subject to coverage limits and certain policies exclude coverage for damages
resulting from environmental contamination. The occurrence of a significant
event or adverse claim in excess of the insurance coverage limits maintained by
the Company or which is not covered by insurance could have a materially adverse
effect on the Company's financial condition and results of operations. See
"Business -- Operating Risks and Insurance."

RISKS RELATING TO INJECTION WELLS

The Company's injection operations pose certain risks of environmental
liability to the Company. Although the Company monitors the injection process,
any leakage from the subsurface portions of the wells could cause degradation
of fresh groundwater resources, potentially resulting in cancellation of
operations of the well, fines and penalties from governmental agencies,
expenditures for remediation of the affected resource, and liability to third
parties for property damages and personal injuries. In addition, the sale by
the Company of residual crude oil collected as part of the saltwater injection
process could impose liability on the Company in the event the entity to which
the oil was transferred fails to manage the material in accordance with
applicable environmental health and safety laws.

RISK OF ENVIRONMENTAL COSTS AND LIABILITIES

The Company's operations are subject to governmental laws and regulations
governing the management and disposal of waste materials or otherwise relating
to the protection of the environment or of public health and safety. Many of the
Company's operations take place in or near ecologically sensitive areas, such as
the Texas Gulf Coast and Louisiana inland waters. Numerous local, state and
federal environmental laws impose liability for causing pollution in inland and
coastal waters. Local, state and federal legislation also provides special
protection to water quality and animal and marine life that could be affected by
some of the Company's activities. The regulations applicable to the Company's
operations include certain regulations controlling the discharge of hazardous or
toxic materials into the environment, requiring removal or remediation of
pollutants, requiring permits or licenses issued by regulatory agencies and
imposing civil and criminal penalties for violations. Some of the statutory and
regulatory programs that apply to the Company's operations also authorize
private suits, the recovery of natural resource damages by the government,
injunctive relief and cease and desist orders.

Some environmental statutes impose strict liability, rendering a person or
entity liable for environmental damage without regard to negligence or fault on
the part of such person or entity. As a result, the Company could be liable,
under certain circumstances, for environmental damage caused by others or for
acts of the Company that were in compliance with all applicable laws at the time
such acts were performed.

The clear trend in environmental regulation has been to impose more
restrictions and limitations on activities that may impact the environment,
including the generation and disposal of wastes and the use and handling of
chemical substances. These restrictions and limitations have increased operating
costs for both the Company and its customers. Any regulatory changes that impose
additional environmental restrictions or requirements on the Company and its
customers could adversely affect the Company through increased operating costs,
capital expenditures to meet new regulatory requirements and potential decreased
demand for the Company's services.

In this regard, the Resource Conservation and Recovery Act ("RCRA"), the
principal federal statute governing the disposal of solid and hazardous wastes,
includes a statutory exemption that allows oil and gas exploration and
production wastes to be classified as non-hazardous waste. A similar exemption
is contained in many of the state counterparts to RCRA, including the state
statutes in Texas and Louisiana. If oil and gas

11
<PAGE> 14

exploration and production wastes were required to be managed and disposed of as
hazardous waste, either as a result of changes in RCRA or the imposition of more
stringent state regulations, the Company could be required to make significant
unanticipated capital and operating expenditures or to cease or curtail certain
operations. Further, if such wastes were required to be managed and disposed of
as hazardous waste, domestic oil and gas producers, including many of the
Company's customers, could be required to incur substantial obligations with
respect to such waste. Because of the potential impact on the Company's
customers, any regulatory changes that impose additional restrictions or
requirements on the disposal of oil and gas wastes could adversely affect demand
for the Company's services. See "Business -- Environmental Regulation."

DEPENDENCE ON KEY PERSONNEL

The Company believes that its success will depend to a significant extent
upon the continued services of certain key individuals, particularly Michael E.
Little, Chairman of the Board, President and Chief Executive Officer, and Joseph
B. Eustace, Vice President of Operations and Chief Operating Officer. The loss
of the services of either of these individuals could have a material adverse
effect on the Company. See "Management."

DEPENDENCE ON MAJOR CUSTOMERS

During the six months ended September 30, 1996, the Company derived
approximately 23.0% of its revenues (9.5% on a pro forma basis) from its largest
customer. The loss of this customer would have a material adverse effect on the
Company's financial condition and results of operations. See "Business --
Customers."

ABSENCE OF PUBLIC MARKET FOR THE NOTES

The Notes are a new issue of securities that the Company does not intend to
list on any securities exchange. There can be no assurance that an active
trading market will develop for the Notes, or that holders of the Notes will be
able to sell their Notes on acceptable terms. Jefferies & Company, Inc. has
indicated that it intends to make a market in the Notes; however, it is not
obligated to do so, and any such market-making may be discontinued at any time
without notice. If the Notes are traded after their initial issuance, they may
trade at a discount from the initial public offering price depending upon
prevailing interest rates, the market price for similar securities and other
factors.

12
<PAGE> 15

THE COMPANY

The Company is engaged in the business of providing: (i) workover rig
services, including completion of new wells, maintenance and recompletion of
existing wells (including horizontal recompletions) and plugging and abandonment
of wells at the end of their useful lives; (ii) liquid services, including
vacuum truck services, frac tank rental and salt water injection; and (iii)
production services, including well test analysis, pipe testing, slickline
wireline services and fishing and rental tool services. For the six months ended
September 30 1996, the Company derived approximately 46%, 38% and 16% (75%, 20%
and 5% on a pro forma basis) of its revenues from its workover rig services,
liquid services and production services, respectively. The Company's services
are utilized by major oil and gas companies as well as independent producers to
optimize performance of oil and gas wells.

13
<PAGE> 16

series of strategic acquisitions of businesses and assets. The majority of this
growth has occurred since 1992. The Company formed Dawson WellTech, L.C. (the
"LLC") in 1992 as a majority owned and operated subsidiary of the Company, which
in November 1994 acquired substantially all of the assets of Well Solutions,
Inc. for approximately $17.5 million (the "Well Solutions Acquisition"). In
1995, the Company acquired the remaining interest in the LLC. See "Certain
Relationships and Related Transactions."

In July 1996, the Company acquired 70 vacuum trucks, 314 frac tanks and 11
salt water injection wells for approximately $12.8 million pursuant to the
purchase of all of the issued and outstanding stock of Taylor Companies, Inc.
(the "Taylor Acquisition"). During 1996, the Company also acquired 18 additional
vacuum trucks, six workover rigs and one production testing unit.

In March 1996, the Company completed an initial public offering (the "IPO")
of 2,616,250 shares of Common Stock at $10.00 per share, with net proceeds to
the Company of approximately $23.5 million. Simultaneously with the IPO, the
Common Stock began trading on the Nasdaq National Market under the symbol
"DPSI."

As of January 7, 1997, the Company had two pending acquisitions. The
Company has entered into a purchase agreement to acquire Pride's U.S. land-based
well servicing operations, which includes 407 workover rigs, 10 vacuum trucks
and ancillary equipment, for approximately $135.9 million. The Company also has
entered into a letter of intent with Mobley Environmental Services, Inc. to
acquire its liquid services business for $5.5 million.

The Company's principal executive office is located at 901 N.E. Loop 410,
Suite 700, San Antonio, Texas 78209, and its telephone number is (210) 828-1838.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical information provided herein are forward-looking and may contain
information about financial results, economic conditions, trends and known
uncertainties. The Company cautions the reader that actual results could differ
materially from those expected by the Company, depending on the outcome of
certain factors, including, without limitation, (i) factors discussed under
"Risk Factors" such as fluctuations in the prices of oil and natural gas,
competition, operating risks, acquisition risks, liquidity and capital
requirements and the effects of governmental and environmental regulation, (ii)
adverse changes in the operations acquired in the Pride Acquisition and (iii)
adverse changes in the market for the Company's services. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to release
publicly the result of any revisions to these forward-looking statements which
may be made to reflect events or circumstances after the date hereof, including,
without limitation, changes in the Company's business strategy or planned
capital expenditures, or to reflect the occurrence of unanticipated events.

EQUITY OFFERING

Concurrently with the Debt Offering, the Company and the Selling
Shareholders are offering 4,000,000 shares and shares, respectively, of
Common Stock to the public. In addition, in the Equity Offering the Company has
granted the underwriters an option to purchase up to additional shares of
Common Stock to cover over-allotments. The consummation of the Debt Offering and
the Equity Offering are each conditioned upon the simultaneous closing of the
other and upon the simultaneous closing of the Pride Acquisition.

14
<PAGE> 17

USE OF PROCEEDS

The net proceeds to the Company from the issuance and sale of the Notes
offered hereby, after deducting the underwriting discount and expenses of the
Debt Offering, are estimated to be approximately $106.0 million. The net
proceeds to the Company from the sale of the shares of Common Stock offered by
the Company pursuant to the Equity Offering are estimated to be approximately
$55.2 million (approximately $ million if the underwriters' over-allotment
option in connection with the Equity Offering is exercised in full), assuming an
offering price of $14.75 per share and after deducting the underwriting discount
and expenses of the Equity Offering payable by the Company.

The following table illustrates the sources and uses of the gross proceeds
to the Company, as estimated by the Company's management, in connection with the
Offerings (dollars in millions):

<TABLE>
<S> <C>
SOURCES
- --------------------------------------------
Notes (Debt Offering)............... $110.0
Common Stock (Equity Offering)...... 59.0
------
Total Sources............. $169.0
======
USES
- --------------------------------------------
Pride Acquisition -- Purchase
Price(1).......................... $135.9
Prepayment of Existing Debt(2)...... 12.3
Fees and Expenses................... 9.3
Working Capital..................... 11.5
------
Total Uses................ $169.0
======
</TABLE>

- ---------------

(1) The Pride Acquisition purchase price is subject to certain adjustments.

(2) Consists of a balance as of September 30, 1996 of approximately $7.0 million
on the loan incurred as a result of the Taylor Acquisition, $3.2 million of
capitalized lease obligations and $2.1 million of other indebtedness. The
$7.0 million loan bears interest at a rate of 7.53% and matures on January
27, 1997. The capitalized lease obligations bear interest at rates ranging
from 5% to 9% and are due in monthly installments of approximately $136,000.
The other indebtedness consists of approximately $2.0 million of term notes
that were assumed in connection with the Taylor Acquisition, bear interest
at rates ranging from 6% to 10% and have maturity dates ranging from one to
five years after July 29, 1996, the date of assumption.

Pending application of the net proceeds of the Offerings, the Company will
invest such net proceeds in short-term, interest-bearing, investment grade
securities.

15
<PAGE> 18

CAPITALIZATION

The following table sets forth the current debt and capitalization of the
Company at September 30, 1996, and as adjusted to give effect to the Offerings
and the application of the net proceeds therefrom as set forth under "Use of
Proceeds." This table should be read in conjunction with the financial
statements and the notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt...................................... $ 9,247 $ 500
Current portion of obligations under capital leases.................... 1,708 --
------- -------
Total current debt........................................... $10,955 $ 500
======= =======
Long-term debt, net of current portion:
Notes payable........................................................ $ 380 $ --
Senior Notes due 2007................................................ -- 110,000
Subordinated notes................................................... 2,750 2,750
------- -------
Total notes, net of current portion.......................... 3,130 112,750
Obligations under capital leases, net of current portion............. 1,478 --
------- -------
Total long-term debt, net of current portion................. 4,608 112,750
Shareholders' equity:
Preferred stock, no par value, 560,600 shares authorized, none issued
and outstanding................................................... -- --
Common stock, $.01 par value, 20,560,600 shares authorized, 6,391,126
shares issued and outstanding, 10,391,126 shares issued and
outstanding as adjusted(1)........................................ 64 104
Paid-in capital...................................................... 41,522 96,642
Retained earnings.................................................... 6,489 6,489
Notes receivable from officers....................................... (142) (142)
------- -------
Total shareholders' equity................................... 47,933 103,093
------- -------
Total capitalization......................................... $52,541 $ 215,843
======= =======
</TABLE>

- ---------------

(1) Excludes 557,250 outstanding stock options, exercisable at various prices
ranging from $4.65 to $12.25 per share (with a weighted average price of
$9.17 per share), of which 172,079 were exercisable.

16
<PAGE> 19

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The table below sets forth the unaudited pro forma condensed consolidated
financial statements of the Company. With respect to statements of income data,
the adjustments give effect to (i) the Pride Acquisition, (ii) the Taylor
Acquisition and (iii) the Offerings, as if each had occurred at the beginning of
the periods presented. With respect to balance sheet data, the adjustments give
effect to (i) the Pride Acquisition and (ii) the Offerings, as if they had been
completed as of the date presented. The unaudited pro forma financial statements
may not be indicative of the results that actually would have occurred if the
transactions described above had been in effect during the periods indicated or
which may be obtained in the future. The unaudited financial statements should
be read in conjunction with the audited financial statements and related notes
of the Company, Taylor and Pride contained elsewhere herein.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
PRIDE PRO FORMA
DAWSON TAYLOR ACQUISITION COMBINED
SIX MONTHS ACQUISITION SIX MONTHS SIX MONTHS
ENDED APRIL 1 - ENDED ENDED
SEPTEMBER 30, JULY 29, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1996 ADJUSTMENTS 1996
------------- ----------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues...................................... $33,811 $ 6,988 $59,430 $ -- $ 100,229
Operating costs............................... 21,893 5,272 45,929 (1,100)A 71,994
General and administrative expenses........... 5,339 979 7,468 (436)B 13,350
Depreciation and amortization................. 2,876 384 2,659 3,743 C 9,662
------- ------ ------- ------- -------
Operating income.............................. 3,703 353 3,374 (2,207) 5,223
Interest expense.............................. 296 194 986 4,429 D 5,905
Other (income) expense........................ (122) 218 (167) -- (71)
------- ------ ------- ------- -------
Income (loss) before income taxes............. 3,529 (59) 2,555 (6,636) (611)
Provision for income taxes.................... 1,354 65 1,007 (2,665)E (239)
------- ------ ------- ------- -------
Net income (loss)............................. $ 2,175 $ (124) $ 1,548 $(3,971) $ (372)
======= ====== ======= ======= =======
Primary earnings (loss) per share............. $ .33 $ (.04)
Fully diluted earnings (loss) per share....... $ .33 $ (.04)
Average shares outstanding -- primary......... 6,510,428 3,880,556 F 10,390,984
Average shares outstanding -- fully diluted... 6,527,796 3,863,188 F 10,390,984
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
--------------------------------------------------------------------
DAWSON TAYLOR PRIDE PRO FORMA
HISTORICAL ACQUISITION ACQUISITION ADJUSTMENTS COMBINED
---------- ----------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues............................................ $ 52,391 $16,713 $ 113,115 $ -- $182,219
Operating costs..................................... 34,320 12,755 86,177 (2,200)A 131,052
General and administrative expenses................. 8,937 2,290 14,504 (1,055)B 24,676
Depreciation and amortization....................... 4,396 1,607 5,385 7,756 C 19,144
------- ------- -------- -------- --------
Operating income.................................... 4,738 61 7,049 (4,501) 7,347
Interest expense.................................... 1,848 461 821 8,680 D 11,810
Other (income) expense.............................. (129) (101) (1,260) -- (1,490)
Minority interest................................... 937 -- -- -- 937
------- ------- -------- -------- --------
Income (loss) before income taxes and extraordinary
item.............................................. 2,082 (299) 7,488 (13,181) (3,910)
Provision for income taxes.......................... 709 (158) 2,873 (4,949)E (1,525)
------- ------- -------- -------- --------
Income (loss) before extraordinary item............. 1,373 (141) 4,615 (8,232) (2,385)
Extraordinary item.................................. (514) -- -- -- (514)
------- ------- -------- -------- --------
Net income (loss)................................... 859 (141) 4,615 (8,232) (2,899)
Preferred stock dividends........................... (88) -- -- -- (88)
------- ------- -------- -------- --------
Net income (loss) applicable to common stock........ $ 771 $ (141) $ 4,615 $ (8,232) $ (2,987)
======= ======= ======== ======== ========
Primary earnings (loss) per share................... $ .27 $ (.43)
Fully diluted earnings (loss) per share............. $ .27 $ (.43)
Average shares outstanding -- primary............... 2,931,234 3,951,662 F 6,882,896
Average shares outstanding-- fully diluted.......... 3,207,622 3,675,274 F 6,882,896
</TABLE>

17
<PAGE> 20

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-------------------------------------------------------
PRIDE PRO FORMA PRO
HISTORICAL ACQUISITION ADJUSTMENTS FORMA
---------- ----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 9,364 $ 1,638 $ 9,858 G $ 20,860
Trade and other receivables...................................... 14,260 19,247 (19,247)G 14,260
Prepaid expenses and other....................................... 883 6,368 (6,368)G 883
Net property and equipment....................................... 39,209 43,041 63,609 G,H 145,859
Goodwill and other assets........................................ 10,376 2,006 32,694 G,H 45,076
------- ------- -------- --------
Total assets............................................. $ 74,092 $72,300 $ 80,546 $226,938
======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities.............................................. $ 18,306 $18,351 $ (28,806)I $ 7,851
Long-term debt, net of current portion........................... 3,130 36,885 72,735 G,I 112,750
Obligations under capital leases, net of current portion......... 1,479 2,066 (3,545)G,I --
Deferred income taxes............................................ 3,244 11,384 (11,384)G 3,244
Shareholders' equity............................................. 47,933 3,614 51,546 F 103,093
------- ------- -------- --------
Total liabilities and shareholders' equity............... $ 74,092 $72,300 $ 80,546 $226,938
======= ======= ======== ========
</TABLE>

- ---------------

NOTES TO PRO FORMA FINANCIAL STATEMENTS:

(A) To record the elimination of approximately $2.2 million of Pride's operating
lease expenses ($1.1 million for the six month period).

(B) To reflect the elimination of certain general corporate cost allocations
that will not be assumed by the Company in connection with the Pride
Acquisition.

(C) To reflect the additional depreciation of property and equipment and
amortization of goodwill (goodwill using a 25-year life) resulting from the
Taylor Acquisition and the Pride Acquisition and a covenant not to compete
(using a five-year life) from the Pride Acquisition, as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30,
1996 1996
---------- -------------
<S> <C> <C>
Pride Acquisition.......................... $6,747 $ 3,407
Taylor Acquisition......................... 1,009 336
------ ------
Total............................ $7,756 $ 3,743
====== ======
</TABLE>

(D) To adjust interest expense to reflect the issuance of $110.0 million of
Notes at an assumed interest rate of 10.5% per annum, adjusted for the
retirement of existing bank debt and capital leases.

(E) To record the tax effect of pro forma adjustments based on the effective
tax rate of the Company.

(F) To record the issuance of 4,000,000 shares to be issued in the Equity
Offering, adjusted for the elimination of certain antidilutive common stock
equivalents.

(G) To record the Pride Acquisition for $135.9 million, such amount to be
financed using a portion of the proceeds to the Company from the Offerings.

(H) To record Pride's property and equipment at estimated fair market value
($106.7 million), covenant not to compete ($5.0 million) and goodwill and
other assets ($29.7 million) at the date of acquisition.

(I) To reflect the retirement of the Company's existing debt and capital leases
totaling approximately $12.3 million.

18
<PAGE> 21

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the
Company for the periods indicated. The selected consolidated financial data for
all fiscal years presented have been derived from the audited consolidated
financial statements of the Company. The selected consolidated financial data
for the Company for the six months ended September 30, 1995 and 1996 have been
derived from the unaudited consolidated financial statements of the Company for
such periods, which, in the opinion of management, include all adjustments,
consisting of only normal recurring adjustments, necessary to state fairly the
data included therein in accordance with generally accepted accounting
principles for such periods. Interim results are not necessarily indicative of
financial results of the Company for the full fiscal year. The selected
financial data should be read in conjunction with, and is qualified in its
entirety by, the consolidated financial statements of the Company and related
notes and other financial information included elsewhere in this Prospectus and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
AT OR FOR SIX
MONTHS ENDED
AT OR FOR YEARS ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................................. $15,784 $20,822 $27,942 $36,005 $52,391 $25,888 $33,811
Costs and expenses:
Operating........................................... 11,440 14,772 19,937 24,241 34,320 16,875 21,893
General and administrative.......................... 2,443 3,040 3,854 5,574 8,937 4,238 5,339
Depreciation and amortization....................... 1,062 1,374 1,707 2,608 4,396 2,016 2,876
-------- -------- -------- -------- -------- -------- --------
Operating income...................................... 839 1,636 2,444 3,582 4,738 2,759 3,703
Interest expense...................................... 352 301 282 789 1,848 953 296
Other (income) expense................................ (8) 84 (61) (41) (129) (27) (122)
Minority interest..................................... -- 358 902 1,092 937 787 --
-------- -------- -------- -------- -------- -------- --------
Income before income taxes and extraordinary item..... 495 893 1,321 1,742 2,082 1,046 3,529
Provision for income taxes............................ 236 320 525 681 709 398 1,354
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary item...................... 259 573 796 1,061 1,373 648 2,175
Extraordinary item(1)................................. 38 -- (92) -- (514) -- --
-------- -------- -------- -------- -------- -------- --------
Net income............................................ 297 573 704 1,061 859 648 2,175
Preferred stock dividends............................. 101 101 101 101 88 50 --
-------- -------- -------- -------- -------- -------- --------
Net income applicable to common stock................. $ 196 $ 472 $ 603 $ 960 $ 771 $ 598 $ 2,175
========= ========= ========= ========= ========= ========= =========
Primary earnings per share............................ $ .11 $ .23 $ .29 $ .45 $ .27 $ .25 $ .33
Fully diluted earnings per share...................... $ .11 $ .23 $ .29 $ .42 $ .27 $ .23 $ .33
Average number of shares outstanding -- primary....... 1,768,613 2,020,664 2,052,168 2,155,380 2,931,234 2,384,359 6,510,428
Average number of shares outstanding -- fully
diluted............................................. 1,768,613 2,020,664 2,450,791 2,648,740 3,207,622 3,095,826 6,527,796
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 400 $ 1,139 $ 2,172 $ 2,797 $13,863 $ 9,364
Net property and equipment............................ 6,261 8,625 8,978 25,321 29,115 39,209
Total assets.......................................... 11,685 15,828 16,714 40,525 56,368 74,092
Long-term debt and other obligations, net of current
portion............................................. 1,938 1,722 1,623 15,989 3,695 4,609
Total shareholders' equity............................ 5,487 6,009 6,720 10,098 45,694 47,933
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(2)................. 2.3x 3.6x 5.0x 3.1x 2.1x 2.1x 10.9x
EBITDA(3)............................................. $ 1,901 $ 3,010 $ 4,151 $ 6,190 $ 9,134 $ 4,775 $ 6,579
EBITDA interest coverage(4)........................... 5.4x 10.0x 14.7x 7.9x 4.9x 5.0x 22.2x
Long-term debt/EBITDA(5).............................. 1.0x 0.6x 0.4x 2.6x 0.4x
</TABLE>

- ---------------

(1) Includes a $92,000 charge in fiscal 1994 to reflect the cumulative effect of
change in accounting principle.

(2) For purposes of computing the ratio of earnings to fixed charges, earnings
are computed as income before income taxes, extraordinary item and
cumulative effect of a change in accounting principle, plus fixed charges.
Fixed charges consist of interest, whether expensed or capitalized,
amortization of debt issuance costs and an estimated portion of rentals
representing interest costs.

(3) EBITDA is defined as earnings before interest expense, taxes, depreciation
and amortization, minority interest and other (income) expense and is
presented because it is a widely accepted financial indication of a
company's ability to incur and service debt. EBITDA should not be considered
as an alternative to earnings as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.

(4) Represents the ratio of EBITDA to interest expense for the period presented.

(5) Represents the ratio of total long-term debt and other obligations, net of
current portion, to EBITDA for period presented.

19
<PAGE> 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical information provided herein are
forward-looking and may contain information about financial results, economic
conditions, trends and known uncertainties. The Company cautions the reader that
actual results could differ materially from those expected by the Company,
depending on the outcome of certain factors, including, without limitation, (i)
factors discussed under "Risk Factors" such as fluctuations in the prices of oil
and natural gas, competition, operating risks, acquisition risks, liquidity and
capital requirements and the effects of governmental and environmental
regulation, (ii) adverse changes in the operations acquired in the Pride
Acquisition and (iii) adverse changes in the market for the Company's services.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to release publicly the result of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof, including, without limitation, changes in the Company's
business strategy or planned capital expenditures, or to reflect the occurrence
of unanticipated events.

GENERAL

The Company's operations and future results will be significantly impacted
by the Pride Acquisition. As a result of the Pride Acquisition, the Company will
increase its workover rig fleet to over five times its current size to become
the second largest provider of workover rigs in the United States. In addition,
the Company will acquire significant operations in California, a market in which
it does not currently operate. The Company also will seek to expand its liquid
and production services into Pride's current land-based well servicing areas.
Other than the Pride Acquisition and the Mobley Acquisition, the Company does
not have any current understanding, arrangement or agreement to acquire other
businesses or assets. There can be no assurance that attractive acquisitions
will be available to the Company at prices it believes to be reasonable or that
any acquisition achieved will ultimately prove to be a successful undertaking by
the Company.

The Company will experience substantial revenue growth as a result of the
Pride Acquisition and, to a lesser extent, the Taylor Acquisition. On a pro
forma basis for the year ended March 31, 1996 and for the six months ended
September 30, 1996, the Company would have generated operating revenues of
approximately $182.2 million and $100.2 million, respectively, as compared to
historical operating revenues for the Company of $52.4 million and $33.8
million, respectively.

The Company derives its revenues from workover rig services, liquid
services and production services. Workover rig services are billed at hourly
rates that are generally determined by the type of equipment required, market
conditions in the region in which the rig operates, the ancillary equipment
provided on the rig and the necessary personnel. The Company charges its
customers for liquid services either on an hourly basis or on a per barrel basis
depending on the services offered, while production services are primarily
billed on an hourly basis. The base rates for the Company's services have
generally been stable over the past three years.

The Company's operating costs are comprised primarily of labor and
maintenance costs. Labor costs generally are variable and are incurred only
while a workover rig is operating or liquid services or production services are
being provided; however, the Company employs rig personnel to perform
maintenance and other services who are paid even when rigs are not operating.
The Company's administrative staff at the yard level and in the corporate office
are accounted for as general and administrative expense. Insurance costs
generally are fixed costs and relate to the number of active rigs, trucks and
other equipment in the Company's fleet. The Company's workers' compensation
insurance costs have declined over the past two years due to its favorable
safety record.

20
<PAGE> 23

RESULTS OF OPERATIONS

Six Months Ended September 30, 1996 Compared to Six Months Ended September 30,
1995

Revenues. Revenues were $33.8 million for the six months ended September
30, 1996, a 31% increase compared with revenues of $25.9 million for the six
months ended September 30, 1995. Compared to the same period in 1995, revenues
for the six months ended September 30, 1996 increased by 13%, 81% and 8% in the
workover, liquid and production services lines of business, respectively. The
increase in revenues was attributable primarily to the Taylor Acquisition in
July 1996, the addition of 11 vacuum trucks in March 1996, the acquisition of
six workover rigs in May 1996 and a general increase in demand in the workover,
liquid services and production services lines of business.

Operating Costs. Operating costs for the six months ended September 30,
1996 were $21.9 million, an increase of 30% from $16.9 million for the six
months ended September 30, 1995, which was proportional to the increase in
revenues for the same period and due to the same factors which affected
revenues. Operating costs as a percentage of revenues were 65% for each of the
six month periods ended September 30, 1996 and 1995.

General and Administrative Expenses. General and administrative expenses
for the six months ended September 30, 1996 were $5.3 million, an increase of
26% from $4.2 million for the six months ended September 30, 1995. This increase
was due primarily to the higher general and administrative expenses associated
with the addition of four new yard locations in connection with the Taylor
Acquisition. As a percentage of revenues, general and administrative expenses
remained constant at 16% for each of the six month periods ended September 30,
1996 and 1995.

Depreciation and Amortization. Depreciation and amortization expense for
the six months ended September 30, 1996 was $2.9 million, an increase of 43%
from $2.0 million for the six months ended September 30, 1995. The increase was
due to the additional depreciation on equipment and amortization of goodwill
related to the Taylor Acquisition, the purchase of 11 vacuum trucks in May 1996,
the acquisition of six workover rigs in May 1996, and depreciation related to
normal and ongoing purchases of additional and replacement equipment.

Interest Expense. Interest expense for the six months ended September 30,
1996 was $0.3 million compared with $1.0 million for the corresponding period in
1995. The decrease of $0.7 million was attributable to the retirement of debt
with a portion of the proceeds from the IPO in March 1996.

Minority Interest. The elimination of the minority interest expense in the
six month period ended September 30, 1996 was due to the acquisition of
WellTech, Inc.'s 39% minority interest (the "Minority Interest Acquisition") in
the LLC in November 1995.

Year Ended March 31, 1996 Compared to the Year Ended March 31, 1995

Revenues. Revenues for the year ended March 31, 1996 were $52.4 million, an
increase of 46% from $36.0 million for the year ended March 31, 1995. This
increase was due primarily to the Well Solutions Acquisition in November 1995.
Revenues from workover rig services were slightly higher for the year ended
March 31, 1996 compared to the prior year due to increased demand for horizontal
recompletion services and the introduction of a second barge-mounted workover
rig in August 1995.

Operating Costs. Operating costs for the year ended March 31, 1996 were
$34.3 million, an increase of 42% from $24.2 million for the year ended March
31, 1995. This increase was due primarily to the Well Solutions Acquisition.
Operating costs as a percentage of revenues decreased to 65% for the year ended
March 31, 1996 compared to 67% for the prior year, which reflects the higher
margin characteristics of the liquid services and production services businesses
acquired in the Well Solutions Acquisition compared to the Company's workover
rig services business.

General and Administrative Expenses. General and administrative expenses
for the year ended March 31, 1996 were $8.9 million, an increase of 60% from
$5.6 million for the year ended March 31, 1995. This increase was due primarily
to the higher general and administrative expenses associated with the Well
Solutions

21
<PAGE> 24

Acquisition, which significantly increased the Company's fixed cost base with
the addition of seven new yard locations. As a percentage of revenues, general
and administrative expenses increased to 17% for the year ended March 31, 1996,
compared to 15% for the prior year. In fiscal year 1996, the Company granted
bonuses of $336,000 in connection with exercises of non-statutory stock options
by certain of the Company's current and former officers, directors and employees
with regard to federal tax liability they incurred related to such exercises.
The Company does not anticipate granting bonuses for such purposes in the
future.

Depreciation and Amortization. Depreciation and amortization expense for
the year ended March 31, 1996 was $4.4 million, an increase of 69% from $2.6
million for the year ended March 31, 1995. This increase was due to a
substantial increase in the Company's asset base resulting from the Well
Solutions Acquisition.

Interest Expense. Interest expense for the year ended March 31, 1996 was
$1.8 million compared to $0.8 million for the year ended March 31, 1995, due to
the incurrence, in connection with the Well Solutions Acquisition, of $13.0
million of debt with a 10.8% interest rate. The approximately $11.4 million of
debt remaining in March 1996 relating to the Well Solutions Acquisition was
prepaid with a portion of the proceeds from the IPO.

Minority Interest. Minority interest for the year ended March 31, 1996 was
$0.9 million, a decrease of 12% from $1.1 million for the year ended March 31,
1995. This decrease was a result of the Minority Interest Acquisition in
November 1995.

Extraordinary Item. As a result of the prepayment of approximately $11.4
million of debt related to the Well Solutions Acquisition, the Company recorded
an extraordinary expense for the year ended March 31, 1996 amounting to
approximately $0.5 million (net of taxes). This amount represents prepayment
penalties, reimbursement to the lender for its costs and expenses resulting from
the prepayment and the write-off of fees incurred at loan origination (net of
taxes).

Year Ended March 31, 1995 Compared to the Year Ended March 31, 1994

Revenues. Revenues for the year ended March 31, 1995 were $36.0 million, an
increase of 29% from $27.9 million for the year ended March 31, 1994. This
increase was due primarily to the inclusion following the Well Solutions
Acquisition of the results of operations of Well Solutions, Inc. for four months
of the year ended March 31, 1995. Revenues from workover rig services were
slightly higher for the year ended March 31, 1995 compared to the prior year due
to an increase in billable hours resulting from improved demand for horizontal
recompletion services and the introduction of the Company's first barge-mounted
workover rig.

Operating Costs. Operating costs for the year ended March 31, 1995 were
$24.2 million, an increase of 22% from $19.9 million for the year ended March
31, 1994. This increase was due primarily to the Well Solutions Acquisition.
Operating costs as a percentage of revenues decreased to 67% for the year ended
March 31, 1995 compared to 71% for the prior year, which reflects the higher
margin characteristics of the liquid services and production services businesses
acquired in the Well Solutions Acquisition compared to the Company's workover
rig services business.

General and Administrative Expenses. General and administrative expenses
for the year ended March 31, 1995 were $5.6 million, an increase of 44% from
$3.9 million for the year ended March 31, 1994. This increase was due primarily
to the higher general and administrative expenses associated with the liquid
services and production services businesses acquired in November 1994. As a
percentage of revenues, general and administrative expenses increased to 16% for
the year ended March 31, 1995, compared to 14% for the prior year.

Depreciation and Amortization. Depreciation and amortization expense for
the year ended March 31, 1995 was $2.6 million, an increase of 53% from $1.7
million for the year ended March 31, 1994. This increase was due to a
substantial increase in the Company's asset base resulting from the Well
Solutions Acquisition.

Interest Expense. Interest expense for the year ended March 31, 1995 was
$0.8 million compared to $0.3 million for the year ended March 31, 1994, due to
the incurrence, in connection with the Well Solutions Acquisition, of $13.0
million of debt with a 10.8% interest rate in the year ended March 31, 1995.

22
<PAGE> 25

Minority Interest. Minority interest for the year ended March 31, 1995 was
$1.1 million, an increase of 22% from $0.9 million for the year ended March 31,
1994. This increase was due to higher pretax income of the LLC resulting from
the Well Solutions Acquisition.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of approximately $9.4 million at
September 30, 1996 compared to approximately $13.9 million at March 31, 1996.
Working capital was approximately $6.2 million and approximately $16.8 million
at September 30, 1996 and March 31, 1996, respectively. The Company used a net
amount of approximately $15.1 million for investing activities in the six months
ended September 30, 1996, primarily for the Taylor Acquisition and for other
capital expenditures of approximately $2.2 million. The Company anticipates that
capital expenditures (excluding acquisitions) for the second six months of the
fiscal year ending March 31, 1997 will be approximately $6.0 to $7.0 million for
improvements to its equipment and for capital additions. Acquisitions of
additional assets and businesses are expected to continue to be an important
part of the Company's strategy. Under the Company's September 1996 $7.0 million
loan commitment discussed below, however, the Company will not be permitted to
spend more than $7.0 million annually on capital expenditures without obtaining
a waiver from its lender. Under certain circumstances, the Company would need to
obtain additional financing to fund such acquisitions.

On November 1, 1996, the Company signed a letter of intent with respect to
the Mobley Acquisition. The Company expects to fund the $5.5 million acquisition
price from existing cash balances and a $500,000 promissory note. There can be
no assurance that this transaction will be consummated.

The Company has available a revolving line of credit (the "Revolver"),
which matures on January 28, 1997, with the Frost National Bank (the "Bank") to
finance temporary working capital requirements and to support the issuance of
letters of credit. The maximum availability under the Revolver is the lesser of
(i) $4.0 million or (ii) a calculated amount based on a percentage of accounts
receivable meeting certain criteria. The Revolver is secured by a first lien
security interest on the Company's accounts receivable. Borrowings against the
Revolver bear interest at 1/2 of 1% above the Bank's prime lending rate (an
interest rate to the Company of 8.25% as of December 31, 1996). At December 31,
1996, the maximum availability under the Revolver was $4.0 million, none of
which was drawn in cash and $0.4 million of which was being utilized to support
the issuance of letters of credit related to the Company's workers' compensation
coverage.

The Company received a commitment on September 13, 1996 from the Bank to
replace the Revolver with a working capital line of credit (the "Working Line")
and an acquisition line of credit (the "Acquisition Line" and, together with the
Working Line, the "Credit Facility"). The maximum availability under the Working
Line would be the lesser of (i) $10.0 million or (ii) 80% of eligible accounts
receivable that have been outstanding less than 90 days. The Working Line would
be secured by a first lien security interest on all the Company's accounts
receivable and inventory. Borrowings under the Working Line would mature two
years from the date of any such borrowings and would bear interest at the lesser
of (i) the Bank's prime rate of interest or (ii) a varying percentage rate
ranging from 1.75% to 2.75%, based on the total funded debt to cash flow ratio,
over the Company's choice of the 30, 90 or 180-day LIBOR rate of interest. Under
the Acquisition Line, up to $20.0 million would be available solely to fund up
to 100% of the purchase price of acquisitions by the Company, to be secured by
assets of the Company with a value not to exceed 70% of the loan amount.
Borrowings under the Acquisition Line would mature seven years from the date of
any such borrowings and would bear interest at the lesser of (i) the Bank's
prime rate of interest or (ii) a varying percentage rate ranging from 2% to 3%,
based on the total funded debt to cash flow ratio, over the 180-day LIBOR rate
of interest. Under the terms of the commitment, the Company must maintain
minimum working capital, tangible net worth, current ratios and debt to capital
ratios.

The Company has requested from the Bank a modification to its commitment to
increase the maximum availability of funds under the Working Line to the lesser
of (i) $50.0 million or (ii) 80% of eligible accounts receivable that have been
outstanding less than 90 days. Based on discussions with the Bank to date,
management expects to receive a commitment from the Bank to such increase.

23
<PAGE> 26

In July 1996, to finance a portion of the Taylor Acquisition, the Company
obtained a loan from a bank in the amount of $7.0 million. The promissory note
carries an annual interest rate of 7.53% and has a maturity date of January 25,
1997. In September 1996, the Company obtained a take-out commitment for a term
loan in the amount of $7.0 million to replace the promissory note. The Company,
however, intends to prepay the loan with a portion of the proceeds from the
Offerings and thus has decided to not take advantage of the take-out commitment.

Also in connection with the Taylor Acquisition, the Company assumed $0.6
million of bank debt owed by the principal Taylor stockholder, and guaranteed
payment of additional bank indebtedness of approximately $1.5 million owed by
Taylor. The Company intends to prepay both of these obligations with a portion
of the proceeds of the Offerings.

The Company had approximately $3.2 million of capitalized lease obligations
outstanding as of September 30, 1996, bearing interest at rates ranging from 5%
to 9% and due in monthly installments of approximately $136,000. The Company
intends to prepay these capitalized lease obligations in full with a portion of
the proceeds of the Offerings.

In March 1996, the Company sold 2,616,250 shares of Common Stock at $10 per
share in the IPO, which yielded net proceeds of approximately $23.5 million. The
Company used approximately $11.4 million of the net proceeds from the IPO to
prepay indebtedness outstanding from the Well Solutions Acquisition and
approximately $0.5 million (net of taxes) to pay prepayment penalties and
reimburse the lender for its costs and expenses resulting from the prepayment.
The remainder of the proceeds were used for acquisitions and working capital.

In preparation for the IPO, effective February 19, 1996, 60,600 outstanding
shares of the Company's Series A 10% Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock") were converted into 260,580 shares of Common Stock.
Also in February 1996, approximately $2.5 million of convertible debt was
converted into 356,900 shares of Common Stock. The remaining $1.5 million of
convertible debt, represented by the debenture held by Well Solutions, bears
interest at 8%, matures on November 30, 1999, is prepayable without penalty at
any time, and may be converted at any time, at the option of the holder, into
37,634 shares of Common Stock, subject to adjustment to prevent dilution. The
Company does not currently intend to prepay the debenture but may decide to do
so in the future if interest rates decline.

The Company generated cash from operating activities of approximately $6.6
million during the year ended March 31, 1996. The Company's principal uses of
cash during the year ended March 31, 1996 were to prepay the indebtedness from
the Well Solutions Acquisition and to fund approximately $4.5 million of capital
expenditures for upgrading and purchasing equipment.

The Company believes that the combination of internally generated cash
flow, the net proceeds from the Offerings and availability under the Credit
Facility should provide the Company with sufficient financing to fund the
Company's operations for at least the next 12 months. There can be no assurance,
however, that the Company will not need additional financing or that such
financing will be available on economically acceptable terms.

INFLATION AND SEASONALITY

Inflation has not had a significant impact on the Company's operations to
date and the Company's operating revenues have not historically been subject to
significant seasonal changes.

NEW ACCOUNTING PRONOUNCEMENTS -- ACCOUNTING FOR ASSET IMPAIRMENT; ACCOUNTING FOR
STOCK-BASED COMPENSATION

During March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of "
("FAS 121"). The Company adopted FAS 121 effective April 1, 1996. FAS 121
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying

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<PAGE> 27

amount of an asset may not be recoverable. Adoption of this pronouncement had no
material effect on the financial statements.

In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). FAS 123 defines
a fair value based method of accounting for employee stock options or similar
equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. Under the fair
value based method, compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period of the award, which
is usually the vesting period. However, FAS 123 also allows entities to continue
to measure compensation costs for employee stock compensation plans using the
intrinsic value method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Entities electing to
remain with the accounting prescribed by APB 25 must make pro forma disclosures
of net income and earnings per share as if the fair value based method
recommended by FAS 123 had been applied. The accounting requirements of FAS 123
are effective for transactions entered into in years that begin after December
15, 1995, though they may be adopted on issuance. The disclosure requirements of
FAS 123 are effective for financial statements for years beginning after
December 15, 1995. The Company intends to continue measuring compensation costs
using APB 25 and to provide pro forma disclosures of net income and earnings per
share as if the fair value based method of accounting under FAS 123 had been
applied beginning with its financial statements for the year ending March 31,
1997.

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<PAGE> 28

BUSINESS

GENERAL

Dawson Production Services, Inc. is a leading provider of a broad range of
workover, liquid and production services used in the production of oil and gas.
The Company's services are utilized by major oil and gas companies as well as
independent producers to optimize performance of oil and gas wells. The Company
recently entered into an agreement to acquire the U.S. land-based well servicing
operations of Pride in a transaction that will position Dawson as the second
largest provider of workover rigs in the United States.

The Company commenced operations in 1951. In 1982, the current management
team joined the Company and initiated a strategy to expand and diversify the
Company's workover rig services. Since 1982, the Company has grown from four
workover rigs in a single yard to 91 workover rigs in 10 yards through a series
of strategic acquisitions of businesses and assets. Upon the closing of the
Pride Acquisition, the Company will own and operate 498 workover rigs. In
addition, in November 1994 the Company broadened the array of services it
provides by acquiring the liquid services and production services businesses of
Well Solutions, Inc. and expanded such businesses in July 1996 with the Taylor
Acquisition. The Company believes that it generally has been successful in
acquiring businesses and assets and subsequently reducing overhead, enhancing
internal controls, improving marketing and related operations through management
incentives and improving the utilization of its assets by redeploying equipment.

BUSINESS STRATEGY

Consistent with its business strategy, on December 23, 1996 the Company
entered into a Purchase Agreement to acquire substantially all of Pride's U.S.
land-based well servicing operations for approximately $135.9 million in cash.
The Pride Acquisition will significantly increase the size and geographic scope
of the Company's workover rig service business. Pride's U.S. land-based fleet
consists of 407 workover rigs and related operations in 28 locations in the
Texas and Louisiana Gulf Coasts, the Permian Basin areas of West Texas and New
Mexico, and California. Upon completion of the Pride Acquisition, the Company
will be the largest provider of workover rigs in Texas and the second largest
provider in the United States. The Company will seek to generate improved profit
margins for the acquired assets through increased operating efficiencies and
cost savings resulting from overhead reductions and the consolidation of certain
overlapping yard locations. In addition, the Company will seek to expand its
liquid and production services businesses into new markets through certain of
the acquired yard locations and also to redeploy certain of the acquired
workover rigs to areas with greater rig demand. See "Pride Acquisition."

The Company believes that the high quality of its equipment, employees and
services combined with its favorable safety record enables it to maintain its
position as a leader in its principal markets. In that regard, the Company has
committed substantial capital to an ongoing workover rig refurbishment program
to maintain the Company's equipment in good working condition. The Company has
invested, and plans to continue to

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<PAGE> 29

invest, in quality management and safety programs. The Company believes that
many smaller competitors have not undertaken comparable maintenance or training
programs and do not have the financial resources to enable them to do so. The
Company believes that a number of its customers place significant importance on
their contractors' safety records and quality management systems in their
screening and selection processes, and that such factors will gain further
importance in the future.

OVERVIEW OF SERVICES

Workover Rig Services

The Company provides workover rig services to oil and gas exploration and
production companies through the use of mobile well servicing workover rigs
together with crews of three to four workers. Additional equipment such as
pumps, tanks, blowout preventers and power swivels are provided by the Company
as may be required for a particular job. The Company also provides trucking
services for moving large equipment to and from the job sites of its customers.
The Company charges its customers an hourly rate for its workover rig services,
which varies based on a number of considerations including market conditions in
each region, the type of rig, the amount of ancillary equipment required and the
necessary personnel. The Company gives its yard managers considerable
flexibility to negotiate with customers and, through compensation arrangements,
seeks to provide incentives to its managers to maximize both revenues and
profitability. For the six months ended September 30, 1996, workover rig
services contributed approximately 46% of the Company's revenues (75% on a pro
forma basis).

As of December 31, 1996, the Company operated 89 land workover rigs, two
barge-mounted workover rigs and ancillary equipment from 10 yards in Texas and
Louisiana. Upon the closing of the Pride Acquisition, the Company will operate
496 land workover rigs, two barge-mounted workover rigs and ancillary equipment
from yards in Texas, Louisiana, California and New Mexico. The Company's land
workover rigs are mobile units that generally operate within a radius of
approximately 75 to 100 miles from their respective bases. Swab rigs are used
for swabbing, or cleaning, wells at depths of up to approximately 16,000 feet.
Pole rigs are used for swabbing and rod and tubing workovers and repairs on
wells at depths of up to approximately 4,000 feet. Rigs having between 150 and
250 horsepower are used for services on wells to maximum depths of between 4,000
and 6,000 feet and work primarily on rod and tubing workovers and repairs. Rigs
having between 251 and 350 horsepower are used for services on wells to maximum
depths of between 10,000 and 12,000 feet and also work primarily on rod and
tubing workovers and repairs. Rigs having between 351 and 550 horsepower are
used for deeper workovers and more complicated procedures such as deepening of
existing well bores, recompletions and complicated fishing operations. These
rigs operate at maximum depths of between 16,000 and 18,000 feet. Rigs having
between 551 and 750 horsepower are used in wells with maximum depths of
approximately 20,000 feet. Rigs having between 751 and 900 horsepower are
generally used for horizontal drilling or recompletion jobs and deep workovers
at depths of up to approximately 25,000 feet. These rigs are almost always
operated for continuous 24-hour periods as contrasted to the Company's other
rigs that typically operate during daylight hours only.

The Company operates two barge-mounted workover rigs in the Louisiana
inland waters. These rigs typically are outfitted by moving a land workover rig
onto the barge, with operating crews housed on the barge, and have the
capability to operate for continuous 24-hour periods. In addition to hourly
charges for the workover rigs, when market conditions permit, the Company
charges its customers for auxiliary equipment, travel time, mobilization and
other related items.

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<PAGE> 30

Set forth below is certain information pertaining to the Company's
land-based workover rigs currently owned and to be acquired in the Pride
Acquisition.

<TABLE>
<CAPTION>
PRIDE
DESCRIPTION DAWSON ACQUISITION TOTAL
----------------------------------------------------------- ------ ----------- -----
<S> <C> <C> <C>
Swab....................................................... 2 17 19
Pole....................................................... -- 1 1
150-250 hp................................................. -- 71 71
251-350 hp................................................. 71 214 285
351-550 hp................................................. 13 95 108
551-750 hp................................................. 1 6 7
751-900 hp................................................. 2 3 5
--
---- ----
89 407 496
</TABLE>

The Company operated 82 of its 91 workover rigs during 1996. Pride has
advised the Company that 89 of its 407 workover rigs were not operated during
the 12 months preceding December 23, 1996, the effective date of the Purchase
Agreement. The Company believes that a majority of these 89 rigs will be
reactivated only if market demand justifies the incremental cost, and the
Company does not expect the remainder of such rigs to be restored to operating
condition. The Company's stacked rigs will be refurbished, used for spare parts
or liquidated.

Workover rig services are categorized by the type of job performed:
completion, maintenance, workover and plugging and abandonment.

Completion Services. Completion services prepare a newly drilled well for
production. The completion process may involve selectively perforating the well
casing to access producing zones, stimulating and testing these zones and
installing downhole equipment. The Company provides a workover rig to assist in
this completion process. Newly drilled wells are frequently completed by well
servicing rigs to minimize the use of higher cost drilling rigs. The completion
process typically requires a few days to several weeks, depending on the nature
and type of the completion, and generally requires additional auxiliary
equipment.

The demand for well completion services is directly related to drilling
activity levels, which are sensitive to expectations relating to and changes in
oil and gas prices. During periods of weak drilling demand, drilling contractors
frequently price well completion work competitively compared to a workover rig
so that the drilling rig stays on the job. Thus, excess drilling capacity will
serve to reduce the amount of completion work available to the well servicing
industry.

Maintenance Services. Maintenance services are required on producing oil
and gas wells to ensure efficient and continuous operation. These services
consist of routine mechanical repairs necessary to maintain production from the
well, such as repairing parted sucker rods or defective downhole pumps in an oil
well or replacing defective tubing in a gas well. The Company provides the
workover rigs, equipment and crews for these maintenance services. Many of these
workover rigs also have pumps and tanks that can be used for circulating fluids
into and out of the well. Maintenance jobs are often performed on a series of
wells in proximity to each other and typically take less than 48 hours per well.

Maintenance services are generally required throughout the life of a well.
The need for these services does not depend on the level of drilling activity
and is generally independent of short-term fluctuations in oil and gas prices.
Accordingly, maintenance services are generally the most stable type of workover
rig services activity. The general level of maintenance, however, is affected by
changes in the total number of producing oil and gas wells in the Company's
geographic service area.

Workover Services. In addition to periodic maintenance, producing oil and
gas wells occasionally require major repairs or modifications called
"workovers." Workover services include extensions of existing wells to drain new
formations either through deepening well bores or through drilling of horizontal
laterals. In less extensive workovers, the Company's rigs are used to drill out
plugs and packers in existing well bores to access previously bypassed
productive zones. The Company's workover rigs are also used to convert producing
wells

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<PAGE> 31

to injection wells during enhanced recovery operations. Workover services also
include major subsurface repairs such as casing repair or replacement, recovery
of tubing and removal of foreign objects in the well bore. These extensive
workover operations are normally performed by a workover rig with additional
specialized auxiliary equipment, which may include rotary drilling equipment,
mud pumps, mud tanks and blowout preventers, depending upon the particular type
of workover operation. Most of the Company's workover rigs are designed and
equipped to perform complex workover operations. A workover may last from a few
days to several weeks.

The demand for workover services is more sensitive to expectations relating
to and changes in oil and gas prices than the demand for maintenance services,
but not as sensitive as the demand for completion services. When oil and gas
prices are low, there is little incentive to perform workovers on wells to
increase production and well operators tend to defer workover services. As oil
and gas prices increase, the level of workover activity tends to increase as
operators seek to increase production by enhancing the efficiency of their
wells.

Plugging and Abandonment Services. Workover rigs are also used in the
plugging and abandonment of oil and gas wells no longer capable of producing in
economic quantities. The demand for well plugging services is not impacted
significantly by levels of demand for oil and gas.

Liquid Services

The Company provides liquid services, which are comprised of vacuum truck
services, frac tank rentals and salt water injection services. The Company uses
its vacuum trucks, frac tanks and salt water injection wells to provide an
integrated mix of liquid services to well site customers. For the six months
ended September 30, 1996, liquid services contributed approximately 38% of the
Company's revenues (20% on a pro forma basis).

Vacuum Truck Services. The Company owns and operates 141 vacuum trucks and
will acquire an additional 44 vacuum trucks in connection with the Pride
Acquisition and the Mobley Acquisition. A vacuum truck is a tractor trailer with
a fluid hauling capacity of 130 barrels. A large vacuum pump mounted on each
truck extracts fluids from pits, tanks and other storage facilities. The vacuum
trucks also are used for the following purposes: to transport water to fill frac
tanks on well locations, including frac tanks provided by the Company and by
others; to transport produced salt water to injection wells, including injection
wells owned and operated by the Company; and to transport brine and other
drilling fluids to and from well locations. In conjunction with the rental of
its frac tanks, the Company generally uses its vacuum trucks to transport water
for use in fracturing operations. Following completion of fracturing operations,
the Company's vacuum trucks are used to transport salt water produced as a
result of the fracturing operations from the well site to injection wells.
Vacuum truck services are generally provided to oilfield operators within a
30-mile radius of the Company's nearest yard.

Frac Tank Rentals. The Company owns 549 frac tanks located primarily at the
Company's yards in Bryan and Giddings, Texas, and, upon the closing of the
Mobley Acquisition, will acquire an additional 147 frac tanks. Each frac tank
can store up to 500 barrels of fluid and is used by oilfield operators to store
various fluids at the well site, including water, drilling mud, acid and brine.
The Company transports frac tanks on its trucks to well locations which are
usually within a 30-mile radius of the Company's nearest yard. Frac tanks are
used during all phases of the life of a producing well. The Company generally
rents frac tanks at daily rates for a minimum of four days. A typical fracturing
operation, absent complications, can be completed within four days using 20 to
100 frac tanks.

Injection Well Services. The Company owns or leases 19 injection wells
that are authorized to dispose of salt water and incidental non-hazardous oil
and gas wastes, each with an injection capacity of 2,000 to 21,000 barrels per
day. Upon the closing of the Mobley Acquisition, the Company will acquire three
additional injection wells. The Company's injection wells are strategically
located in close proximity to its customers' producing wells. These wells are
utilized primarily to dispose of salt water produced from oil and gas wells.
Most oil and gas wells ultimately produce varying amounts of salt water and,
particularly in vertically fractured formations such as those common in the
Austin Chalk trend, produce salt water at increasing rates throughout their
productive lives. In addition, these wells are utilized for the disposal of
incidental, non-hazardous oil and gas wastes. In Texas and Arkansas, oil and
gas wastes and salt water produced from oil and gas wells are required by law to
be disposed of in authorized facilities, including permitted injection wells.
Injection wells are licensed by state authorities and are completed in permeable
formations below the fresh water table.

The Company utilizes its injection wells primarily for the disposal of salt
water and incidental, non-hazardous oil and gas waste transported from the well
site by vacuum trucks owned and operated by the Company. Although the Company
is authorized to inject salt water and non-hazardous oil and gas wastes
transported by other licensed vacuum truck operators, the Company does not
currently permit such uses by third parties. The Company also maintains
separators at each of its injection wells permitting it to salvage residual
crude oil, which is later sold for the account of the Company.

The Company's injection operations pose certain risks of environmental
liability to the Company. Although the Company monitors the injection process,
any leakage from the subsurface portions of the wells could cause degradation of
fresh groundwater resources, potentially resulting in cancellation of operation
of the well, fines and penalties from governmental agencies, expenditures for
remediation of the affected resource, and liability to third parties for
property damages and personal injuries. In addition, the sale by the Company
of residual crude oil collected as part of the saltwater injection process
could impose liability on the Company in the event the entity to which the oil
was transferred fails to manage the material in accordance with applicable
environmental health and safety laws.

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<PAGE> 32

Production Services

The Company provides production services, which are comprised of production
testing services, slickline wireline services, fishing and rental tool services
and pipe testing. For the six months ended September 30, 1996, production
services contributed approximately 16% of the Company's revenues (5% on a pro
forma basis).

Production Testing Services. The Company owns 21 gas production testing
units that are used to provide services to oil and gas wells located onshore and
in inland waters. The Company performs production testing services for oil and
gas producers primarily along the Texas Gulf Coast. In addition, the Company is
bidding on a multi-year contract for services in northern Mexico.

The Company's equipment includes several trailer-mounted manifolds,
separators, heater treaters, sand separators, light generators and slickline
wireline units. Manifolds are used to reduce the flowing pressure of the well
stream to a rate which will easily flow through the production testing
equipment. After the appropriate well stream rate is achieved, a separator is
used to divide the well stream into its respective components -- oil, gas and
water. For gas wells, a heater is used to prevent the gas from freezing during
flowbacks. Slickline wireline equipment generally is used to lower measurement
equipment into a well for several days to retrieve data to determine the
characteristics of the reservoir.

The Company uses its production testing units to perform deliverability
tests required upon the initial completion of a well and periodically during the
productive life of a gas well to determine the maximum production allowable
under certain rules of the Texas Railroad Commission, the state oil and gas
regulatory agency. In addition, these units are used to clean and test
stimulated wells and to measure the pressure, volume and quality of gas and
liquids produced by the well. These units also are used to determine the most
efficient production flow rate, to run pressure build-up tests that measure the
rate of increase of shut-in gas pressure to determine reservoir characteristics
and to determine whether a producing formation has been damaged.

Slickline Wireline Services. The Company owns seven slickline wireline
units and will acquire three additional units upon the closing of the Pride
Acquisition. The mechanical downhole wireline or "slickline" services are used
to simplify completion operations and in connection with regular maintenance on
producing wells. In some cases, slickline wireline services may be used instead
of workover rigs to provide workover services. By using slickline wireline
services, workover services can be performed under 15,000 psi of pressure
without shutting-in the well. The Company also provides slickline wireline
consulting services where unusual conditions exist.

Fishing and Rental Tools. The Company provides a complete line of cased
hole fishing and rental tools to oilfield operators and well service companies
from two yards in the Texas Panhandle. The Company's rental tool inventory
includes both air compressor equipment, which is used in drilling and workover
activities, and fishing tools, which are used to mill or retrieve loose or
broken equipment or other material in the well bore or to free stuck pipe and
other tools, such as slips, elevators and casing cutters. The Company rents the
equipment to its customers at daily rates and, in the case of air compressors
and fishing tools, generally conducts or supervises the operations.

Pipe Testing. The Company operates nine pipe testing units along the Texas
Gulf Coast. The Company's testing equipment is used during completion and
recompletion operations for leak detection in the internal pipe systems of oil
and gas wells.

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<PAGE> 33

CUSTOMERS

The Company had approximately 1,050 customers during the 12 months ended
September 30, 1996. For the six months ended September 30, 1996, the Company's
largest customer, Union Pacific Resources Company ("UPRC"), accounted for
approximately 23% of the Company's revenues (approximately 9.5% on a pro forma
basis). The Company has a contract with UPRC pursuant to which the Company
provides liquid services to UPRC in the Austin Chalk trend. Under this contract,
which expires in February 1997, the Company is required to maintain established
levels of insurance and to indemnify UPRC against all losses arising in whole or
in part from the Company's negligence, whether or not UPRC and its agents were
contributorily negligent. The loss of UPRC as a customer would have a material
adverse effect on the Company's financial condition and results of operations.
No other customer accounted for more than 10% of the Company's revenues during
the six months ended September 30, 1996.

OPERATING RISKS AND INSURANCE

The Company's operations are subject to hazards inherent in the oil and gas
industry, such as blowouts, explosions, craterings, fires and oil spills, that
can cause personal injury or loss of life, damage to or destruction of property,
equipment, the environment and marine life, and suspension of operations. In
addition, claims for loss of oil and gas production and damage to formations can
occur in the workover business. If a serious accident was to occur at a location
where the Company's equipment and services are used, it could result in the
Company being named as a defendant in lawsuits asserting potentially large
claims.

Because the Company's vacuum truck and frac tank rentals involve the
transportation of heavy equipment and materials, the Company may experience
traffic accidents which may result in spills, property damage and personal
injury. Despite the Company's efforts to maintain high safety standards, the
Company from time to time has suffered losses in the past and anticipates that
it could experience further losses in the future. Moreover, the frequency and
severity of such incidents affect the Company's operating costs and
insurability, and its relationship with customers, employees and regulators. Any
significant increase in the frequency or severity of such incidents, or the
general level of compensation awards with respect thereto, could adversely
affect the cost of, or ability of the Company to obtain, workers' compensation
and other forms of insurance, and could have other material adverse effects on
the Company's financial condition and results of operations.

As a protection against operating hazards, the Company maintains broad
insurance coverage, including physical damage, employer's liability,
comprehensive commercial general liability and workers' compensation insurance.
The Company believes that it is adequately insured for public liability and
property damage to others with respect to its operations, and that its insurance
coverage is comparable to that which is customary in the industry against such
hazards. However, such insurance may not be sufficient to protect the Company
against liability for all consequences of well disasters, extensive fire damage,
damage to personal property, injuries to or deaths of persons or damage to the
environment. In addition, certain insurance policies exclude coverage for
damages resulting from environmental contamination. The Company also carries
insurance to cover physical damage to or loss of its workover rigs. No assurance
can be given that the Company will be able to maintain the type and amount of
coverage that it considers adequate at rates that it considers reasonable or
that insurance will continue to be available on terms as favorable as the
Company's existing arrangements.

In addition to insurance, the Company conducts training programs designed
to promote the safe operation of all equipment and to minimize accidents
occurring on job sites. The Company gives its managers incentives, through
compensation arrangements, to take all reasonable steps possible to promote
safety. The Company monitors safety closely and has carefully designed safety
programs to reduce costs associated with accidents. However, there can be no
assurance that the Company's insurance or safety programs will be adequate to
protect against liability for accidents occurring on the job site or affecting
the Company's equipment.

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<PAGE> 34

COMPETITION

The workover rig and production services industry is highly competitive and
fragmented and includes a number of small companies capable of competing
effectively on a local basis and several large companies which possess
substantially greater financial and other resources than the Company. Pool
Energy Services Co. ("Pool"), Pride and Key Energy Group, Inc. ("Key"), all of
which currently provide workover rig and liquid services, are the largest
companies in the domestic well servicing market. Pool, Pride and Key operate in
multiple geographic regions and currently have significantly more domestic
workover rigs than the Company. Upon the closing of the Pride Acquisition, the
Company will be the second largest provider of workover rigs in the United
States behind Pool. The Company has numerous regional competitors for each of
the services it provides. The Company believes that it is competitive in terms
of pricing, performance, equipment, safety, availability of equipment to meet
customer needs and availability of experienced, skilled personnel in those areas
in which it operates.

Excess capacity in the well servicing industry has resulted in severe price
competition throughout much of the past decade. In the well servicing market, an
important competitive factor in establishing and maintaining long-term customer
relationships is having an experienced and skilled work force. In recent years,
many of the Company's larger customers have placed an emphasis not only on
pricing, but also on safety records and quality management systems of
contractors. The Company believes that such factors will gain further importance
in the future. The Company has directed substantial resources toward employee
safety and quality management training programs as well as its employee review
process. While the Company's efforts in these areas are not unique, many
competitors, particularly small contractors, have not undertaken similar
training programs for their employees. The Company expects competition and
pricing pressures to continue in the foreseeable future.

ENVIRONMENTAL REGULATION

Many of the Company's operations take place in or near ecologically
sensitive areas, such as the Texas Gulf Coast and the Louisiana inland waters.
In addition, the Company's operations routinely involve the handling of
significant amounts of waste materials, some of which are classified as
hazardous substances. The Company's operations and facilities are thus subject
to numerous local, state and federal environmental and public health and safety
laws, rules and regulations, including laws concerning the containment and
disposal of hazardous materials, oilfield waste and other waste materials, the
use of underground storage tanks and the use of underground injection wells. The
regulations applicable to the Company's operations include certain regulations
controlling the discharge of hazardous or toxic materials into the environment,
requiring removal or remediation of pollutants, requiring permits or licenses
issued by regulatory agencies and imposing civil and criminal penalties for
violations. Some of the statutory and regulatory programs that apply to the
Company's operations also authorize private suits, the recovery of natural
resource damages by the government, injunctive relief and cease and desist
orders. Moreover, environmental laws typically expose the Company to "strict
liability" rendering a person or entity liable for environmental damage without
regard to negligence or fault on the part of such person or entity. As a result,
the Company could be liable for cleanup costs, even if the situation resulted
from previous acts by the Company that were lawful at the time or from the
improper conduct of, or conditions caused by, previous property owners, lessees
or other persons not associated with the Company. Environmental laws have become
more stringent in recent years and are expected to become even more so in the
future.

Cleanup costs associated with environmental claims or capital expenditures
or increased operating costs associated with changes in environmental laws and
regulations could be substantial and could have a material adverse effect on the
Company's financial condition and results of operations. However, the cost of
environmental compliance has not had any material adverse effect on the
Company's operations, financial condition or competitive position in the past,
and management is not currently aware of any situation or condition that it
believes is likely to have any such material adverse effect or require any
material capital expenditure in the foreseeable future. In addition to
management personnel who are responsible for monitoring environmental compliance
and arranging for remedial actions as required from time to time, the Company
also employs outside experts to advise and assist the Company's environmental
compliance efforts.

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In addition to having a direct effect on the Company, local, state and
federal environmental regulations also may negatively impact oil and gas
exploration and production companies which in turn could have a material adverse
effect on the Company. To the extent laws are enacted or other governmental
action is taken that prohibits or restricts drilling or imposes environmental
protection requirements that result in increased costs to the oil and gas
industry in general and the drilling industry in particular, the financial
condition and results of operations of the Company could be adversely affected.

In this regard, RCRA, the principal federal statute governing the disposal
of solid and hazardous wastes, includes a statutory exemption that allows oil
and gas exploration and production wastes to be classified as nonhazardous
waste. A similar exemption is contained in many of the state counterparts to
RCRA, including the state statutes in Texas and Louisiana. If oil and gas
exploration and production wastes were required to be managed and disposed of as
hazardous waste, either as a result of changes in RCRA or the imposition of more
stringent state regulations, the Company could be required to make significant
unanticipated capital and operating expenditures or to cease or curtail certain
operations. Further, if such wastes were required to be managed and disposed of
as hazardous waste, domestic oil and gas producers, including many of the
Company's customers, could be required to incur substantial obligations with
respect to such waste. Because of the potential impact on the Company's
customers, any regulatory changes that impose additional restrictions or
requirements on the disposal of oil and gas wastes could adversely affect demand
for the Company's services.

EMPLOYEES

As of December 31, 1996, the Company employed 1,057 people, of whom 848
were employed on an hourly basis. The Company's future success will depend
partially on its ability to attract, retain and motivate qualified personnel.
The Company is not a party to any collective bargaining agreements and has not
experienced any strikes or work stoppages. The Company considers its relations
with employees to be generally satisfactory.

LEGAL PROCEEDINGS

From time to time, the Company is a party to litigation or other legal
proceedings that the Company considers to be a part of the ordinary course of
its business. The Company currently is not involved in any legal proceedings
that could reasonably be expected to have a material adverse effect on the
Company's financial condition or results of operations. See "-- Operating Risks
and Insurance."

PROPERTIES

The principal office of the Company is located in San Antonio, Texas. The
Company operates 22 yards, 10 of which it owns and 12 of which it leases. Of the
Company's 22 yards, 19 yards are located in Texas and three yards are located in
Louisiana. The Company also operates 18 injection wells in Texas and one in
Arkansas, four of which it owns and 15 of which it leases. The Company believes
that its leased and owned properties, none of which individually is material to
the Company, are adequate for its current needs.

33
<PAGE> 36

PRIDE ACQUISITION

On December 23, 1996, the Company entered into a purchase agreement (the
"Purchase Agreement") to acquire substantially all of Pride's U.S. land-based
well servicing operations for approximately $135.9 million in cash. The Pride
Acquisition will significantly increase the size and geographic scope of the
Company's workover rig services business. Pride's U.S. land-based fleet consists
of 407 workover rigs and related operations in 28 locations in the Texas and
Louisiana Gulf Coasts, the Permian Basin areas of West Texas and New Mexico, and
California. Upon completion of the Pride Acquisition, the Company will be the
largest provider of workover rigs in Texas and the second largest provider in
the United States. The Company will seek to generate improved profit margins for
the acquired assets through increased operating efficiencies and cost savings
resulting from overhead reductions and the consolidation of certain overlapping
yard locations. In addition, the Company will also seek to expand its liquid and
production services businesses into new markets through certain of the acquired
yard locations and also to redeploy certain of the acquired workover rigs to
areas with greater rig demand.

Pursuant to the Purchase Agreement, the Company will purchase the Pride
Assets "as is, where is." Dawson has undertaken a limited amount of
investigation of the condition of the Pride Assets, particularly the workover
rigs, in an effort to determine that their condition appears to be sufficient to
sustain the operations previously conducted by Pride with those assets. The
Company has not, however, thoroughly investigated all material items of
equipment due to limitations of time, cost and geographic disbursement.

With regard to real property, it is expected that the Company will acquire
approximately 14 properties in fee simple and will receive an assignment or
sublease of approximately 14 leased properties. With respect to all parcels of
real estate, Dawson has conducted only limited environmental studies and
investigations. The Company has obtained Phase I reports on the properties and
has had the opportunity to review the books and records of Pride concerning
environmental compliance aspects of each of those properties. As to each such
property, Dawson has the option of acquiring Pride's interest therein, of
declining to accept the property (resulting in a reduction of the purchase
price) or of leasing the property with an option to buy. There can be no
assurance that Dawson will not acquire properties that have latent environmental
risks and concurrent financial exposure, which could be significant in amount.
Moreover, Pride has not made any warranties and representations concerning the
environmental aspects of any properties that would survive the closing.

The Company expects to employ approximately 1,940 employees of Pride
immediately following consummation of the Pride Acquisition. All such employees
of Pride will continue their employment following the closing as "at will"
employees of the Company. Approximately 146 salaried employees will be entitled
to certain severance benefits if their employment with the Company is
terminated, other than for cause, within 18 months of the closing. To facilitate
certain transitional issues, the Company also has obtained the agreement of
Pride that it will provide a portion of its headquarters office in Houston for
the use of the Company and its employees for six months at no cost to the
Company. This is intended to help facilitate and implement a transfer of
bookkeeping and accounting functions with respect to the acquired operations.

Pursuant to the Purchase Agreement, Pride is required to indemnify and hold
harmless the Company with respect to damages, losses or third party warranty
claims accruing or arising prior to the date of closing and for breaches of
certain limited warranties and representations. The Company generally will bear
the first $2.0 million of losses or damages relative to breaches of such
representations and warranties, with Pride being liable for certain specified
losses in excess thereof. The Purchase Agreement also provides for a $5.0
million break-up fee ($4.0 million of which may be paid, at the option of the
Company, by the issuance of shares of Common Stock), payable by the Company if
it is not able to obtain financing, and a five year non-compete agreement
imposed upon Pride with respect to U.S. land-based well servicing operations.

The closing of the Debt Offering and the Equity Offering are each
conditioned upon the simultaneous closing of the other and upon the simultaneous
closing of the Pride Acquisition.

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<PAGE> 37

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company and their respective
ages and positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- ---- -----------------------------------------
<S> <C> <C>
Michael E. Little(1)............... 41 Chairman of the Board, President and
Chief Executive Officer
Joseph B. Eustace.................. 41 Vice President of Operations and Chief
Operating Officer
P. Mark Stark...................... 41 Chief Financial Officer
Russell Banks(1)................... 77 Director
J. Michael Bell(2)................. 57 Director
Wm. Ward Greenwood(1).............. 43 Director
Douglas D. Lewis(2)................ 51 Director
Paul E. McCollam(2)................ 51 Director
Stephen F. Oakes(3)................ 47 Director
Lawrence C. Petrucci(3)............ 37 Director
</TABLE>

- ---------------

(1) Member of the Nominations Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.

Michael E. Little has been President, Chief Executive Officer and a
director of the Company since 1982 and Chairman of the Board since 1983. From
1980 to 1982, he was vice president of Cambern Engineering, Inc., a company that
provided drilling and completion consulting services in the Texas Gulf Coast
area. From 1976 to 1980, he was employed by Chevron USA as a drilling foreman in
Midland, Texas and as a drilling engineer in New Orleans, Louisiana. Mr. Little
received his Bachelor of Science degree in Petroleum Engineering in 1978 from
Texas Tech University.

Joseph B. Eustace has served as the Vice President of Operations and Chief
Operating Officer of the Company since March 1983. From June 1981 to March 1982,
he served as assistant manager of ServRigs, Inc., the Company's largest
competitor at the time. Mr. Eustace received his Bachelor of Arts degree in
Agribusiness in 1978 from Texas Tech University.

P. Mark Stark has served as Chief Financial Officer of the Company since
January 1996. From 1991 through 1995, he was chief financial officer of the Y.O.
Ranch and family holdings of the Schreiner family which has interests in
agribusiness, tourism, lodging and retail and real estate development. From 1979
through 1991, Mr. Stark was employed by Shelton Ranch Corporation and its
successor, Texas Hill Country Orchards, LLP, serving as chief financial officer
from 1984 through 1991. His duties with Shelton Ranch Corporation included
serving as treasurer of Shelton Energy Resources, Ltd., an oil and gas
exploration and production partnership among Shelton Ranch Corporation,
Prudential Insurance Company of America and Shell Oil Company. Mr. Stark
received his Bachelor of Business Administration degree in Finance from the
University of Texas in 1977, and his Master of Business Administration degree in
1978 from Southern Methodist University.

Russell Banks has been a director of the Company since April 1996. From
1962 to 1995, Mr. Banks was president and chief executive officer of Grow Group,
Inc., which was a New York Stock Exchange company that produced coatings, paints
and household products. Since 1995, Mr. Banks has been a principal of Russell
Banks & Co., Ltd., a financial consulting firm. Mr. Banks is also on the board
of directors of GVC Venture Corporation. Mr. Banks is a past president of the
National Paint and Coatings Association and has served on the executive
committee of the board of directors of the American Management Association and
is currently

35
<PAGE> 38

on its general management council. Mr. Banks has been named as a defendant in
certain litigation relating to his service as a director of two other companies.
All other directors of those companies were also named as defendants. Counsel to
one of the companies has taken the position that all the claims against that
company and Mr. Banks are without merit and will be vigorously defended. Counsel
to the other company and to its board of directors has taken the position that
the claims against that company and Mr. Banks and all the other directors are
without merit and will also be vigorously defended. Mr. Banks was designated to
succeed a former director, Kevin P. Collins, to the Board of Directors pursuant
to a letter agreement that provided Mr. Collins the right, upon his departure
from the Board, to designate a successor Board member, subject to the approval
of such successor by the Board.

J. Michael Bell has been a director of the Company since 1982. For more
than the past five years, he has served as the president of Southwest Venture
Management Company, a firm that provides investment management and advisory
services to three venture capital funds. Mr. Bell also serves as the managing
general partner of each of these funds, one of which is HixVen Partners, a
shareholder of the Company.

Wm. Ward Greenwood has been a director of the Company since 1983. Mr.
Greenwood served as Chief Financial Officer of the Company from December 1994
through December 1995. Mr. Greenwood has been since 1990, and is currently, the
president and sole shareholder of Nueces Ventures, Inc. ("Nueces"), a firm that
provides financial consulting services with respect to acquisitions and capital
formation. Since October 1995, he has also served as a principal of First
Capital Group of Texas II, L.P., a private equity fund. Since 1982, Mr.
Greenwood has provided financial consulting services to the Company, most
recently through Nueces. See "Certain Relationships and Related Transactions."

Douglas D. Lewis has been a director of the Company since 1982. Since 1972,
Mr. Lewis has been in the real estate construction, development and management
business, most recently as principal of Vanguard Development, Inc., which he
formed in 1987.

Paul E. McCollam has been a director of the Company since 1991. Since 1985,
he has been a managing director of Resource Investors Management Company Limited
Partnership, a full service investment management company specializing in the
energy industry that serves as the general partner of the RIMCO Parties (as
defined herein). Mr. McCollam serves as a director of the Company pursuant to
the 1991 agreement described below.

Stephen F. Oakes has been a director of the Company since 1994. Since 1996,
Mr. Oakes has served on the board of directors of Universal Seismic Associates,
Inc., a company engaged in the acquisition of seismic data and the exploration
and production of oil and gas. From 1989 to 1992, he served as managing director
of Robert Fleming, Inc., an investment banking company. Since 1992, he has been
associated with Resource Investors Management Company Limited Partnership, a
full service investment management company specializing in the energy industry
that serves as the general partner of the RIMCO Parties, serving as managing
director since 1993. Mr. Oakes serves as a director of the Company pursuant to
the 1994 Voting Agreement (as defined herein).

Lawrence C. Petrucci has been a director of the Company since March 1996.
Since 1991, Mr. Petrucci has served as vice president of First Albany
Corporation, a provider of investment banking, financial advisory and brokerage
services. From April 1990 through June 1991, Mr. Petrucci was a portfolio
manager with Westinghouse Credit Corporation, a financial services company. Mr.
Petrucci is a member of the Audit Committee.

In March 1996, the Company entered into a letter agreement that provided
Mr. Collins, a director of the Company at that time, with the right, upon his
departure from the Board of Directors prior to the Company's next Annual Meeting
of Shareholders, to designate a successor Board member, subject to the approval
of such successor by the Board of Directors. Mr. Banks was designated Mr.
Collins' successor to the Board pursuant to this letter agreement.

A Voting Agreement dated November 28, 1994 (the "1994 Voting Agreement")
among the RIMCO Parties, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P.
III, and RIMCO Partners, L.P. IV (the "RIMCO Parties"), Triad Ventures Limited
II and Mr. Little provides that the parties to the 1994 Voting

36
<PAGE> 39

Agreement will vote the shares of Common Stock held by them in favor of two
nominees of the RIMCO Parties to the Company's Board of Directors. The 1994
Voting Agreement continues as long as the RIMCO Parties own at least 10% of the
issued and outstanding shares of Common Stock, on a fully diluted basis. In
addition, pursuant to a 1991 agreement, as long as the RIMCO Parties own 5% of
the issued and outstanding shares of Common Stock or shares of Common Stock with
a value of $500,000, the Company is required to use its best efforts to elect
Mr. McCollam (or a designee of the parent company of the RIMCO Parties) to the
Company's Board. Messrs. McCollam and Oakes were reelected to the Board pursuant
to these agreements. These agreements have been terminated and superseded by a
subsequent agreement. See "Certain Relationships and Related Transactions."

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established standing Audit, Compensation and
Nominations Committees. The Audit Committee annually recommends to the Board the
appointment of independent certified public accountants as auditors for the
Company, discusses and reviews the scope of and fees for the prospective annual
audit and reviews the results with the auditors, reviews the Company's
compliance with its existing accounting and financial policies, reviews the
adequacy of the financial organization of the Company and considers comments by
the auditors regarding internal controls and accounting procedures and
management's response to those comments. The Audit Committee currently is
comprised of Messrs. Oakes and Petrucci. One vacancy exists on this committee.

The Compensation Committee reviews and make recommendations to the Board
regarding salaries, compensation and benefits of executive officers and
employees of the Company and administers the Company's 1995 Incentive Plan (the
"Incentive Plan"). The Compensation Committee currently is comprised of Messrs.
Bell, Lewis and McCollam.

The Nominations Committee is responsible for recommending to the Board
those persons who will be nominated as management's nominees for positions on
the Board. The Nominations Committee is currently comprised of Messrs. Little,
Greenwood and Banks.

COMPENSATION OF DIRECTORS

For the year ended March 31, 1996, the Company granted each of its
non-employee directors an option under the Incentive Plan to purchase 4,300
shares of Common Stock, at an exercise price per share of $7.44, which was
determined by the Board to be the fair market value of the Common Stock on the
date of grant, for his services as a director. Additionally, all directors were
reimbursed for their reasonable travel expenses incurred in attending meetings
of the Board. Commencing April 1, 1996, each non-employee director received, and
on each April 1 thereafter until and including April 1, 2003 will receive, an
annual grant of an option under the Incentive Plan to purchase 4,300 shares of
Common Stock with an exercise price per share equal to the fair market value of
the Common Stock on the date of grant and reimbursement of reasonable travel
expenses for attending Board or committee meetings. See "Management -- 1995
Incentive Plan."

37
<PAGE> 40

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth certain information for the year ended March
31, 1996 with respect to the compensation paid to the President and Chief
Executive Officer, Mr. Little, and the Vice President of Operations and Chief
Operating Officer, Mr. Eustace (collectively, the "Named Executive Officers").
No other executive officers of the Company received annual compensation
(including salary and bonuses earned) which exceeded $100,000 for the year ended
March 31, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
--------------------------------- -----------------------------
YEAR SECURITIES
ENDED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION MARCH 31, SALARY BONUS OPTIONS COMPENSATION(2)
- ----------------------------------- --------- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Michael E. Little.................. 1996 $150,000 $ 50,000(3) 51,600 --
President and Chief 241,000(4)
Executive Officer 1995 138,125 75,000 64,500 $ 500
1994 105,000 30,000
Joseph B. Eustace.................. 1996 96,200 20,000(3) 17,200 --
Vice President of Operations 24,000(4)
and Chief Operating Officer 1995 80,000 15,000 21,500 500
1994 80,000 12,000
</TABLE>

- ---------------

(1) The value of perquisites and personal benefits are excluded because the
aggregate amount thereof did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus reported for each Named Executive Officer.
(2) All other compensation consists entirely of employer contributions to the
Company's 401(k) Plan made by the Company in 1996 as a result of 1995
earnings.
(3) Bonuses are awarded annually in the discretion of the Compensation Committee
with respect to performance in the year indicated; the amount of the bonuses
is determined and paid in the following year.
(4) In the year ended March 31, 1996, in addition to standard bonuses, the Board
of Directors declared special bonuses in the amount of $241,000 for Mr.
Little and $24,000 for Mr. Eustace, each of whom exercised stock options and
incurred federal income tax liability in connection with such exercise.

STOCK OPTION GRANTS IN 1996

The following table shows information concerning individual grants of
options during the year ended March 31, 1996 to the Named Executive Officers.

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
-------------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------
NAME GRANTED IN YEAR ($/SHARE)(2) DATE 5% 10%
- --------------------------------- ---------- ------------ ---------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Little(3)... 51,600 48% $ 7.44 October 6, 2005 $241,435 $611,844
Joseph B. Eustace(3)... 17,200 16% $ 7.44 October 6, 2005 $ 80,478 $203,948
</TABLE>

- ---------------

(1) The exercise price of the options represents the fair market value of the
Common Stock on the date of grant as determined by the Board of Directors.
Potential realizable values are based on the assumption that the Common
Stock will appreciate in value from the date of grant to the end of the
option terms at the stated annualized rates. Such assumed rates of
appreciation and potential realizable values are not necessarily indicative
of appreciation, if any, that may be realized in future periods.
(2) The exercise price of the option was set equal to the fair market value of
the Common Stock as determined by the Board of Directors on the date of
grant. In establishing the exercise price, the Board

38
<PAGE> 41

considered recent sales of the Company's securities, and the terms and
conditions of such sales, the book value of the Company's outstanding shares
of Common Stock and the Company's financial performance at the time of such
grants.
(3) The options granted to Mr. Little and to Mr. Eustace become exercisable
annually and ratably over a three-year period, which began June 30, 1996.

STOCK OPTION EXERCISES AND HOLDINGS

The following table sets forth information concerning the exercise of stock
options during the year ended March 31, 1996, and the number and value of
unexercised stock options held as of the end of the year ended March 31, 1996,
by the Named Executive Officers.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES YEAR END OPTION AT YEAR
ACQUIRED VALUE EXERCISABLE/ END EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------------- ----------- ----------- ------------- -----------------
<S> <C> <C> <C> <C>
Michael E. Little.................... 33,681 $ 286,922 21,500/94,600 $131,150/$433,096
Joseph B. Eustace.................... 1,431 $ 15,054 7,310/31,390 $ 44,591/$143,491
</TABLE>

- ---------------

(1) In calculating the value realized and the value of unexercised in-the-money
options at year end, the Company used the closing price on March 31, 1996 of
$10.75 per share.

OUTSTANDING OPTIONS AND CERTAIN PRIOR EXERCISES

As of December 31, 1996, the Company had outstanding options under the
Incentive Plan to purchase 449,750 shares of Common Stock at prices ranging from
$7.44 to $12.25 per share, of which 93,174 were exercisable as of such date. Of
the total options granted pursuant to the Incentive Plan that were outstanding
as of December 31, 1996, Mr. Little held options to acquire 138,980 shares of
Common Stock at prices of $7.44 and $11.375 per share, of which 17,200 were
exercisable at a price of $7.44 per share, and Mr. Eustace held options to
acquire 80,720 shares of Common Stock at prices of $7.44 and $11.375 per share,
of which 5,736 were exercisable at a price of $7.44 per share.

As of December 31, 1996, the Company also had outstanding nonstatutory
options to purchase 107,500 shares of Common Stock. The exercise price per share
of these options is $4.65, with options to acquire 78,905 shares being
exercisable as of December 31, 1996. Of the total nonstatutory options
outstanding as of such date, Mr. Little held options to acquire 64,500 shares of
Common Stock, of which 43,000 were exercisable, and Mr. Eustace held options to
acquire 21,500 shares of Common Stock, of which 14,405 were exercisable. Mr.
Little exercised options in February 1996 to acquire 32,250 shares of Common
Stock at $2.33 per share.

In February 1996, the Company granted bonuses of an aggregate of
approximately $336,000 to certain current and former officers, directors and
employees who had exercised nonstatutory stock options and incurred federal
income tax liability in connection with such exercises. Of this amount, Mr.
Little received a bonus of approximately $241,000 and Mr. Eustace received a
bonus of approximately $24,000.

1995 INCENTIVE PLAN

The Incentive Plan was adopted by the Board of Directors and approved by
the shareholders in October 1995. A total of 537,500 shares of Common Stock have
been reserved for issuance pursuant to the Incentive Plan. The Incentive Plan
provides for the grant to employees, including officers of the Company, of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), nonstatutory stock options, stock
appreciation rights and restricted shares of Common Stock (collectively, the
"Awards"). In addition, nonemployee directors (the "Outside Directors") and
consultants are eligible to receive nonstatutory stock options.

39
<PAGE> 42

The Incentive Plan provides that Awards may be granted to employees
(including officers), consultants and directors of the Company and its majority
owned subsidiaries. The Incentive Plan is not a qualified deferred compensation
plan under Section 401(a) of the Code and is not subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended.

The Incentive Plan is required to be administered by the Board or by a
committee of the Board. The Incentive Plan is currently administered by the
Compensation Committee of the Board. Subject to special provisions relating to
Outside Directors, the Board or its designated committee selects the employees
to which Awards may be granted and the type of Award to be granted and
determines, as applicable, the number of shares to be subject to each Award, the
exercise price and the vesting. In making such determination, the Board or its
designated committee takes into account the employee's present and potential
contributions to the success of the Company and other relevant factors.

401(K) PLAN

The Company has adopted a defined contribution retirement plan which
complies with Section 401(k) of the Code (the "401(k) Plan"). Substantially all
employees with at least one year of continuous service are eligible to
participate and may contribute up to the lesser of $9,500 or 15% of their annual
compensation. The Board made no matching contributions for employee
contributions made in the year ended March 31, 1996, and has not made a decision
regarding matching contributions for employee contributions made in the year
ending March 31, 1997. Company contributions vest over a four-year period in
increments of 25% per year.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Messrs. Little,
Eustace and Stark. Mr. Little's agreement is for a three-year term, which
commenced April 1, 1996, and provides for an annual base salary of $175,000 in
the first year, increasing to $200,000 in the second year and to $225,000 in the
third year. The agreement does not provide for a mandatory bonus, but the Board
of Directors may, in its discretion, award an annual bonus of up to 50% of Mr.
Little's compensation without regard to the special bonus described in the
footnotes to the Summary Compensation Table. If Mr. Little's employment is
terminated without cause in the first, second or third year of the agreement, he
will be entitled to severance compensation in an amount equal to his then
current annual base salary rate for 14, 15 or 16 months, respectively. If Mr.
Little's employment is terminated in connection with a change of control of the
Company (as defined in the employment agreement), he will be entitled to
severance compensation in an amount equal to three times his then current annual
base salary. If Mr. Little's employment is constructively terminated in
connection with a change of control of the Company, he will be entitled to
severance compensation in an amount equal to two times his then current base
salary.

Mr. Eustace's employment agreement is for a three-year term, which
commenced April 1, 1996, and provides for an annual base salary of $125,000 in
the first year, increasing to $132,500 in the second year and to $140,000 in the
third year. The Board of Directors may, in its discretion, award Mr. Eustace an
annual cash bonus without regard to the special bonus described in the footnotes
to the Summary Compensation Table. If Mr. Eustace's employment is terminated
without cause, he will be entitled to severance compensation in an amount equal
to his then current annual base salary rate. If Mr. Eustace's employment is
terminated in connection with a change of control of the Company (as defined in
the employment agreement), he will be entitled to severance compensation in an
amount equal to 1.5 times his then current annual base salary. If Mr. Eustace's
employment is constructively terminated in connection with a change of control
of the Company, he will be entitled to severance compensation in an amount equal
to his then current annual base salary.

Mr. Stark's employment agreement is for a two-year term, which commenced
April 1, 1996, and provides for an annual base salary of $80,000 in the first
year and $90,000 in the second year. The Board of Directors may, in its
discretion, award Mr. Stark an annual cash bonus. If Mr. Stark's employment is
terminated without cause in the first or second year of the agreement, he will
be entitled to severance compensation in an amount equal to one or two months'
salary, respectively, at his then current annual base salary rate. If

40
<PAGE> 43

Mr. Stark's employment is terminated in connection with a change of control of
the Company (as defined in the employment agreement), he will be entitled to
severance compensation in an amount equal to his then current annual base
salary. If Mr. Stark's employment is constructively terminated in connection
with a change of control of the Company, he will be entitled to severance
compensation in an amount equal to six months' salary at his then current annual
base salary rate.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In 1990, the Company issued 80,000 shares of Series A Preferred Stock for
$12.50 per share to Triad Ventures Limited II and NationsBanc Capital
Corporation. In connection with such issuance, Nueces received 800 shares of
Series A Preferred Stock from the Company as a portion of a finder's fee for
services rendered in negotiating the issuance of such stock. H.A. Abshier, a
director of the Company until June 1996, was a general partner of Triad II
Management Company, L.P., which is the general partner of Triad Ventures Limited
II. Mr. Greenwood, a director of the Company, is the sole shareholder of Nueces.
Holders of the Series A Preferred Stock elected, pursuant to their rights under
the Certificate of Designation of Series A Preferred Stock, to convert 20,200
shares of such stock into 86,860 shares of Common Stock, effective October 18,
1995. Pursuant to the Agreement for the Conversion of Securities dated November
1, 1995 (the "Conversion Agreement"), the remaining 60,600 shares of Series A
Preferred Stock converted into 260,580 shares of Common Stock effective February
19, 1996 (the conversion of all shares of Series A Preferred Stock to Common
Stock being referred to herein as the "Series A Preferred Stock Conversion
Transaction"). Purchasers under the Preferred Purchase Agreement were entitled
to appoint one person to the Board as long as they owned an aggregate of at
least 86,860 shares of Common Stock received on conversion of Series A Preferred
Stock. Mr. Abshier, who resigned as a director in June 1996, was elected to the
Board pursuant to this agreement. This agreement has subsequently been
terminated. Purchasers of the Series A Preferred Stock received certain
registration rights in connection with that transaction. See "Description of
Capital Stock -- Registration Rights."

In August 1992, the Company entered into an agreement (the "Nueces
Agreement") with Nueces, pursuant to which Nueces received a commission upon the
consummation by the Company of certain acquisition and financing transactions.
Mr. Greenwood, a director of the Company, is the sole shareholder of Nueces.
Pursuant to the Nueces Agreement, the Company paid Nueces $50,070, $25,416 and
$46,466 in the years ended March 31, 1996, 1995, and 1994, respectively. Of the
amount paid to Nueces in the year ended March 31, 1996, $34,000 was paid upon
the consummation of the IPO. In addition, Jefferies & Company, Inc. paid to
affiliates of Mr. Greenwood in the year ended March 31, 1995, a finder's fee of
$122,500 from the fee it received from the Company in connection with the Well
Solutions Acquisition. Mr. Greenwood has continued to provide consulting
services to the Company during the fiscal year ending March 31, 1997 and may
continue to do so in the future. See "Management -- Executive Officers and
Directors."

In November 1992, the Company and WellTech, Inc. ("WellTech") formed the
LLC by contributing their respective workover rig service businesses in the
Texas Gulf Coast area, for which the Company received a 61% interest and
WellTech received a 39% interest in the LLC. Effective November 1, 1995, the
Company acquired WellTech's 39% minority interest in the LLC in exchange for the
issuance of 1,329,495 shares of the Common Stock to WellTech. In connection with
the Minority Interest Acquisition, the Company granted certain registration
rights to WellTech. See "Description of Capital Stock -- Registration Rights."
The purchase price paid by the Company for WellTech's minority interest in the
LLC was a result of arms-length negotiation and reflected the illiquidity of the
minority interest, the lack of control over the LLC operations by the minority
interest holder and other factors deemed relevant by the parties. The Minority
Interest Acquisition benefitted the Company by removing the Company's need to
get consent of the minority interest holder on a number of issues, such as
borrowing money and making capital expenditures, and relieved the Company from
the obligation under a non-competition provision to conduct all of its well
servicing activities in South Texas only through the LLC. On February 16, 1996,
WellTech distributed its 1,329,495 shares of Common Stock to its shareholders
and directors (the "WellTech Distributees"). As long as the WellTech
Distributees own at least 20% of the issued and outstanding shares of Common
Stock, the WellTech Distributees are entitled to recommend five persons to the
Company's Board, two of whom will be nominated

41
<PAGE> 44

by the Company and recommended to the shareholders for election to the Board. As
long as the WellTech Distributees own less than 20% but more than 10% of the
issued and outstanding shares of Common Stock, the Company will nominate and
recommend to the shareholders from a list of persons recommended by the WellTech
Distributees one such person for election to the Board. Mr. Collins, a former
director of WellTech, was elected to the Board pursuant to this provision. This
right, and the right to contractual preemptive rights, terminated upon
consummation of the IPO.

On November 1, 1994, the Company loaned Mr. Little, Chairman of the Board,
President and Chief Executive Officer of the Company, $55,486, which amount
bears interest at 7.5% per annum, provides for annual payments of interest and
for one principal payment at the end of the six-year term of the note. The loan
was made to enable Mr. Little to acquire 33,699 shares of Common Stock and is
secured by those shares. The entire principal balance of such loan was
outstanding as of November 30, 1996. In February 1996, the Company loaned Mr.
Little $75,000, which amount bears interest at 7.5% per annum, provides for
annual payments of interest and for one principal payment at the end of the
six-year term of the note. This loan was made to enable Mr. Little to exercise
options to acquire 32,250 shares of Common Stock and is secured by those shares.
The entire principal balance of such loan was outstanding as of November 30,
1996. In addition, on November 1, 1994, the Company loaned Mr. Eustace, Vice
President of Operations and Chief Operating Officer of the Company, $11,392,
which amount bears interest at 7.5% per annum, provides for annual payments of
interest and for one principal payment at the end of the six-year term of the
note. The loan was made to enable Mr. Eustace to acquire 6,919 shares of Common
Stock and is secured by those shares. The entire principal balance on such loan
was outstanding as of November 30, 1996.

In November 1994, the Company consummated the Well Solutions Acquisition
for $17.5 million. In connection with this transaction, and as part of the
purchase price, the Company issued to Well Solutions, Inc. a $1.5 million
convertible debenture, which bears interest at 8% per annum and matures November
30, 1999. The debenture is convertible at any time, at the option of Well
Solutions, Inc., into 37,634 shares of Common Stock (an effective conversion
price of $39.86 per share). If more or less than $1.5 million of principal and
accrued interest is outstanding under the debenture at the time of such
conversion, Well Solutions is entitled to a proportionately increased or
decreased amount of Common Stock. The Company does not currently intend to
prepay the debenture but may decide to do so in the future if interest rates
decline. In addition to this debenture, to consummate the Well Solutions
Acquisition, the Company utilized a portion of the $2.4 million received from
the issuance of subordinated debt and the $2.4 million received from the
issuance of 344,000 shares of Common Stock to RIMCO Partners, L.P. IV described
below, and a $13.0 million term loan to provide the funding required. The terms
upon which the Company issued the Common Stock and the subordinated debt are
further described below.

Also in November 1994, the Company issued $2.4 million of subordinated debt
to RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III and
Triad Ventures Limited II. The subordinated debt bore interest at 10% per annum,
with a maturity date of December 1, 1999. Pursuant to the Conversion Agreement,
the subordinated debt converted into Common Stock at the rate of one share of
Common Stock for each $6.98 in principal amount of subordinated debt effective
February 19, 1996. In November 1994 and January 1995, RIMCO Partners, L.P. IV
purchased 344,000 shares of Common Stock at $6.98 per share. In addition, Triad
Ventures Limited II held a promissory note issued by the Company with a
principal balance of $75,000 and maturing June 27, 1997, which note converted,
in February 1996, into 12,900 shares of Common Stock (conversion of this debt
and the $2.4 million of subordinated debt being referred to herein as the "Debt
Conversion Transaction" and together with the Series A Preferred Stock
Conversion Transaction, the "Conversion Transactions"). The RIMCO Parties and
Triad Ventures Limited II received certain registration rights in connection
with that transaction. See "Description of Capital Stock -- Registration
Rights."

The Conversion Agreement was entered into, effective November 1, 1995,
among the RIMCO Parties, Triad Ventures Limited II, NationsBanc Capital
Corporation, Nueces and the Company, and provided that the parties to that
agreement would convert all shares of Series A Preferred Stock and the $2.4
million subordinated debt owned by such parties into Common Stock on the
earliest of March 31, 1996, the consummation by the Company of an initial public
offering or notice of the distribution by WellTech of the Common Stock it owned
to the WellTech Distributees, which notice was given on February 19, 1996.

42
<PAGE> 45

In 1990, the Company issued a promissory note to an unrelated party in
connection with an asset acquisition. The promissory note, which was acquired by
Triad Ventures Limited II, provided for conversion into Common Stock, at the
rate of one share of Common Stock for each $5.81 of principal due on the note,
at the discretion of Triad Ventures Limited II. In February 1996, Triad Ventures
Limited II converted the promissory note, which had a principal balance of
$75,000, into 12,900 shares of Common Stock.

Effective October 17, 1990, NationsBanc Capital Corporation, Triad Ventures
Limited II and Mr. Greenwood entered into a Voting Agreement (the "1990 Voting
Agreement") pursuant to which the parties agreed to vote the shares of Series A
Preferred Stock held by them, and any Common Stock into which such Series A
Preferred Stock is converted, in the manner directed by Triad Ventures Limited
II and NationsBanc Capital Corporation. Such voting agreement was terminated in
August 1996 by holders of two-thirds of the shares covered by the 1990 Voting
Agreement.

A voting agreement dated November 28, 1994 (the "1994 Voting Agreement")
among the RIMCO Parties, Triad Ventures Limited II and Michael E. Little
provided that the parties to the 1994 Voting Agreement would vote the shares of
Common Stock held by them in favor of two nominees of the RIMCO Parties to the
Board. The 1994 Voting Agreement continues as long as the RIMCO Parties own at
least 10% of the issued and outstanding shares of Common Stock, on a fully
diluted basis. Messrs. McCollam and Oakes were elected to serve on the Board
pursuant to a 1991 agreement and the 1994 Voting Agreement. See
"Management -- Directors and Executive Officers."

On November 21, 1996, the 1994 Voting Agreement and the 1990 Voting
Agreement were terminated concurrent with the execution by the Company of a new
voting agreement. Under the current agreement, the Company agrees to nominate
and seek to elect two nominees of the RIMCO Parties if they own an aggregate of
10% or more of the Company's outstanding Common Stock, one nominee if such
ownership is less than 10% but more than 5% and no nominees if such ownership is
less than 5%.

In March 1996, the Company entered into a letter agreement that provided
Mr. Collins, a director of the Company at that time, with the right, upon his
departure from the Board prior to the Company's next Annual Meeting of
Shareholders, to designate a successor Board member, subject to the approval of
such successor by the Board. Mr. Banks was designated Mr. Collins' successor to
the Board pursuant to this letter agreement.

Gene Little, the father of Michael E. Little, serves as an operations
consultant to the Company and received fees and expense reimbursements of
$63,857, $54,491 and $44,480 in the years ended March 31, 1996, 1995 and 1994,
respectively. Gene Little has continued to serve as an operations consultant for
the Company during the fiscal year ending March 31, 1997.

Jefferies & Company, Inc. has in the past provided investment banking
services to the Company and also acted as an underwriter in the IPO. Jefferies &
Company, Inc. performed investment banking services for the Company in
connection with the Well Solutions Acquisition in November 1994 for which
Jefferies & Company, Inc. received usual and customary fees in the amount of
$295,000. Jefferies & Company, Inc. paid to affiliates of Mr. Greenwood in the
year ended March 31, 1995, a finder's fee of $122,500 from the fee it received
from the Company in connection with the Well Solutions Acquisition. Jefferies &
Company, Inc. also has acted as financial advisor to the Company in connection
with the Pride Acquisition for which it will be paid a fee of approximately $1.2
million, and is being reimbursed for its reasonable out-of-pocket expenses in
connection therewith.

Jefferies & Company, Inc. is serving as one of the representatives of
the underwriters for purposes of the Equity Offering. The underwriters of the
Equity Offering will receive customary compensation for such underwriting
consisting of the underwriting discount.

43
<PAGE> 46

SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of December 31, 1996, and as adjusted to
reflect the sale of Common Stock in the Equity Offering, by (i) each director of
the Company, (ii) each Named Executive Officer, (iii) each person known or
believed by the Company to own beneficially 5% or more of the Common Stock, (iv)
all directors and executive officers as a group and (v) the Selling
Shareholders. Unless otherwise indicated, each person has sole voting and
dispositive power with respect to such shares.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE THE EQUITY AFTER THE EQUITY
OFFERING(1) OFFERING(1)
-------------------------- -------------------------
SHARES OF SHARES TO SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK PERCENT BE SOLD COMMON STOCK PERCENT
- ------------------------------------------------ -------- --------- ------------ -------
<S> <C> <C> <C> <C> <C>
RIMCO Partners, L.P.
RIMCO Partners, L.P. II
RIMCO Partners, L.P. III
RIMCO Partners, L.P. IV........... 1,050,133(2) 16.4% -- 1,050,133(2) 10.1%
FMR Corp............................ 812,760(3) 12.8% %
Cumberland Associates............... 400,000(4) 6.3% -- 400,000(4) 3.8%
Michael E. Little................... 198,345(5) 3.1% -- 198,345(5) 1.9%
Russell Banks....................... 5,300(6) * -- 5,300(6) *
J. Michael Bell..................... 60,200(7) * -- 60,200(7) *
Joseph B. Eustace................... 42,138(8) * -- 42,138(8) *
Wm. Ward Greenwood.................. 21,804(9) * *
Douglas D. Lewis.................... 19,633(10) * -- 19,633(10) *
Paul E. McCollam.................... 1,063,033(11) 16.6% -- 1,063,033(11) 10.2%
Stephen F. Oakes.................... 8,600(12) * -- 8,600(12) *
Lawrence C. Petrucci................ 4,300(13) * -- 4,300(13) *
All executive officers and directors
as a group........................ 1,423,353 22.3% -- 1,423,353 13.6%
</TABLE>

- ---------------

* Less than 1%
(1) Shares of Common Stock that are not outstanding but that can be acquired by
a person within 60 days upon exercise of an option or similar right are
included in the number of shares beneficially owned and in computing the
percentage for such person but are not included in the number of shares
beneficially owned and in computing the percentage for any other person.
(2) The RIMCO Parties are limited partnerships; the general partner of each is
Resource Investors Management Company Limited Partnership, and its general
partner is RIMCO Associates, Inc. Their address is 22 Waterville Road,
Avon, Connecticut 06001. Voting and investment power over the shares held
by the RIMCO Parties is exercised by the managing directors of Resource
Investors Management Company Limited Partnership, and by the officers and
directors of RIMCO Associates, Inc. Messrs. McCollam and Oakes, directors
of the Company, are managing directors of Resource Investors Management
Company Limited Partnership. Does not include shares of Common Stock that
may be purchased by one or more affiliates of the RIMCO Parties in the
Equity Offering. See "Underwriting."
(3) FMR Corp., whose address is 82 Devonshire, E20E, Boston, Massachusetts
02109, may be deemed the beneficial owner of approximately 812,760 shares
of Common Stock. This number includes (i) 117,536 shares beneficially owned
by Fidelity Management & Research Company ("FMR Co."), a wholly owned
subsidiary of FMR Corp., as a result of FMR Co. serving as investment
adviser to an investment company registered under the Investment Company
Act of 1940 and (ii) 695,224 shares beneficially owned by Fidelity
Management Trust Company ("FMTC"), another wholly owned subsidiary of FMR
Corp., as a result of FMTC serving as investment manager for certain other
funds generally offered to limited groups of investors. FMR Corp. has no
voting power with respect to the shares owned by FMR

44
<PAGE> 47

Co. and sole dispositive power with respect to those shares, and FMR Corp.
has sole voting and dispositive power with respect to the shares owned by
FMTC.
(4) Includes (i) 315,600 shares of Common Stock as to which there is sole
voting power and sole power to dispose or to direct the disposition and
(ii) 84,400 shares of Common Stock as to which there is shared voting power
and shared power to dispose or to direct the disposition because the other
account holders may be deemed beneficial owners of such shares pursuant to
Rule 13d-3 under the Exchange Act as a result of their right to terminate
their discretionary accounts within a period of 60 days. The general
partners of Cumberland Associates are K. Tucker Andersen, Richard Reiss,
Jr., Oscar S. Schafer, Bruce G. Wilcox, Glenn Krevlin, Andrew Wallach and
Eleanor Poppe. Their address is 1114 Avenue of the Americas, New York, New
York 10036.
(5) Includes immediately exercisable options to purchase 60,200 shares of
Common Stock.
(6) Includes immediately exercisable options to purchase 4,300 shares of Common
Stock.
(7) Includes 43,000 shares owned by HixVen Partners, of which Mr. Bell, a
director of the Company, is the managing general partner, and with respect
to which shares he exercises sole voting and investment power. Also
includes immediately exercisable options for the purchase of 12,900 shares
of Common Stock, and 4,300 shares of Common Stock owned by Mr. Bell's wife
as to which Mr. Bell disclaims any beneficial ownership.
(8) Includes immediately exercisable options to purchase 20,141 shares of
Common Stock.
(9) Includes 4,081 shares held by Nueces, of which Mr. Greenwood is the sole
shareholder, and immediately exercisable options held by Mr. Greenwood to
purchase 12,900 shares of Common Stock.
(10) Includes immediately exercisable options to purchase 12,900 shares of
Common Stock.
(11) Includes 1,050,133 shares of Common Stock beneficially owned by the RIMCO
Parties and immediately exercisable options to purchase 12,900 shares of
Common Stock. Mr. McCollam intends to direct to the RIMCO Parties the
economic benefit of any options he has acquired in his capacity as a
director of the Company. Mr. McCollam's address is c/o RIMCO Associates,
Inc., 600 Travis Street, Suite 6875, Houston, Texas 77002.
(12) Represents immediately exercisable options to purchase shares of Common
Stock. Mr. Oakes intends to direct to the RIMCO Parties the economic
benefit of any options he has acquired in his capacity as a director of the
Company. Mr. Oakes' address is c/o RIMCO Associates, Inc., 22 Waterville
Road, Avon, Connecticut 06001.
(13) Represents immediately exercisable options to purchase shares of Common
Stock.

DESCRIPTION OF NOTES
GENERAL

The Notes will be issued under an indenture to be dated as of ,
1997 (the "Indenture"), between the Company and , as trustee (the
"Trustee"). The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Notes are subject to all such
terms, and Holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. A copy of the proposed form of Indenture is available
as set forth under "-- Available Information." The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions."

As used below in this "Description of Notes," the "Company" means Dawson
Production Services, Inc., but not any of its Subsidiaries.

The Notes will rank senior in right of payment to all Subordinated
Indebtedness of the Company issued in the future, if any. The Notes will rank
pari passu in right of payment with all senior Indebtedness of the Company,
including borrowings under the Credit Facility. However, the Notes will be
unsecured obligations of the Company and the borrowings under (i) the Working
Line will be secured by Liens on the accounts receivable and inventory of the
Company and its Subsidiaries and (ii) the Acquisition Line will be secured by
Liens on assets of the Company and its Subsidiaries with a value not to exceed
70% of the loan amount. As a

45
<PAGE> 48

result, the Indebtedness under the Credit Facility will effectively rank senior
to the Notes to the extent of the security therefor. The Notes will be
unconditionally guaranteed on a senior unsecured basis by the Subsidiary
Guarantors. See "-- Subsidiary Guarantees."

As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. Subject to the requirements of the Indenture, the
Company will be able to designate future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to the restrictive
covenants set forth in the Indenture.

PRINCIPAL, MATURITY AND INTEREST

The Notes will be limited in aggregate principal amount to $110.0 million
and will mature on February 1, 2007. Interest on the Notes will accrue at the
rate of % per annum and will be payable semi-annually in arrears on
February 1 and August 1 commencing on August 1, 1997, to Holders of record on
the immediately preceding January 15 and July 15. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Notes will be payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or in the case of Notes not in book-entry form, at the option
of the Company, payment of interest may be made by check mailed to the Holders
of the Notes at their respective addresses set forth in the register of Holders
of Notes; provided that all payments with respect to Notes in book-entry form,
and with respect to Notes in certificated form, the Holders of which have given
wire transfer instructions to the Company, will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. See "-- Book-Entry, Delivery and Form." Until otherwise designated by
the Company, the Company's office or agency in New York will be the office of
the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.

OPTIONAL REDEMPTION

The Notes will not be redeemable at the Company's option prior to February
1, 2002. Thereafter, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning on February 1,
of the years indicated below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
------------------------------------------------------------------ ----------
<S> <C>
2002.............................................................. %
2003.............................................................. %
2004.............................................................. %
2005 and thereafter............................................... 100.00%
</TABLE>

Notwithstanding the foregoing, at any time on or prior to February 1, 2000,
the Company may redeem up to an aggregate of $38.5 million principal amount of
Notes at a redemption price of % of the principal amount thereof, plus
accrued and unpaid interest thereon to the redemption date, with the net
proceeds of a Public Equity Offering; provided that at least $71.5 million in
aggregate principal amount of Notes remain outstanding immediately after the
occurrence of such redemption; and, provided, further, that such redemption
shall occur within 60 days of the date of the closing of such Public Equity
Offering.

SELECTION AND NOTICE

If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided that no
Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall
be mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of

46
<PAGE> 49

redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.

MANDATORY REDEMPTION

Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.

SUBSIDIARY GUARANTEES

Each of the Company's Significant Subsidiaries on the Issue Date and each
other Restricted Subsidiary that provides a guarantee under the Credit Facility
will become a Subsidiary Guarantor under the Indenture. Each Subsidiary
Guarantor will unconditionally guarantee on a senior basis, jointly and
severally, the full and prompt performance of the Company's obligations under
the Indenture and the Notes, including the payment of principal and interest on
the Notes. The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee will be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Subsidiary Guarantor in respect of the obligations of such other
Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its
contribution obligations under the Indenture, result in the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. The
terms of the Subsidiary Guarantees will provide that, for purposes of such
limitations and the applicable fraudulent conveyance laws, any indebtedness of a
Subsidiary Guarantor incurred from time to time pursuant to the Credit Facility
and secured by a perfected Lien on the assets of such Subsidiary Guarantor
(assuming, for purposes of such determination, that the incurrence of any such
indebtedness and the granting of any such security interest did not violate any
such fraudulent conveyance laws) shall be deemed, to the extent of the value of
the assets subject to such Lien, to have been incurred prior to the incurrence
by such Subsidiary Guarantor of liability under its Subsidiary Guarantee. See
"Risk Factors -- Fraudulent Conveyance."

The Indenture will provide that no Subsidiary Guarantor may consolidate
with or merge with or into (whether or not such Subsidiary Guarantor is the
surviving Person) another Person (other than the Company or another Subsidiary
Guarantor), whether or not affiliated with such Subsidiary Guarantor, unless (i)
subject to the provisions of the following paragraph, the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) shall execute a Subsidiary Guarantee and deliver an opinion of
counsel in accordance with the terms of the Indenture; (ii) immediately after
giving effect to such transaction, no Default or Event of Default exists; (iii)
such Subsidiary Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth (immediately after
giving effect to such transaction), equal to or greater than the Consolidated
Net Worth of such Subsidiary Guarantor immediately preceding the transaction;
(iv) the Company would be permitted by virtue of the Company's pro forma Fixed
Charge Coverage Ratio, immediately after giving effect to such transaction, to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant described below under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock" and (v) such transaction does not violate any of the covenants described
under "-- Certain Covenants."

The Indenture will provide that in the event of (i) the designation of any
Subsidiary Guarantor as an Unrestricted Subsidiary or (ii) a sale or other
disposition of all or substantially all of the properties or assets of any
Subsidiary Guarantor to a third party or an Unrestricted Subsidiary, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Subsidiary Guarantor, in either case, in a transaction or
manner that does not violate any of the covenants in the Indenture, then such
Subsidiary Guarantor (in the event of such a designation or a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
capital stock of such Subsidiary Guarantor) or the Person acquiring the property
(in the event of a sale or other disposition of all or substantially all of the
properties or assets of

47
<PAGE> 50

such Subsidiary Guarantor) will be released from and relieved of any obligations
under its Subsidiary Guarantee, provided that any Net Proceeds of such sale or
other disposition are applied in accordance with the covenant described under
the caption "-- Repurchase at the Option of Holders -- Asset Sales," and
provided, further, however, that any such termination shall occur only to the
extent that all obligations of such Subsidiary Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests that secure, any other Indebtedness of the Company or its Restricted
Subsidiaries shall also terminate upon such release, sale or disposition.

The Indenture will provide that (i) if the Company or any of its Restricted
Subsidiaries shall, after the Issue Date, (a) transfer or cause to be
transferred, any assets, businesses, divisions, real property or equipment
having an aggregate fair market or book value in excess of $1.0 million to any
Restricted Subsidiary that is not a Subsidiary Guarantor or (b) make any
Investment having an aggregate fair market or book value in excess of $1.0
million in any Restricted Subsidiary that is not a Subsidiary Guarantor or (ii)
if, after the Issue Date, any Restricted Subsidiary that is not a Subsidiary
Guarantor shall own any assets or properties having an aggregate fair market or
book value in excess of $1.0 million, then the Company shall cause such
Restricted Subsidiary to execute a Subsidiary Guarantee and deliver an opinion
of counsel, in accordance with the terms of the Indenture. In addition, the
Company shall not permit any of its Restricted Subsidiaries, other than a
Subsidiary Guarantor, directly or indirectly, to (i) incur, guarantee or secure
through the granting of Liens the payment of any Indebtedness of the Company or
(ii) pledge any intercompany notes representing obligations of any of its
Restricted Subsidiaries to secure the payment of any Indebtedness of the
Company, in each case, unless the Company shall cause such Restricted Subsidiary
to execute a Subsidiary Guarantee and deliver an opinion of counsel in advance
in accordance with the terms of the Indenture.

REPURCHASE AT THE OPTION OF HOLDERS

Change of Control

Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes on a Business Day (the
"Change of Control Payment Date") not more than 60 nor less than 30 days
following such Change of Control, pursuant to the offer described below (the
"Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon to
the date of purchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase all of the Notes then outstanding pursuant to the
procedures required by the Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. The Change of Control Offer is required to remain
open for at least 20 Business Days and until the close of business on the fifth
Business Day prior to the Change of Control Payment Date.

On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted, together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail or otherwise deliver to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.

The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture

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does not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.

The occurrence of a Change of Control may result in a default under the
Credit Facility and give the lenders thereunder the right to require the Company
to repay all Indebtedness outstanding thereunder. There can be no assurance that
the Company will have available funds sufficient to repay all Indebtedness owing
under the Credit Facility or to fund the repurchase of the Notes upon a Change
of Control. In the event a Change of Control occurs at a time when the Company
does not have available funds sufficient to pay for all of the Notes delivered
by Holders seeking to accept the Company's repurchase offer, an Event of Default
would occur under the Indenture.

The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.

"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any person (as such term is used in Section 13(d)(3) of the
Exchange Act); (ii) the Company consolidates with or merges into another Person
or any Person consolidates with, or merges into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (a) the outstanding voting stock of the Company is
changed into or exchanged for voting stock of the surviving or resulting Person
that is Qualified Capital Stock and (b) the holders of the voting stock of the
Company immediately prior to such transaction own, directly or indirectly, not
less than a majority of the voting stock of the surviving or resulting Person
immediately after such transaction; (iii) the adoption of a plan relating to the
liquidation or dissolution of the Company; (iv) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any person (as defined above) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the voting stock of the
Company or (v) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors. For purposes of this
definition, any transfer of an equity interest of an entity that was formed for
the purpose of acquiring voting stock of the Company will be deemed to be a
transfer of such portion of such voting stock as corresponds to the portion of
the equity of such entity that has been so transferred.

"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.

The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.

Asset Sales

The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the

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consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are Subordinated Indebtedness or
otherwise by their terms subordinated to the Notes or the Subsidiary Guarantees)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash within 180 days of closing such
Asset Sale (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision.

Within 365 days after the receipt of any Net Proceeds from any Asset Sale,
the Company may (i) apply all or any of the Net Proceeds therefrom to repay
Indebtedness (other than Subordinated Indebtedness) of the Company or any
Restricted Subsidiary, provided, in each case, that the related loan commitment
of any revolving credit facility or other borrowing (if any) is thereby
permanently reduced by the amount of such Indebtedness so repaid or (ii) invest
all or any part of the Net Proceeds thereof in properties and other capital
assets that replace the properties or other capital assets that were the subject
of such Asset Sale or in other properties or other capital assets that will be
used in the business of the Company and its Restricted Subsidiaries. Pending the
final application of any such Net Proceeds, the Company may temporarily reduce
borrowings under any revolving credit facility or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds equals or exceeds $15.0 million, the
Company will be required to make an offer to all holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon to the date of purchase in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use any remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.

The Company will not permit any Restricted Subsidiary to enter into or
suffer to exist any agreement that would place any restriction of any kind
(other than pursuant to law or regulation) on the ability of the Company to make
an Asset Sale Offer following any Asset Sale. The Company will comply with Rule
14e-1 under the Exchange Act, and any other securities laws and regulations
thereunder, if applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.

CERTAIN COVENANTS

Restricted Payments

The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company or dividends or distributions payable to the Company or any Wholly Owned
Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any Affiliate
of the Company (other than (A) any such Equity Interests owned by the Company or
any Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary
Guarantor and (B) Employee Stock Repurchases); (iii) make any principal payment
on, or purchase, redeem, defease or otherwise acquire or retire for value any
Subordinated Indebtedness, except in accordance with the mandatory redemption or
repayment provisions set forth in the original documentation governing such
Indebtedness or (iv) make any

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Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:

(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;

(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described below under the
caption "Incurrence of Indebtedness and Issuance of Preferred Stock;" and

(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by clauses
(x) and (y) of the next succeeding paragraph, but including the Restricted
Payment permitted by clause (z) of the next succeeding paragraph), is less
than the sum of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the first
quarter commencing after the Issue Date to the end of the Company's most
recently ended quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate Net Equity Proceeds (A) received by the Company
from the issue or sale, subsequent to the Issue Date, of Qualified Capital
Stock of the Company or (B) of any other Equity Interests or debt
securities of the Company that have been issued subsequent to the Issue
Date and that have been converted into such Qualified Capital Stock (other
than any Qualified Capital Stock sold to a Restricted Subsidiary of the
Company) plus (iii) to the extent not otherwise included in Consolidated
Net Income, the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or a Restricted Subsidiary
after the Issue Date from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary
(valued as provided below), plus (iv) $10.0 million.

The foregoing provisions will not prohibit any of the following: (w) the
payment of any dividend within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the provisions
of the Indenture; (x) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the Net Equity Proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of Qualified Capital Stock of the Company
(other than any Disqualified Stock); provided that the amount of any such Net
Equity Proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph and (y) the defeasance, redemption or repurchase of
Subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or the substantially concurrent sale (other
than to a Restricted Subsidiary of the Company) of Qualified Capital Stock of
the Company; provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph.

For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment of the asset(s)
proposed to be transferred by the Company or such Restricted Subsidiary, as the
case may be, pursuant to the Restricted Payment. Not later than the date of
making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this "Restricted
Payments" covenant were computed, which calculations may be based upon the
Company's latest available financial statements.

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The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would be permitted by the provisions
of this "Restricted Payments" covenant and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. For purposes of
making such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash prior to such
designation) in the Restricted Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under paragraph (c) of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the Fair Market Value of such Investments at the time of such
designation.

Incurrence of Indebtedness and Issuance of Preferred Stock

The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Indebtedness but excluding any Permitted
Indebtedness) and that the Company will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock, and any
Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness),
if the Fixed Charge Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least (i) 2.0 to 1.0 if
such date occurs on or after the Issue Date and on or prior to March 31, 1998,
or (ii) 2.25 to 1.0 if such date occurs after March 31, 1998, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.

The Indenture will also provide that neither the Company nor any Subsidiary
Guarantor will, directly or indirectly, in any event incur any Indebtedness that
by its terms (or by the terms of any agreement governing such Indebtedness) is
subordinated to any other Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinate to the Notes or the Subsidiary Guarantee of such Subsidiary
Guarantor, as the case may be, to the same extent and in the same manner as such
Indebtedness is subordinated pursuant to subordination provisions that are most
favorable to the holders of any other Indebtedness of the Company or such
Subsidiary Guarantor, as the case may be.

Liens

The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, create, incur, assume,
affirm or suffer to exist or become effective any Lien of any kind, except for
Permitted Liens, upon any of their respective property or assets, whether now
owned or acquired after the Issue Date, or any income, profits or proceeds
therefrom, to secure (a) any Indebtedness of the Company or such Restricted
Subsidiary (if it is not also a Subsidiary Guarantor), unless prior to, or
contemporaneously therewith, the Notes are equally and ratably secured or (b)
any Indebtedness of any Subsidiary Guarantor, unless prior to, or
contemporaneously therewith, the Subsidiary Guarantees are equally and ratably
secured; provided, however, that if such Indebtedness is expressly subordinated
to the Notes or the Subsidiary Guarantees, the Lien securing such Indebtedness
will be subordinated and junior to the Lien securing the Notes or the Subsidiary
Guarantees, as the case may be, with the same relative priority as such
Indebtedness has with respect to the Notes or the Subsidiary Guarantees. The
foregoing covenant will not apply to any Lien securing Acquired Indebtedness,
provided that any such Lien extends only to the property or assets that were
subject to such Lien prior to the related acquisition by the Company or such
Restricted Subsidiary and was not created, incurred or assumed in contemplation
of such transaction. The incurrence of additional secured Indebtedness by the
Company and its Restricted Subsidiaries is subject to further

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limitations on the incurrence of Indebtedness as described under "-- Incurrence
of Indebtedness and Issuance of Preferred Stock."

Sale-and-Leaseback Transactions

The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale-and-leaseback
transaction; provided that the Company or any Restricted Subsidiary, as
applicable, may enter into a sale-and-leaseback transaction if (i) the Company
could have (a) incurred Indebtedness in an amount equal to the Attributable
Indebtedness relating to such sale-and-leaseback transaction pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Additional
Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the caption
"-- Liens," (ii) the gross cash proceeds of such sale-and-leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale-and-leaseback
transaction and (iii) the transfer of assets in such sale-and-leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales."

Transactions with Affiliates

The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, (a) sell, lease, transfer or otherwise
dispose of any of its properties, assets or securities to, (b) purchase or lease
any property, assets or securities from, (c) make any Investment in or (d) enter
into or suffer to exist any other transaction or series of related transactions
with, or for the benefit of, any Affiliate of the Company unless (i) such
transaction or series of transactions is on terms that are no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than those that
would be available in a comparable arm's length transaction with an unrelated
third party, (ii) with respect to any one transaction or series of related
transactions involving aggregate payments in excess of $1.0 million, the Company
delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (i) above and
(iii) with respect to a transaction or series of related transactions involving
payments in excess of $10.0 million, the Company delivers an Officers'
Certificate to the Trustee certifying that (A) such transaction or series of
related transactions complies with clause (i) above and (B) such transaction or
series of related transactions has been approved by a majority of the
Disinterested Directors of the Company; provided, however, that the foregoing
restriction shall not apply to (u) any arrangements in effect on the Issue Date,
(v) transactions between or among the Company and its Wholly Owned Restricted
Subsidiaries, (w) loans or advances to officers, directors and employees of the
Company or any Restricted Subsidiary made in the ordinary course of business and
consistent with past practices of the Company and its Restricted Subsidiaries in
an aggregate amount not to exceed $1.0 million outstanding at any one time, (x)
indemnities of officers, directors and employees of the Company or any
Restricted Subsidiary permitted by bylaw or statutory provisions, (y) the
payment of reasonable and customary regular fees to directors of the Company or
any of its Restricted Subsidiaries who are not employees of the Company or any
Affiliate and (z) the Company's employee compensation and other benefit
arrangements.

Issuances and Sales of Capital Stock of Wholly Owned Subsidiaries

The Indenture will provide that the Company (i) will not, and will not
permit any Wholly Owned Restricted Subsidiary of the Company to, transfer,
convey, sell or otherwise dispose of any Capital Stock of any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale or other disposition is of all the Capital Stock of such Wholly
Owned Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale or other disposition are applied in accordance with the
covenant described above under the caption "-- Repurchase at the Option of
Holders -- Asset Sales," and (ii) will not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests to any

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Person other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company; except, in the case of both clauses (i) and (ii) above, with respect to
dispositions or issuances by a Wholly Owned Restricted Subsidiary of the Company
as contemplated in clauses (i) and (ii) of the definition of "Wholly Owned
Restricted Subsidiary."

Dividend and Other Payment Restrictions Affecting Subsidiaries

The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) (a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (r) Existing Indebtedness as in effect on the date of the Indenture,
(s) the Credit Facility as in effect as of the date of the Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Credit
Facility as in effect on the date of the Indenture, (t) the Indenture and the
Notes, (u) applicable law, (v) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (w) by reason of customary nonassignment provisions in leases
entered into in the ordinary course of business and customary provisions in
other agreements that restrict assignment of such agreements or rights
thereunder, (x) customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale, (y)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired or (z) Permitted Refinancing Indebtedness with
respect to any indebtedness referred to in clauses (r), (t) and (v) above,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced.

Merger, Consolidation or Sale of Assets

The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
Person unless (i) the Company is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) except in the
case of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, immediately after such transaction no Default or Event of Default
exists and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the

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Company immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Stock."

Business Activities

The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than (i) the Oil
Service Business, (ii) such other businesses as the Company or its Restricted
Subsidiaries are engaged in on the Issue Date and (iii) such other business
activities as are reasonably related or incidental thereto.

REPORTS

The Indenture will provide that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the consolidated financial condition
and results of operations of the Company and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all information that would be required to be contained in a
filing with the Commission on Form 8-K if the Company were required to file such
Form. In addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request.

EVENTS OF DEFAULT AND REMEDIES

The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if any,
on the Notes; (iii) failure by the Company to comply with the provisions
described under the caption "-- Repurchase at the Option of Holders" or
"-- Certain Covenants -- Merger, Consolidation or Sale of Assets;" (iv) failure
by the Company for 45 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (A) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (B) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more for any single Indebtedness or a
total of $10.0 million or more for all such Indebtedness; (vi) failure by the
Company or any of its Subsidiaries to pay final judgments aggregating in excess
of $5.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (vii) any Subsidiary Guarantee shall for any reason cease to be, or
be asserted by the Company or any Subsidiary Guarantor, as applicable, not to
be, in full force and effect (except pursuant to the release of any Subsidiary
Guarantee in accordance with the Indenture) and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Restricted
Subsidiaries that constitute a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary.

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If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Restricted Subsidiary that constitutes a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.

The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.

The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS

No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

The Company may, at its option and at any time, elect to have all of the
obligations of itself and the Subsidiary Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders
of outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under the caption "-- Events of
Default and Remedies" will no longer constitute an Event of Default with respect
to the Notes.

To exercise either Legal Defeasance or Covenant Defeasance, (i) the Company
must irrevocably deposit with the Trustee, in trust, for the benefit of the
Holders of the Notes, cash in U.S. dollars, non-callable Government Securities,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to maturity or to
a particular redemption date; (ii) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the

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Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of the Indenture, 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 shall confirm that, the Holders of the
outstanding Notes 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 times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes 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; (iv) 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) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, which, taken together, state that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.

TRANSFER AND EXCHANGE

A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.

The registered Holder of a Note will be treated as the owner of it for all
purposes.

AMENDMENT, SUPPLEMENT AND WAIVER

Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in aggregate principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).

Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"); (iii) reduce the rate of or change
the time for payment of interest on any Note; (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the

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payment default that resulted from such acceleration); (v) make any Note payable
in money other than that stated in the Notes; (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes; (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders"); (viii) alter the ranking of
the Notes relative to other Indebtedness of the Company or (ix) make any change
in the foregoing amendment and waiver provisions. In addition, without the
consent of Holders of not less than 66 2/3% in aggregate principal amount of the
Notes then outstanding, no such amendment, supplement or waiver may amend,
change or modify the obligation of the Company to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate an
Asset Sale Offer with respect to any Asset Sale or modify any of the provisions
or definitions with respect thereto.

Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to (i) cure any ambiguity, defect or inconsistency, (ii) provide for
uncertificated Notes in addition to or in place of certificated Notes, (iii)
provide for the assumption of the Company's obligations to Holders of Notes in
the case of a merger or consolidation, (iv) make any change that would provide
any additional rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, (v)
secure the Notes pursuant to the requirements of the "Liens" covenant or
otherwise or (vi) comply with requirements of the Commission to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.

CONCERNING THE TRUSTEE

The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, 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 it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.

The Holders of a majority in aggregate principal amount of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.

GOVERNING LAW

The Indenture, the Notes and the Subsidiary Guarantees will provide that
they will be governed by the laws of the State of New York.

BOOK-ENTRY, DELIVERY AND FORM

The Notes to be resold as set forth herein will initially be issued in the
form of one or more fully registered global Notes (collectively, the "Global
Note"). The Global Note will be deposited on the Issue Date with, or on behalf
of, The Depository Trust Company, New York, New York (the "Depository") and
registered in the name of Cede & Co., as nominee of the Depository (such nominee
being referred to herein as the "Global Note Holder").

The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers (including the Underwriter),
banks and trust companies, clearing corporations and certain other
organizations.

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Access to the Depository's system is also available to other entities such as
banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depository's Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depository only through the Depository's
Participants or the Depository's Indirect Participants.

The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Note, the Depository will credit the
accounts of Participants designated by the Underwriter with portions of the
principal amount of the Global Note and (ii) ownership of the Notes evidenced by
the Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depository (with respect to the
interests of the Depository's Participants), the Depository's Participants and
the Depository's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.

So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Except as provided below, beneficial owners
of Notes evidenced by the Global Note will not be entitled to have the Notes
registered in their names, will not receive or be entitled to receive physical
delivery of the Notes in definitive form and will not be considered the owners
or Holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depository or for maintaining,
supervising or reviewing any records of the Depository relating to the Notes.

Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be made by the Company through the paying agent to or at the
direction of the Global Note Holder in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names Notes, including the Global Note,
are registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depository to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depository. Payments by the Depository's Participants and the Depository's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depository's Participants or the Depository's Indirect Participants.

As long as the Notes are represented by a Global Note, the Depository's
nominee will be the Holder of the Notes and therefore will be the only entity
that can exercise a right to repurchase the Notes. See "Certain Covenants" and
"-- Repurchase at the Option of Holders." Notice by Participants or Indirect
Participants or by owners of beneficial interests in a Global Note held through
such Participants or Indirect Participants of the exercise of the option to
elect repurchase of beneficial interests in Notes represented by Global Note
must be transmitted to the Depository in accordance with its procedures on a
form required by the Depository and provided to Participants. To ensure that the
Depository's nominee will timely exercise a right to repurchase with respect to
a particular Note, the beneficial owner of such Note must instruct the broker or
other Participant or Indirect Participant through which it holds an interest in
such Note to notify the Depository of its desire to exercise a right to
repurchase. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other Participant or Indirect Participant through which it
holds an interest in a Note in order to ascertain the cut-off time by which such
an instruction must be given in order for timely notice to be delivered to the
Depository. The Company will not be liable for any delay in delivery to the
paying agent of notices of the exercise of any option to elect repurchase.

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If (i) the Company notifies the Trustee in writing that the Depository is
no longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Securities under the Indenture, then, upon surrender by
the Global Note Holder of its Global Note, Notes in such form will be issued to
each person that the Global Note Holder and the Depository identify as being the
beneficial owner of the related Notes.

Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depository in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depository for all purposes.

Same-Day Settlement and Payment

The Indenture will require that payments in respect of the Notes
represented by the Global Note (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, if any,
and interest by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. The Notes represented by the
Global Note are expected to trade in the Depository's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes will,
therefore, be required by the Depository to be settled in immediately available
funds. The Company expects that secondary trading in Certificated Securities
will also be settled in immediately available funds.

CERTAIN DEFINITIONS

Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.

"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary to such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.

"Acquisition Line" means the loan facility under the Credit Agreement,
dated , 1997, as amended, modified, supplemented, extended, restated
or renewed from time to time.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.

"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including, without limitation, by means of a sale-and-leaseback
transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary held by the
Company or any other Restricted Subsidiary, (b) all or substantially all of the
properties and assets of any division or line of business of the Company or any
of its Restricted Subsidiaries, (c) any Event of Loss or (d) any other
properties or assets of the Company or any of its Restricted Subsidiaries other
than transfers of cash, Cash Equivalents, accounts receivable, or properties or
assets in the

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ordinary course of business; provided that the sale, lease, conveyance or other
disposition of all or substantially all of the properties or assets of the
Company and its Restricted Subsidiaries, taken as a whole, will be governed by
the provisions of the Indenture described above under the caption "-- Repurchase
at the Option of Holders -- Change of Control" and/or the provisions described
above under the caption "-- Certain Covenants -- Merger, Consolidation or Sale
of Assets" and not by the provisions of the "Asset Sales" covenant. For the
purposes of this definition, the term "Asset Sale" also shall not include any of
the following: (i) any transfer of properties or assets to an Unrestricted
Subsidiary, if such transfer is permitted under the "Restricted Payments"
covenant described above; (ii) sales of damaged, worn-out or obsolete equipment
or assets that, in the Company's reasonable judgment, are either (A) no longer
used or (B) no longer useful in the business of the Company or its Restricted
Subsidiaries; (iii) any lease of any property entered into in the ordinary
course of business and with respect to which the Company or any Restricted
Subsidiary is the lessor, except any such lease that provides for the
acquisition of such property by the lessee during or at the end of the term
thereof for an amount that is less than the fair market value thereof at the
time the right to acquire such property is granted and (iv) any transfers that,
but for this clause (iv), would be Asset Sales, if (A) the Company elects to
designate such transfers as not constituting Asset Sales and (B) after giving
effect to such transfers, the aggregate Fair Market Value of the properties or
assets transferred in such transaction or any such series of related
transactions so designated by the Company does not exceed $500,000.

"Attributable Indebtedness" in respect of a sale-and-leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale-and-leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended). As used in the preceding sentence, the "net rental
payments" under any lease for any such period shall mean the sum of rental and
other payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on account
of maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges. In the case of any lease that is terminable by the lessee upon
payment of penalty, such net rental payment shall also include the amount of
such penalty, but no rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated.

"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.

"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability
corporation or similar entity, any membership or other similar interests therein
and (v) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.

"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of 365 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 365 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million; (iii) commercial
paper with a maturity of 270 days or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of the
United States or the District of Columbia and rated at least A-2 by Standard and
Poor's Ratings Group (or its successors) or at least P-2 by Moody's Investors
Service, Inc. (or its successors); (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any commercial bank meeting the
specifications of clause (ii) above; (v) overnight bank deposits and bankers'
acceptances at any commercial bank meeting the qualifications specified in
clause (ii) above; (vi) deposits available for withdrawal on demand with any
commercial bank not meeting the qualifications specified in clause (ii) above,
provided all such deposits do not exceed $5.0 million

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in the aggregate at any one time; (vii) demand and time deposits and
certificates of deposit with any commercial bank organized in the United States
not meeting the qualifications specified in clause (ii) above, provided that
such deposits and certificates support bond, letter of credit and other similar
types of obligations incurred in the ordinary course of business and (viii)
investments in money market or other mutual funds substantially all of whose
assets comprise securities of the types described in clauses (i) through (v)
above.

"Commission" means the Securities and Exchange Commission.

"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated net interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable
Indebtedness, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Interest Rate Protection Obligations), to the extent that
any such expense was deducted in computing such Consolidated Net Income, plus
(iv) depreciation, amortization (including amortization of goodwill, debt
issuance costs and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash charges (including
any provision for the reduction in the carrying value of assets recorded in
accordance with GAAP but excluding any such non-cash charge to the extent that
it represents an accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash charges were deducted in computing
such Consolidated Net Income, minus (v) any non-cash items increasing the
Consolidated Net Income of such Person and its Restricted Subsidiaries during
such period (excluding any such items that represent the reversal of any accrual
of, or cash reserve for, anticipated cash charges in any prior period commencing
subsequent to the Issue Date), in each case, on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other non-cash charges of a Restricted Subsidiary of the referent Person shall
be added to Consolidated Net Income to compute Consolidated Cash Flow only to
the extent (and in same proportion) that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.

"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof that is a Subsidiary Guarantor; (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders; (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded and (iv) the cumulative effect of a change
in accounting principles shall be excluded.

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"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common shareholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Subsidiaries (except, in each case, Permitted
Investments) and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.

"Credit Facility" means, collectively, the Acquisition Line and the Working
Line.

"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time that were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.

"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors of the Company is
required to deliver a resolution of the Board of Directors under the Indenture,
a member of the Board of Directors of the Company who does not have any material
direct or indirect financial interest (other than an interest arising solely
from the beneficial ownership of Capital Stock of the Company) in or with
respect to such transaction or series of transactions.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which the Notes mature.

"Employee Stock Repurchases" means purchases by the Company of any of its
Capital Stock from employees, provided that the aggregate amount of all such
purchases shall not exceed $500,000 during any fiscal year of the Company.

"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

"Event of Loss" means, with respect to any workover rig or similar or
related property or asset of the Company or any Restricted Subsidiary, (i) any
damage to such workover rig or similar or related property or asset that results
in an insurance settlement with respect thereto on the basis of a total loss or
a constructive or compromised total loss or (ii) the confiscation, condemnation
or requisition of title to such workover rig or similar or related property or
asset by any government or instrumentality or agency thereof. An Event of Loss
shall be deemed to occur as of the date of the insurance settlement,
confiscation, condemnation or requisition of title, as applicable.

"Existing Indebtedness" means up to $ million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Facility) in existence on the Issue Date, until
such amounts are repaid.

"Fair Market Value" means, with respect to any asset or Investment, the
fair market value of such asset or Investment at the time of the event requiring
such determination, and, with respect to any assets or Investment in excess of
$5.0 million (other than cash or Cash Equivalents) as determined by a reputable

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appraisal firm that is, in the reasonable judgment of the Board of Directors of
the Company, qualified to perform the task for which such firm has been engaged
and independent with respect to the Company.

"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person for
such period. In the event that the Company or any of its Restricted Subsidiaries
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues preferred stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions of businesses that
have been made by the referent Person or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period; (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded; and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.

"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense (net of any interest income) of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(excluding amortization of debt issuance costs and including, without
limitation, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Interest
Rate Protection Obligations); (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period;
(iii) any interest expense on Indebtedness of another Person that is guaranteed
by such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or not such
guarantee or Lien is called upon) and (iv) the product of (A) all cash dividend
payments (and non-cash dividend payments in the case of a Person that is a
Restricted Subsidiary) on any series of preferred stock of such Person, to the
extent such preferred stock is owned by Persons other than such Person or its
Restricted Subsidiaries, times (B) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.

The term "guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or any
part of such obligation, including, without limiting the foregoing, the payment
of amounts drawn down under letters of credit. When used as a verb, "guarantee"
has a corresponding meaning.

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"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any obligations in respect of
Currency Hedge Obligations or Interest Rate Protection Obligations, except any
such balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing indebtedness (other than letters of credit, Currency
Hedge Obligations and Interest Rate Protection Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the guarantee by such Person of any Indebtedness
of any other Person.

"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements or arrangements designed to protect
against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in interest rates.

"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that the following shall not constitute Investments: (i) an acquisition
of assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company, (ii) extensions of trade
credit or other advances to customers on commercially reasonable terms in
accordance with normal trade practices or otherwise in the ordinary course of
business, (iii) Interest Rate Protection Obligations and Currency Hedge
Obligations, but only to the extent that the same constitute Permitted
Indebtedness and (iv) endorsements of negotiable instruments and documents in
the ordinary course of business. If the Company or any Subsidiary of the Company
sells or otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.

"Issue Date" means the date on which the Notes were first issued under the
Indenture.

"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other
than a precautionary financing statement respecting a lease not intended as a
security agreement).

"Net Equity Proceeds" means (i) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net proceeds received by
the Company, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in other property
(valued as determined reasonably and in good faith by the Board of Directors of
the Company, as evidenced by a written resolution of said Board of Directors, at
the fair market value thereof at the time of receipt) and (ii) in the case of
any exchange, exercise, conversion or surrender of any outstanding Indebtedness
of the Company or any Restricted Subsidiary for or into shares of Qualified
Capital Stock of the Company, the amount of such Indebtedness (or, if such
Indebtedness was issued at an amount less than the stated principal amount
thereof, the accrued amount thereof as determined in accordance with GAAP) as
reflected in the consolidated

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financial statements of the Company prepared in accordance with GAAP as of the
most recent date next preceding the date of such exchange, exercise, conversion
or surrender (plus any additional amount required to be paid by the holders of
such Indebtedness to the Company or to any Wholly Owned Restricted Subsidiary of
the Company upon such exchange, exercise, conversion or surrender and less any
and all payments made to the holders of such Indebtedness, and all other
expenses incurred by the Company in connection therewith), in the case of each
of clauses (i) and (ii) to the extent consummated after the Issue Date.

"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale-and-leaseback transactions) or other
sale of assets or (b) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries; (ii) any extraordinary or
nonrecurring item (but not loss), together with any related provision for taxes
on such extraordinary or nonrecurring gain (but not loss) and (iii) any interest
income, together with any related provision for taxes on such interest income.

"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facility) secured by a Lien on the
asset or assets that were the subject of such Asset Sale, amounts required to be
paid to any Person (other than the Company or any Restricted Subsidiary) owning
a beneficial interest in the asset or assets that were the subject of such Asset
Sale, and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.

"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (A) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (B) is directly or indirectly liable (as a Subsidiary
Guarantor or otherwise) or (C) constitutes the lender; (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.

"Non-Recourse Purchase Money Indebtedness" means Indebtedness or that
portion of Indebtedness of the Company or any Restricted Subsidiary incurred in
connection with the acquisition by the Company or such Restricted Subsidiary,
subsequent to the Issue Date, of any property or assets and as to which (i) the
holders of such Indebtedness agree that they will look solely to the property or
assets so acquired (or, in the case of the acquisition of all of the outstanding
Capital Stock of a Person, the underlying properties and assets of such Person
at the time of such acquisition, including proceeds thereof) and securing such
Indebtedness for payment on or in respect of such Indebtedness, and neither the
Company nor any Restricted Subsidiary (A) provides credit support, including any
undertaking, agreement or instrument that would constitute Indebtedness or (B)
is directly or indirectly liable for such Indebtedness and (ii) no default with
respect to such Indebtedness would permit (after notice or passage of time or
both), according to the terms thereof, any holder of any Indebtedness of the
Company or a Restricted Subsidiary to declare a default on such Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and, provided however, that any portion of the purchase price of such
property or assets that is not financed through the incurrence of such
Indebtedness, shall be deemed to be a "Restricted Investment" under the
Indenture and shall only be permitted to be expended by the Company or any
Restricted Subsidiary to the extent that

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the Company would be permitted to make a Restricted Payment in such amount under
the terms of the covenant described above under "-- Certain
Covenants -- Restricted Payments."

"Oil Service Business" means any businesses related to providing services
related to the drilling for or exploration and production of oil, gas or other
hydrocarbons, including, but not limited to (i) the well servicing business,
(ii) liquid services and (iii) production services.

"Permitted Indebtedness" means any of the following:

(i) Indebtedness (and any guarantee thereof) under the Working Line in
an aggregate principal amount at any one time outstanding not to exceed the
greater of (A) $35 million, less any amounts derived from Asset Sales and
applied to the permanent reduction of the Indebtedness thereunder as
contemplated by the covenant described above under the caption "Repurchase
at the Option of Holders -- Asset Sales" or (B) the sum of (1) 80% of the
Company's Eligible Accounts Receivable (as defined in the Working Line) and
(2) 50% of the inventory of the Company and its Restricted Subsidiaries
determined in accordance with GAAP (the "Maximum Bank Facility Amount"),
and any renewals, amendments, extensions, supplements, modifications,
deferrals, refinancing or replacements (each, for purposes of this clause
(i), a "refinancing") thereof, including any successive refinancing
thereof, so long as the aggregate principal amount of any such new
Indebtedness, together with the aggregate principal amount of all other
Indebtedness outstanding pursuant to this clause (i), shall not at any one
time exceed the Maximum Bank Facility Amount;

(ii) Indebtedness under the Acquisition Line in an aggregate principal
amount at any one time outstanding not to exceed $20.0 million, and any
renewals, amendments, extensions, supplements, modifications, deferrals,
refinancing or replacements (each for purposes of this clause (ii), a
"refinancing") thereof, including any successive refinancing thereof, so
long as the aggregate principal amount of any such new Indebtedness
hereunder, together with the aggregate principal amount of all other
Indebtedness outstanding pursuant to this clause (ii), shall not at any one
time exceed $20.0 million;

(iii) Indebtedness under the Notes;

(iv) Indebtedness under any Existing Indebtedness and any Indebtedness
under Letters of Credit existing on the Issue Date;

(v) Indebtedness under Interest Rate Protection Obligations, provided
that (A) such Interest Rate Protection Obligations are related to payment
obligations on Permitted Indebtedness or Indebtedness otherwise permitted
by the initial paragraph of the "Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant and (B) the notional principal amount of such
Interest Rate Protection Obligations does not exceed the principal amount
of such Indebtedness to which such Interest Rate Protection Obligations
relate;

(vi) Indebtedness under Currency Hedge Obligations, provided that (A)
such Currency Hedge Obligations are related to payment obligations on
Permitted Indebtedness or Indebtedness otherwise permitted by the initial
paragraph of the "Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant or to the foreign currency cash flows reasonably expected
to be generated by the Company and its Restricted Subsidiaries and (B) the
notional principal amount of such Currency Hedge Obligations does not
exceed the principal amount of such Indebtedness and the amount of such
foreign currency cash flows to which such Currency Hedge Obligations
relate;

(vii) the Subsidiary Guarantees of the Notes (and any assumption of
the obligations guaranteed thereby);

(viii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary of the Company to
the Company or a Wholly Owned Restricted Subsidiary; provided, however,
that upon any subsequent issuance or transfer of any Capital Stock or any
other event that results in any such Wholly Owned Restricted Subsidiary
ceasing to be a Wholly Owned Restricted Subsidiary or any other subsequent
transfer of any such Indebtedness (except to the Company or a Wholly Owned
Restricted Subsidiary), such Indebtedness shall be deemed, in each case, to
be incurred

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and shall be treated as an incurrence for purposes of the initial paragraph
of the "Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant at the time the Wholly Owned Restricted Subsidiary in question
ceased to be a Wholly Owned Restricted Subsidiary or the time such
subsequent transfer occurred;

(ix) Indebtedness in respect of bid, performance or surety bonds
issued for the account of the Company or any Restricted Subsidiary thereof
in the ordinary course of business, including guarantees or obligations of
the Company or any Restricted Subsidiary thereof with respect to letters of
credit supporting such bid, performance or surety obligations (in each case
other than for an obligation for money borrowed);

(x) the incurrence by the Company or its Restricted Subsidiaries of
Non-Recourse Purchase Money Indebtedness;

(xi) any Permitted Refinancing Indebtedness incurred by the Company or
a Restricted Subsidiary of any Indebtedness incurred pursuant to clause
(iii) or (iv) of this definition, including any successive refinancing by
the Company or such Restricted Subsidiary; and

(xii) any additional Indebtedness issued pursuant to one or more
credit agreements in an aggregate principal amount for all such credit
agreements not in excess of $5.0 million at any one time outstanding and
any guarantee thereof.

"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or any of its Wholly Owned
Restricted Subsidiaries; (iii) Investments by the Company or any of its
Restricted Subsidiaries in another Person, if as a result of such Investment (A)
such other Person becomes a Wholly Owned Restricted Subsidiary or (B) such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its properties and assets to, the Company or a Wholly Owned
Restricted Subsidiary; (iv) Investments permitted under the covenant described
above under the caption "-- Repurchase at the Option of Holders -- Asset Sales;"
(v) Investments made in the ordinary course of business in prepaid expenses,
lease, utility, workers' compensation, performance and other similar deposits;
(vi) Investments in stock, obligations or securities received in, settlement of
debts owing to the Company or any Restricted Subsidiary as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection or
enforcement of any Lien in favor of the Company or any Restricted Subsidiary, in
each case as to debt owing to the Company or any Restricted Subsidiary that
arose in the ordinary course of business of the Company or any such Restricted
Subsidiary, provided that any stocks, obligations or securities received in
settlement of debts that arose in the ordinary course of business (and received
other than as a result of bankruptcy or insolvency proceedings or upon
foreclosure, perfection or enforcement of any Lien) that are, within 30 days of
receipt, converted into cash or Cash Equivalents shall be treated as having been
cash or Cash Equivalents at the time received and (vii) other Investments in
joint ventures, corporations, limited liability companies or partnerships formed
with or organized by third Persons, which joint ventures, corporations, limited
liability companies or partnerships, engage in the Oil Service Business and are
not Unrestricted Subsidiaries at the time of such Investment, provided such
Investments do not, in the aggregate, exceed $10.0 million.

"Permitted Liens" means the following types of Liens:

(a) Liens existing as of the date of the Indenture;

(b) Liens securing the Notes or the Subsidiary Guarantees;

(d) Liens securing Indebtedness that constitutes Permitted
Indebtedness pursuant to clause (i), (ii) or (iv) of the definition of
Permitted Indebtedness;

(e) Liens for taxes, assessments and governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;

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(f) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;

(g) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds,
bids, government contracts and leases, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);

(h) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceedings that may have been duly initiated for the
review of such judgment shall not have been finally terminated or the
period within which such proceeding may be initiated shall not have
expired;

(i) any interest or title of a lessor under any Capital Lease
Obligation or operating lease;

(j) Liens securing Non-Recourse Purchase Money Indebtedness and other
purchase money Liens; provided, however, that (A) the related Non-Recourse
Purchase Money Indebtedness or other purchase money Indebtedness shall not
be secured by any property or assets of the Company or any Restricted
Subsidiary other than the property or assets so acquired and any proceeds
therefrom and (B) the Lien securing any such Indebtedness shall be created
within 90 days of such acquisition;

(k) Liens securing obligations under or in respect of either Currency
Hedge Obligations or Interest Rate Protection Obligations;

(l) Liens upon specific items of inventory or other goods of any
Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;

(m) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property or
assets relating to such letters of credit and products and proceeds
thereof; and

(n) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off.

"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded and (iv) with
respect to any such Indebtedness of the Company being extended, refinanced,
renewed, replaced, defeased or refunded, such Permitted Refinancing Indebtedness
shall not be incurred by any Restricted Subsidiary.

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<PAGE> 72

"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

"Public Equity Offering" means an underwritten offer and sale of common
stock of the Company pursuant to a registration statement that has been declared
effective by the Commission pursuant to the Securities Act (other than a
registration statement on Form S-8 or otherwise relating to equity securities
issuable under any employee benefit plan of the Company).

"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Stock.

"Restricted Investment" means (without duplication) (i) the designation of
a Subsidiary as an Unrestricted Subsidiary in the manner described in the
definition of Unrestricted Subsidiary, (ii) any Investment other than a
Permitted Investment and (iii) any amount constituting a "Restricted Investment"
as contemplated in the definition of "Non-Recourse Purchase Money Indebtedness."

"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.

"Significant Subsidiary" means any (i) Subsidiary that would be a
significant subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof, and (ii) any other Subsidiary that contributed more than 5% of
the Company's Consolidated Cash Flow for the most recent four fiscal quarters
for which financial statements are available.

"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
Notes or the Subsidiary Guarantees, as the case may be.

"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person of one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (A) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (B)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).

"Subsidiary Guarantee" means any guarantee of the Notes by any Subsidiary
Guarantor in accordance with the provisions described under "-- Subsidiary
Guarantees."

"Subsidiary Guarantors" means each of (i) the Company's Significant
Subsidiaries on the Issue Date or any other Restricted Subsidiary that provides
a guarantee under the Credit Facility, (ii) any other Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture and
(iii) their respective successors and assigns, as required under the Indenture.

"Unrestricted Subsidiary" means any Subsidiary (or any successor to any of
them) that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a resolution of the Board of Directors; but only to the extent that
such Subsidiary (i) has no Indebtedness other than Non-Recourse Indebtedness;
(ii) is not party to any agreement, contract, arrangement or understanding with
the Company or any Restricted Subsidiary of the Company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable to
the Company or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of the Company; (iii) is a Person
with respect to which neither the Company nor any of its Restricted Subsidiaries
has any direct or indirect obligation (A) to subscribe for additional Equity
Interests or (B) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results and (iv)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the

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<PAGE> 73

covenant described above under the caption "Certain Covenants -- Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock," the Company shall be in default of such covenant). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock" and (ii) no Default or Event of
Default would be in existence following such designation.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (B) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.

"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the
extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company or (ii) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be partially
owned by the government of such foreign jurisdiction or individual or corporate
citizens of such foreign jurisdiction in order for such Restricted Subsidiary to
transact business in such foreign jurisdiction, provided that the Company,
directly or indirectly, owns the remaining Capital Stock or ownership interests
in such Restricted Subsidiary and, by contract or otherwise, controls the
management and business of such Restricted Subsidiary and derives the economic
benefits of ownership of such Restricted Subsidiary to substantially the same
extent as if such Restricted Subsidiary were a wholly owned Subsidiary.

"Wholly Owned Subsidiary" means any Subsidiary to the extent (i) all of the
Capital Stock or other ownership interests in such Subsidiary, other than any
directors' qualifying shares mandated by applicable law, is owned directly or
indirectly by the Company or (ii) such Subsidiary is organized in a foreign
jurisdiction and is required by the applicable laws and regulations of such
foreign jurisdiction to be partially owned by the government of such foreign
jurisdiction or individual or corporate citizens of such foreign jurisdiction in
order for such Subsidiary to transact business in such foreign jurisdiction,
provided that the Company, directly or indirectly, owns the remaining Capital
Stock or ownership interests in such Subsidiary and, by contract or otherwise,
controls the management and business of such Subsidiary and derives the economic
benefits of ownership of such Subsidiary to substantially the same extent as if
such Subsidiary were a wholly owned Subsidiary.

"Working Line" means the loan facility under the Credit Agreement, dated
, 1997, as amended, modified, supplemented, extended, restated or
renewed from time to time.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,560,600 shares
of Common Stock, $.01 par value, and 560,600 shares of undesignated preferred
stock, no par value per share.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders voting with the holders of the
Company's preferred stock as a single class, except where class

71
<PAGE> 74

voting is required by the Texas Business Corporation Act (the "TBCA") or by a
Certificate of Designation adopted by the Board. Cumulative voting in the
election of directors is prohibited. Accordingly, the holders of a majority of
the combined number of outstanding shares of Common Stock and the Company's
preferred stock entitled to vote in any election of directors may elect all of
the directors standing for election except to the extent otherwise provided by
various voting agreements. See "Management -- Directors and Executive Officers"
and "Certain Relationships and Related Transactions."

Holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors out of funds legally available
therefor, subject to any preferential dividend rights of outstanding preferred
stock. Upon a liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to receive ratably the net assets of the Company
available after the payment of all debts and other liabilities and subject to
the prior rights of any outstanding preferred stock. The holders of Common Stock
have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of Common Stock are, and the shares issued in the Equity
Offering will be, when issued and paid for, fully paid and nonassessable.

As of December 31, 1996, the outstanding shares of Common Stock were owned
of record by approximately 121 shareholders.

PREFERRED STOCK

There are 560,600 shares of undesignated preferred stock authorized and no
shares of preferred stock issued or outstanding.

REGISTRATION RIGHTS

Pursuant to a Registration Rights Agreement dated as of November 1, 1995 by
and among the Company, WellTech, the RIMCO Parties, Nueces, NationsBanc Capital
Corporation and Triad Ventures Limited II (the "Registration Rights Agreement"),
the Company granted registration rights under the Securities Act with respect to
the shares of Common Stock received by WellTech pursuant to the Minority
Interest Acquisition and with respect to the shares of Common Stock currently
held and to be received by the RIMCO Parties, Nueces, NationsBanc Capital
Corporation and Triad Ventures Limited II (collectively with WellTech, the
"Rights Holders") upon the consummation of the Conversion Transactions. The
Registration Rights Agreement replaced the registration rights previously
granted to certain of the Rights Holders.

In February 1996, WellTech distributed all of the Common Stock it then
owned to its approximately 30 shareholders and to certain of its directors
("WellTech Distributees"). The WellTech Distributees, in addition to the RIMCO
Parties, Triad Ventures Limited II and Nueces (and in each case, their
respective transferees), represent the Rights Holders who are entitled to the
benefits of the Registration Rights Agreement.

Under the Registration Rights Agreement, the Company is obligated,
beginning July 20, 1997, to file a registration statement (the "Shelf
Registration Statement") pursuant to Rule 415 of the Securities Act covering all
of the registrable shares held by the Rights Holders (the "Registrable
Securities"). The holders of a majority of the Registrable Securities can
require that the Shelf Registration Statement be in the form of an underwritten
offering. Additionally, if the Company proposes to register any of its
securities under the Securities Act for its own account or for the account of
the other security holders, the Rights Holders are entitled to notice of such
registration and are entitled to include all or a portion of the Registrable
Securities in such registration, subject to certain exceptions and limitations,
including the right of the underwriters (if any) of any such offering to exclude
for marketing reasons some or all of the Registrable Securities from such
registration. The Company generally is required to pay all of the expenses
relating to the registration of the Registrable Securities, except for the
Rights Holders' share of any underwriting discounts and commissions. The
Registration Rights Agreement prohibits the Company from granting any new
registration rights under the Securities Act that would adversely impact the
rights of the Rights Holders. All of the shares of Common Stock being
offered by the Selling Shareholders in the Equity Offering are being registered
and sold

72
<PAGE> 75

pursuant to the Registration Rights Agreement for the account of the Rights
Holders. See "Security Ownership of Management and Principal and Selling
Shareholders."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is KeyCorp
Shareholder Services, Inc., Houston, Texas.

PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECT

The Company's Articles of Incorporation and Bylaws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors of the Company and in the
policies formulated by the Board and to discourage certain types of transactions
which may involve an actual or threatened change of control of the Company. The
provisions are designed to reduce the vulnerability of the Company to an
unsolicited proposal for a takeover of the Company that does not contemplate the
acquisition of all of its outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of the Company. The provisions also are
intended to discourage certain tactics that may be used in proxy fights.

The Board will have the authority, without further action by the
shareholders, to issue up to 560,600 shares of the Company's preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof, and to issue over 9,000,000 additional shares of Common
Stock after the Equity Offering. The issuance of the Company's preferred stock
or additional shares of Common Stock could adversely affect the voting power of
the purchasers of Common Stock in the Equity Offering and could have the effect
of delaying, deferring or preventing a change in control of the Company.

The Articles of Incorporation also provide that, subject to the terms of
any outstanding preferred stock, any action required or permitted to be taken by
the shareholders of the Company must be taken at a duly called annual or special
meeting of shareholders and may not be taken by written consent unless
previously approved by a majority of the entire Board. In addition, special
meetings may be called only by the President, the Board or by holders of 20% or
more of the combined voting power of the then outstanding shares of capital
stock entitled to vote at the proposed special meeting.

Upon a change of control of the Company, holders of the Notes will have the
right to require the Company to purchase the Notes at a price equal to 101% of
the aggregate principal amount thereof, together with accrued and unpaid
interest to the date of purchase.

INDEMNIFICATION OF OFFICERS AND DIRECTORS; LIMITATION OF DIRECTOR LIABILITY

The Company has entered into indemnification agreements with all of its
directors and executive officers, which, among other things, indemnify directors
of the Company against liability arising from shareholder claims of a breach of
duty by a director if a director votes against a transaction that would result
in a change of control of the Company. The Articles of Incorporation also
provide that its directors shall not be liable for monetary damages caused by an
act or omission occurring in their capacity as directors. This provision does
not eliminate the duty of care, and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Texas law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Company, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to a director and for acts or omissions for which a director is
made expressly liable by applicable statute, such as the improper payment of
dividends. The limitations on liability provided for in the Articles of
Incorporation do not restrict the availability of non-monetary remedies and do
not affect a director's responsibilities under any other law, such as the
federal securities laws or state or federal environmental laws. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as executive officers and directors.

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<PAGE> 76

UNDERWRITING

Subject to the terms and upon the conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to Jefferies & Company, Inc. (the
"Underwriter"), and the Underwriter as agreed to purchase, the Notes at the
public offering price less the underwriting discount set forth on the cover page
of this Prospectus. At the request of the Company, the Underwriter has reserved
up to $5.5 million of the Notes offered hereby for sale at the initial public
offering price to one or more affiliates of RIMCO Associates, Inc., which has
expressed an interest in purchasing Notes. In addition, up to 200,000 shares of
the Common Stock offered in the Equity Offering have been reserved for sale at
the initial public offering price to one or more affiliates of RIMCO Associates,
Inc., which has expressed an interest in purchasing shares of Common Stock. The
amount of Notes and the number of shares of Common Stock available to the
general public will be reduced to the extent one or more affiliates of RIMCO
Associates, Inc. purchases the reserved Notes and shares of Common Stock.

The Underwriting Agreement provides that the obligation of the Underwriter
to purchase the Notes offered hereby is subject to certain conditions. Under the
terms and upon the conditions of the Underwriting Agreement, the Underwriter is
committed to purchase all of the Notes offered hereby, if any are purchased. The
Underwriter proposes to offer the Notes to the public initially at the public
offering price set forth on the cover of this Prospectus. After the initial
public offering of the Notes, the public offering price may be changed by the
Underwriter.

The Underwriter proposes to offer the Notes to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of % of the
principal amount of the Notes. The Underwriter may allow, and such dealers may
reallow, a discount not in excess of % to certain other dealers. After the
Debt Offering commences, the public offering price, the concession to selected
dealers and the reallowance to other dealers may be changed by the Underwriter.

Prior to the Debt Offering, there has been no public market for the Notes.
The initial public offering price for the Notes will be determined by
negotiations between the Company and the Underwriter. Among the principal
factors to be considered in such negotiations will be the financial strength of
the Company in recent periods, prevailing economic prospects, debt offerings of
companies in related businesses, the prospects for the Company and the well
servicing industry, and the general conditions prevailing in the securities
markets. The Underwriter does not intend to confirm sales of the Notes to any
accounts over which it exercises discretionary authority.

The Company has agreed to indemnify the Underwriter against certain
liabilities that may be incurred in connection with the offering of the Notes,
including liabilities under the Securities Act, or to contribute to the payments
that the Underwriter may be required to make in respect thereof.

The Underwriter has advised the Company that it currently intends to make a
market in the Notes after the consummation of the Debt Offering, as permitted by
applicable laws and regulations; however, it is not obligated to do so, and any
such market-making, if commenced, may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the liquidity of the
trading market for the Notes or that any active trading market for the Notes
will develop. See "Risk Factors -- Absence of Public Market for the Notes."

The closing of Debt Offering is conditioned upon the simultaneous closing
of the Equity Offering and the Pride Acquisition.

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<PAGE> 77

paid a fee of approximately $1.2 million, and is being reimbursed for its
reasonable out-of-pocket expenses in connection therewith.

Jefferies & Company, Inc. is serving as one of the representatives of the
underwriters for purposes of the Equity Offering. The underwriters of the Equity
Offering will receive customary compensation for such underwriting consisting of
the underwriting discount.

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<PAGE> 78

LEGAL MATTERS

Certain legal matters with respect to the legality of the Notes offered
hereby will be passed upon for the Company by Jenkens & Gilchrist, A
Professional Corporation, Austin, Texas. Fulbright & Jaworski L.L.P., Houston,
Texas, has acted as counsel for the Underwriter in connection with the Debt
Offering and will pass upon certain legal matters relating to the Debt Offering.

EXPERTS

The consolidated financial statements and schedule of the Company as of
March 31, 1995 and 1996 and for each of the years in the three-year period ended
March 31, 1996 included in this Prospectus and elsewhere in the Registration
Statement, of which this Prospectus constitutes a part, have been included
herein and in the Registration Statement in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants, included elsewhere
herein and in the Registration Statement and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering
the March 31, 1994, financial statements refers to a change in the method of
accounting for income taxes.

The financial statements of the Taylor Acquisition Group as of December 31,
1994 and 1995 and for the years then ended have been audited by Chapman,
Williams & Co., Carthage, Texas, independent certified public accountants. Such
financial statements have been included herein and elsewhere in the Registration
Statement in reliance upon the report of said firm given upon their authority as
experts in accounting and auditing.

The financial statements of the U.S. Land-Based Well Servicing Operations
of Pride as of December 31, 1994 and 1995 and for each of the years in the
three-year period ended December 31, 1995 have been audited by Coopers & Lybrand
L.L.P., independent accountants. Such financial statements have been included
in the Registration Statement in reliance upon the report of such firm given up
on their authority as experts in accounting and auditing.

The financial statements of Well Solutions, Inc., as of March 31, 1994 and
1993 and for each of the three years in the period ended March 31, 1994, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving such reports.

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<PAGE> 79

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy and information statements,
and other information with the Securities and Exchange Commission (the
"Commission"). These reports, proxy and information statements, and other
information concerning the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices at Suite 1400, Northwestern Atrium Center, 500 West Madison Avenue,
Chicago, Illinois 60661-2511 and at Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can also be obtained from the
Commission at prescribed rates through its Public Reference Section at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such
materials filed electronically by the Company with the Commission are available
at the Commission's World Wide Web site at http://www.sec.gov. The Common Stock
is traded on the Nasdaq National Market and such reports, proxy and information
statements, and other information may be inspected at the Nasdaq Stock Market,
1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the securities offered hereby
(including all amendments and supplements thereto, the "Registration
Statement"). This Prospectus, which forms a part of the Registration Statement,
does not contain all the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement, including the exhibits and
schedules thereto. The Registration Statement and the exhibits and schedules
thereto may be inspected, without charge, and copies may be obtained at
prescribed rates, at the public reference facilities and regional offices
referred to above.

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<PAGE> 80

DAWSON PRODUCTION SERVICES, INC. AND ACQUISITIONS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Dawson Production Services, Inc.
Independent Auditors' Report....................................................... F-2
Consolidated Balance Sheets at March 31, 1995 and 1996 and September 30, 1996
(unaudited)..................................................................... F-3
Consolidated Statements of Income for the years ended March 31, 1994, 1995 and 1996
and
the six months ended September 30, 1995 and 1996 (unaudited).................... F-4
Consolidated Statements of Shareholders' Equity for the years ended March 31, 1994,
1995
and 1996 and the six months ended September 30, 1996 (unaudited)................ F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1994, 1995 and
1996
and the six months ended September 30, 1995 and 1996 (unaudited)................ F-6
Notes to the Consolidated Financial Statements..................................... F-7
U.S. Land-Based Well Servicing Operations of Pride Petroleum Services, Inc.
Annual Financial Statements
Report of Independent Accountants............................................... F-19
Combined Balance Sheet as of December 31, 1995 and 1994......................... F-20
Combined Statement of Operations and Changes in Owner's Equity for the years
ended December 31, 1995, 1994 and 1993......................................... F-21
Combined Statement of Cash Flows for the years ended December 31, 1995, 1994 and
1993........................................................................... F-22
Notes to Combined Financial Statements.......................................... F-23
Interim Financial Statements (Unaudited)
Combined Balance Sheet as of September 30, 1996 and December 31, 1995........... F-31
Combined Statement of Operations for the nine months ended September 30, 1996
and 1995....................................................................... F-32
Combined Statement of Cash Flows for the nine months ended September 30, 1996
and 1995....................................................................... F-33
Notes to Unaudited Combined Financial Statements................................ F-34
Taylor Acquisition Group
Independent Auditor's Report....................................................... F-36
Combined Balance Sheet at December 31, 1994 and 1995 and June 30, 1996
(unaudited)..................................................................... F-37
Combined Statement of Income (Loss) for the years ended December 31, 1994 and 1995
and the six months ended June 30, 1995 and 1996 (unaudited)..................... F-38
Combined Statement of Cash Flows for the years ended December 31, 1994 and 1995 and
the six months ended June 30, 1995 and 1996 (unaudited)......................... F-39
Combined Statement of Changes in Stockholder's Equity for the years ended December
31, 1994 and 1995 and the six months ended June 30, 1996 (unaudited)............ F-40
Notes to the Financial Statements.................................................. F-41
Well Solutions, Inc.
Report of Independent Public Accountants........................................... F-48
Balance Sheets at March 31, 1994 and 1993.......................................... F-49
Statement of Income for the years ended March 31, 1994, 1993 and 1992.............. F-50
Statement of Shareholder's Equity for the years ended March 31, 1994, 1993 and
1992............................................................................ F-51
Statement of Cash Flows for the years ended March 31, 1994, 1993 and 1992.......... F-52
Notes to Financial Statements...................................................... F-53
</TABLE>

F-1
<PAGE> 81

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Dawson Production Services, Inc.:

We have audited the accompanying consolidated balance sheets of Dawson
Production Services, Inc. and subsidiaries as of March 31, 1995 and 1996, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended March 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dawson
Production Services, Inc. and subsidiaries as of March 31, 1995 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended March 31, 1996, in conformity with generally
accepted accounting principles.

As discussed in note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in fiscal 1994.

KPMG Peat Marwick LLP

San Antonio, Texas
June 11, 1996, except as
to note (14) which is as
of December 23, 1996

F-2
<PAGE> 82

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,
--------------------------- SEPTEMBER 30,
1995 1996 1996
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 2,796,540 $13,863,108 $ 9,364,032
Trade receivables (net of allowance for doubtful
accounts of $348,052, $290,839 and $307,236,
respectively).................................. 8,243,705 8,773,156 13,687,635
Other receivables................................. 200,247 95,202 281,536
Income taxes receivable........................... 294,215 740,768 290,768
Prepaid expenses and other........................ 143,985 215,497 882,996
----------- ----------- -----------
Total current assets...................... 11,678,692 23,687,731 24,506,967
Net property and equipment, substantially all
pledged (notes 4 and 5)........................... 25,320,908 29,114,671 39,209,362
Goodwill and other assets........................... 3,525,787 3,565,555 10,375,613
----------- ----------- -----------
Total assets.............................. $40,525,387 $56,367,957 $ 74,091,942
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 2,929,186 $ 2,909,390 $ 4,114,105
Accrued liabilities............................... 2,315,621 2,825,926 3,237,185
Current portion of long-term debt (note 4)........ 1,611,289 20,055 9,246,947
Current portion of obligations under capital
leases (note 5)................................ 372,308 1,167,384 1,707,665
----------- ----------- -----------
Total current liabilities................. 7,228,404 6,922,755 18,305,902
----------- ----------- -----------
Long-term debt, net of current portion (note 4)..... 15,477,990 1,530,903 3,130,100
Obligations under capital leases, net of current
portion (note 5).................................. 511,254 2,163,610 1,478,405
Deferred income taxes (note 8)...................... 846,072 56,310 3,244,169
Minority interest................................... 5,353,511 -- --
Mandatorily redeemable Series A preferred stock, no
par value, 80,800 shares issued and outstanding in
1995 (note 3)..................................... 1,010,000 -- --
Shareholders' equity (notes 6 and 7):
Preferred stock, no par value 560,600 shares
authorized, none issued and outstanding........ -- -- --
Common stock, $.01 par value, 20,560,600 shares
authorized, 1,682,827, 6,382,526 and 6,391,126
issued, respectively, and 1,681,610, 6,382,526
and 6,391,126 outstanding, respectively........ 16,828 63,826 63,912
Paid-in capital................................... 6,610,595 41,458,254 41,522,152
Retained earnings................................. 3,543,271 4,314,177 6,489,180
Notes receivable from officers.................... (66,878) (141,878) (141,878)
----------- ----------- -----------
10,103,816 45,694,379 47,933,366
Less treasury common stock, at cost............... (5,660) -- --
----------- ----------- -----------
Total shareholders' equity................ 10,098,156 45,694,379 47,933,366
Commitments and contingencies (note 11).............
----------- ----------- -----------
Total liabilities and shareholders'
equity.................................. $40,525,387 $56,367,957 $ 74,091,942
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 83

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................. $27,942,484 $36,004,700 $52,391,307 $25,888,387 $33,811,434
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Operating.............................. 19,936,624 24,240,773 34,319,579 16,875,158 21,893,507
General and administrative............. 3,854,336 5,573,978 8,937,502 4,238,011 5,338,804
Depreciation and amortization.......... 1,706,856 2,607,837 4,396,574 2,016,424 2,875,974
----------- ----------- ----------- ----------- -----------
Total costs and expenses....... 25,497,816 32,422,588 47,653,655 23,129,593 30,108,285
----------- ----------- ----------- ----------- -----------
Operating income............... 2,444,668 3,582,112 4,737,652 2,758,794 3,703,149
----------- ----------- ----------- ----------- -----------
Other income and expenses:
Interest expense....................... 281,977 789,276 1,847,678 952,872 296,022
Other income, net...................... (60,530) (40,939) (129,494) (27,207) (121,820)
----------- ----------- ----------- ----------- -----------
Total other income and
expenses..................... 221,447 748,337 1,718,184 925,665 174,202
----------- ----------- ----------- ----------- -----------
Income before minority
interest, income taxes,
extraordinary item and
cumulative effect of change
in accounting principle...... 2,223,221 2,833,775 3,019,468 1,833,129 3,528,947
Minority interest in consolidated
subsidiary............................. 901,707 1,091,717 937,164 787,001 --
----------- ----------- ----------- ----------- -----------
Income before income taxes, extraordinary
item and cumulative effect of change in
accounting principle................... 1,321,514 1,742,058 2,082,304 1,046,128 3,528,947
Provision for income taxes (note 8): 525,281 680,822 709,306 398,000 1,353,944
----------- ----------- ----------- ----------- -----------
Income before extraordinary item and
cumulative effect of change in
accounting principle................... 796,233 1,061,236 1,372,998 648,128 2,175,003
Extraordinary item....................... -- -- (513,819) -- --
Cumulative effect of change in accounting
principle.............................. (92,202) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income............................... 704,031 1,061,236 859,179 648,128 2,175,003
----------- ----------- ----------- ----------- -----------
Preferred stock dividends................ 101,007 101,007 88,273 50,086 --
----------- ----------- ----------- ----------- -----------
Net income applicable to common stock.... $ 603,024 $ 960,229 $ 770,906 $ 598,042 $ 2,175,003
=========== =========== =========== =========== ===========
Earnings per common share:
Primary:
Income before extraordinary item and
cumulative effect of change in
accounting principle................ $ 0.34 $ 0.45 $ 0.44 $ 0.25 $ 0.33
Extraordinary item..................... -- -- (0.17) -- --
Cumulative effect of change in
accounting principle................ (0.05) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income.......................... $ 0.29 $ 0.45 $ 0.27 $ 0.25 $ 0.33
=========== =========== =========== =========== ===========
Average number of shares outstanding... 2,052,168 2,155,380 2,931,234 2,384,359 6,510,428
=========== =========== =========== =========== ===========
Fully diluted:
Income before extraordinary item and
cumulative effect of change in
accounting principle................ $ 0.33 $ 0.42 $ 0.43 $ 0.23 $ 0.33
Extraordinary item..................... -- -- (0.16) -- --
Cumulative effect of change in
accounting principle................ (0.04) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income............................. $ 0.29 $ 0.42 $ 0.27 $ 0.23 $ 0.33
=========== =========== =========== =========== ===========
Average number of shares outstanding... 2,450,791 2,648,740 3,207,622 3,095,826 6,527,796
=========== =========== =========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 84

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK NOTES TOTAL
------------------- TREASURY STOCK RECEIVABLE SHARE-
ISSUED PAID-IN ------------------ RETAINED FROM HOLDERS'
SHARES AMOUNTS CAPITAL SHARES AMOUNTS EARNINGS OFFICERS EQUITY
--------- ------- ----------- ------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1993...... 1,298,548 $12,985 $ 4,093,473 48,732 $(76,994) $1,980,018 $ -- $ 6,009,482
Issuance of common stock in
lieu of interest payments... 2,150 22 7,478 -- -- -- 7,500
Dividends on preferred stock,
paid in common stock........ 7,220 72 25,113 -- -- (25,185) -- --
Dividends on preferred stock,
paid in cash................ -- -- -- -- -- (75,822) -- (75,822)
Conversion of subordinated
convertible note into common
stock....................... 18,430 184 74,816 -- -- -- -- 75,000
Net income.............. -- -- -- -- -- 704,031 -- 704,031
--------- ------- ----------- ------- ------- ---------- --------- -----------
BALANCES AT MARCH 31, 1994...... 1,326,348 13,263 4,200,880 48,732 (76,994) 2,583,042 -- 6,720,191
Purchase of treasury stock.... -- -- -- 16,172 (72,264) -- -- (72,264)
Sale of common stock.......... 282,536 2,826 2,248,576 (63,687) 143,598 -- -- 2,395,000
Dividends on preferred stock,
paid in cash................ -- -- -- -- -- (101,007) -- (101,007)
Exercise of common stock
warrants.................... 57,818 578 86,300 -- -- -- (66,878) 20,000
Conversion of subordinated
convertible note into common
stock....................... 16,125 161 74,839 -- -- -- -- 75,000
Net income.............. -- -- -- -- -- 1,061,236 -- 1,061,236
--------- ------- ----------- ------- ------- ---------- --------- -----------
BALANCES AT MARCH 31, 1995...... 1,682,827 16,828 6,610,595 1,217 (5,660) 3,543,271 (66,878) 10,098,156
Dividends on preferred stock,
paid in cash................ -- -- -- -- -- (88,273) -- (88,273)
Common stock issued --
Initial public offering
(note 6).................. 2,616,202 26,163 23,495,829 -- -- -- -- 23,521,992
Conversion of subordinated
convertible note.......... 371,232 3,712 2,546,288 -- -- -- -- 2,550,000
Issuance of common stock for
minority interest......... 1,329,495 13,295 7,686,705 -- -- -- -- 7,700,000
Conversion of preferred
stock to common stock..... 347,440 3,474 1,006,526 -- -- -- -- 1,010,000
Exercise of stock options..... 36,547 366 75,633 -- -- -- (75,000) 999
Tax benefit realized from
stock options............... -- -- 42,326 -- -- -- -- 42,326
Retirement of treasury
stock....................... (1,217) (12) (5,648) (1,217) 5,660 -- -- --
Net income.............. -- -- -- -- -- 859,179 -- 859,179
--------- ------- ----------- ------- ------- ---------- --------- -----------
BALANCES AT MARCH 31, 1996...... 6,382,526 63,826 41,458,254 -- -- 4,314,177 (141,878) 45,694,379
(the following information is
unaudited)
Exercise of stock options..... 8,600 86 63,898 -- -- -- -- 63,984
Net income.............. -- -- -- -- -- 2,175,003 -- 2,175,003
--------- ------- ----------- ------- ------- ---------- --------- -----------
BALANCES AT SEPTEMBER 30,
1996.......................... 6,391,126 $63,912 $41,522,152 -- -- $6,489,180 $(141,878) $47,933,366
========= ======= =========== ======= ======= ========== ========= ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 85

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------- ---------------------------
1994 1995 1996 1995 1996
----------- ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 704,031 $ 1,061,236 $ 859,179 $ 648,128 $ 2,175,003
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in net income of
subsidiary company...................... 901,707 1,091,717 937,164 787,001 --
Depreciation and amortization............. 1,706,856 2,607,837 4,396,574 2,016,424 2,875,974
Allowance for doubtful accounts........... 97,088 157,921 (57,213) (48,088) 53,603
Common stock issued in lieu of interest
payments................................ 7,500 -- -- -- --
Loss (gain) on sale of assets............. (31,762) (22,113) 95,351 (19,176) 81,826
Increase in deferred income taxes......... 256,037 88,740 636,665 26,740 978,192
Decrease (increase) in receivables........ 286,786 (4,338,722) (813,746) (509,666) (721,886)
Decrease (increase) in prepaid expenses
and other............................... 57,571 (11,802) (71,512) (604,779) (463,526)
Decrease (increase) in other assets....... (50,202) (129,336) 170,390 68,092 10,014
Increase (decrease) in accounts payable... 339,887 1,823,552 (19,796) 184,904 378,408
Increase (decrease) in income tax
payable................................. 288,671 (288,671) -- (184,375) (17,980)
Increase in accrued expenses.............. 433,988 1,000,374 510,305 (38,762) (506,176)
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities............................ 4,998,158 3,040,733 6,643,361 2,326,443 4,843,452
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions.................................. -- (16,597,550) (125,000) -- (12,958,413)
Additions to property and equipment........... (1,235,963) (2,567,230) (4,522,765) (2,689,532) (2,236,135)
Proceeds from sales of property and
equipment................................... 160,227 65,644 281,841 195,578 65,428
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities... (1,075,736) (19,099,136) (4,365,924) (2,493,954) (15,129,120)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings.......................... 781,153 16,156,053 1,042,677 170,100 7,261,330
Payments on short-term borrowings............. (965,297) -- -- -- --
Payments on long-term debt.................... (1,058,147) (2,027,649) (14,058,284) (781,757) (462,451)
Capital lease payments........................ (700,673) (593,838) (1,348,564) (320,277) (1,076,271)
Sale of common stock.......................... -- 2,395,000 23,521,992 -- --
Exercise of common stock options and
warrants.................................... -- 20,000 999 -- 63,984
Tax benefit realized from stock options....... -- -- 42,326 -- --
Cost of treasury stock purchased.............. -- (72,264) -- -- --
Cash dividends on preferred stock............. (75,822) (101,007) (88,273) (50,086) --
Investment in subsidiary by minority owner.... -- 1,404,000 -- -- --
Subsidiary distributions to minority owner.... (871,442) (497,026) (323,742) (131,935) --
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities... (2,890,228) 16,683,269 8,789,131 (1,113,955) 5,786,592
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash......... 1,032,194 624,866 11,066,568 (1,281,466) (4,499,076)
Cash and cash equivalents at the beginning of
the period.................................. 1,139,480 2,171,674 2,796,540 2,796,540 13,863,108
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at the end of the
period...................................... $ 2,171,674 $ 2,796,540 $ 13,863,108 $ 1,515,074 $ 9,364,032
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for:
Interest.................................... $ 275,461 $ 708,234 $ 1,928,993 $ 1,058,823 $ 261,681
Income taxes................................ 100,000 967,208 912,628 640,000 214,000
SUPPLEMENTAL DISCLOSURES OF NON-CASH
TRANSACTIONS:
Assets acquired under capital leases.......... 844,116 645,972 3,823,282 820,292 904,547
Conversion of preferred stock to common
stock....................................... -- -- 1,010,000 75,000 --
Conversion of long-term debt to common
stock....................................... 75,000 75,000 2,550,000 -- --
Issuance of common stock for acquisition of
minority interest........................... -- -- 7,700,000 -- --
Issuance of notes payable for acquisition of
business.................................... -- 1,500,000 -- -- 1,750,000
Issuance of notes receivable for exercise of
stock options............................... -- 66,878 75,000 -- --
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 86

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Dawson Production Services, Inc. (the Company) is engaged in the business
of providing workover rig services, liquid services and production services in
Texas and Louisiana. The Company's primary customers are oil and gas well
operators.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated. (See note 2).

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. While it is believed that such estimates are reasonable,
actual results could differ from those estimates.

CASH EQUIVALENTS

For purposes of the statement of cash flows, cash and short-term
investments with an original maturity of three months or less from the date of
purchase are considered to be cash equivalents.

REVENUE RECOGNITION

The Company generally recognizes revenue when services are rendered.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Major renewals and improvements
are capitalized and depreciated over the respective asset's useful life.
Expenditures for repairs and maintenance are charged to expense as incurred.

Property and equipment are depreciated over their estimated useful lives on
the straight-line method as follows:

<TABLE>
<CAPTION>
ESTIMATED
LIFE (YEARS)
------------
<S> <C>
Buildings................................................................ 20
Well servicing equipment................................................. 5-12
Vehicles................................................................. 3-5
Office furniture and other equipment..................................... 5-12
</TABLE>

INCOME TAXES

Effective April 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS 109 requires a change from the deferred method of accounting for income
taxes of APB Opinion 11 to the asset and liability method of accounting for
income taxes. Under the asset and liability method of SFAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS 109, the effect
on deferred

F-7
<PAGE> 87

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. In connection with the adoption of
SFAS 109, the Company recorded an adjustment to income of $92,202 which
represents the net increase of the deferred tax liability at April 1, 1993. Such
adjustment has been reflected in the 1994 statement of income as the cumulative
effect of change in accounting principle.

INTANGIBLE AND OTHER ASSETS

Goodwill represents the excess purchase price over fair value of net assets
acquired and is amortized on a straight-line basis over twenty years from the
date of acquisition. Other assets consist principally of loan costs and are
amortized on a straight-line basis over the term of the loan.

Intangible assets are reviewed for impairment whenever events or
circumstances provide evidence that suggests that the carrying amount of the
intangible asset may not be recoverable. The Company assesses the recoverability
of the intangible asset by determining whether the carrying amount of the
intangible asset can be recovered through projected undiscounted future cash
flows over the remaining amortization period.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of short-term,
variable rate items or recently issued debt instruments for which management
believes fair value approximates carrying value.

TREASURY STOCK

Treasury stock is recorded under the cost method.

EARNINGS PER SHARE

Primary earnings per share is computed by deducting preferred dividends
from net income in order to determine net income attributable to common
shareholders. This amount is then divided by the weighted average number of
common shares outstanding and common stock equivalents.

Earnings per share assuming full dilution is determined by dividing net
income plus tax effected convertible debt interest by the weighted average
number of common shares outstanding during the year after giving effect for
common stock equivalents arising from stock options and for convertible debt or
preferred stock assumed converted to common stock.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, stock and stock options issued during the twelve months immediately
preceding the Company's initial public offering filing date including those
issued in connection with the minority interest acquisition (see note 2) have
been included in the calculation of common and common equivalent shares using
the treasury stock method and the anticipated public offering price as if they
were outstanding for all periods. Common stock equivalents resulting from the
conversion or exercise of convertible debt or preferred shares and other stock
options are excluded when their result is anti-dilutive.

RECLASSIFICATION

Certain amounts, as previously presented, have been reclassified to conform
with the current year financial statement presentation.

F-8
<PAGE> 88

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

Accounting for Asset Impairment

During March 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." The Company adopted Statement 121
effective April 1, 1996. Statement 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This new pronouncement had
no material effect on the financial statements upon adoption.

Accounting for Stock-Based Compensation

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which sets forth alternative accounting and disclosure
requirements for stock-based compensation arrangements. SFAS 123 does not
rescind the existing accounting for employee stock-based compensation under APB
Opinion No. 25. Companies may continue to follow the current accounting to
measure and recognize employee stock-based compensation; however, SFAS 123
requires disclosure of pro forma net income and earnings per share that would
have been reported under the "fair value" based recognition provisions of SFAS
123. The Company has elected to continue to follow the provisions of APB Opinion
No. 25 for employee stock-based compensation and will disclose the pro forma
information required under SFAS 123 beginning with its consolidated financial
statements for the year ending March 31, 1997.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of temporary cash investments
and trade receivables. The Company places its temporary cash investments in U.S.
Government securities and in other high quality financial instruments. By policy
the Company limits the amount of credit exposure to any one financial
institution or issuer. The Company's customer base consists primarily of
independent oil and natural gas producers. During the year ended March 31, 1994
no single customer accounted for 10% or more of the Company's total revenues.
During the years ended March 31, 1995 and 1996, sales to the Company's largest
customer accounted for approximately 16% and 24%, respectively, of the Company's
total operating revenues.

UNAUDITED INFORMATION

The consolidated financial statements as of September 30, 1996 and for the
six months ended September 30, 1996 and 1995, and related footnote disclosures
to the extent they relate to such periods, have been prepared in accordance with
generally accepted accounting principles for interim financial information and
are unaudited. Accordingly, such data does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the six months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1997.

(2) ACQUISITIONS

WELL SOLUTIONS, INC.

On November 30, 1994, the Company acquired substantially all of the
property and equipment of Well Solutions, Inc. (Well Solutions), a company
engaged in providing oilfield services, for an aggregate purchase price of
$18,097,550, consisting of $15,895,733 in cash, a convertible note payable of
$1,500,000 and closing costs of $701,817. The acquisition has been accounted for
as a purchase and, accordingly, the operating results

F-9
<PAGE> 89

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of Well Solutions have been included in the Company's consolidated statements of
income since the date of acquisition. The excess of the aggregate purchase price
over the fair market value of the net assets acquired was recognized as goodwill
and is being amortized over 20 years. The fair value of assets acquired,
including goodwill of $2,451,818, was $18,534,355 and liabilities assumed
totaled $436,805. The funds used to acquire Well Solutions were provided by
long-term borrowings, proceeds of sales of common stock and subordinated debt
and cash from operations.

TAYLOR COMPANIES, INC.

Effective July 29, 1996, the Company acquired all of the issued and
outstanding stock of Taylor Companies, Inc. for an aggregate purchase price of
$12,750,000, consisting of $11,000,000 in cash and a $1,750,000 subordinated
promissory note payable to the selling shareholders. Goodwill recognized on this
transaction amounted to approximately $6,690,000, which is being amortized over
a twenty-year period. The Company reported this acquisition and related pro
forma effects on a current report Form 8-K.

Assuming the purchase of Taylor Companies, Inc. had been consummated as of
the beginning of the fiscal year 1996, unaudited pro forma operating results of
the Company would be as follows:

<TABLE>
<S> <C>
Revenues................................................................ $69,104,000
Net income (loss)....................................................... $ (363,000)
Primary earnings (loss) per share....................................... $ (0.15)
Fully diluted earnings (loss) per share................................. $ (0.15)
</TABLE>

The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the purchase been made
at the beginning of the respective period.

OTHER ACQUISITIONS:

Effective November 1, 1995, the Company acquired the 39% minority interest
in the Company's subsidiary, Dawson WellTech, L.C., from WellTech, Inc. in
exchange for the issuance to WellTech, Inc. of 1,329,495 shares of common stock
for a total purchase price of $7,700,000 based on an independent appraisal of
the common stock. Goodwill recognized on this transaction amounted to $384,847
and is being amortized over 20 years.

Effective March 1, 1996, the Company acquired a portion of the assets of a
small company in Giddings, Texas for an aggregate purchase price of
approximately $1,248,000, consisting of $125,000 in cash and $1,123,000 in
capital leases and a note payable. Goodwill recognized on this transaction
amounted to $97,000 and is being amortized over 20 years.

In April 1996, the Company acquired the assets of two small production
testing companies in Louisiana. The aggregate purchase price was approximately
$673,000. Goodwill and a non-compete agreement were recognized on these
transactions which amounted to approximately $111,000. These items are being
amortized over 20 and five year periods, respectively.

In May 1996, the Company acquired the Texas-based well servicing division
of a non-affiliated company. The aggregate purchase price was $779,000.

In July 1996, the Company acquired the assets of a trucking company in
Louisiana. The aggregate purchase price was approximately $400,000. Goodwill
recognized on the transaction amounted to $50,000, which is being amortized over
a 20-year period.

The acquisitions have been accounted for as purchases and, accordingly, the
operating results have been included in the Company's consolidated statements of
income since the dates of acquisition. Excluding the

F-10
<PAGE> 90

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Taylor acquisition, the effect on results of operations would not have been
material if such acquisitions had occurred at the beginning of the year.

(3) MANDATORILY REDEEMABLE PREFERRED STOCK

In October 1990, the Company issued 80,800 shares of 10% cumulative
convertible preferred stock for a total price of $1,010,000. Each preferred
shareholder was entitled to receive, in preference to common shareholders,
annual dividends in the amount of $1.25 per share, payable quarterly. At the
discretion of the Company, the dividends could have been declared in either cash
or common stock valued at $3.49 a share. Dividends were cumulative and accrued
from the date of the stock issuance. The Company declared dividends on the
preferred stock in the amount of $101,007 in the years ended March 31, 1994 and
1995 and $88,273 in the year ended March 31, 1996.

Holders of the preferred stock elected to convert 20,200 shares of such
stock into 86,860 shares of common stock, effective October 18, 1995. Pursuant
to a November 1, 1995 Agreement for the Conversion of Securities (the
"Conversion Agreement"), the remaining 60,600 shares of preferred stock
converted into 260,580 shares of common stock effective February 19, 1996.

(4) NOTES PAYABLE AND LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
MARCH 31,
------------------------ SEPTEMBER
1995 1996 30, 1996
----------- ---------- -----------
<S> <C> <C> <C>
Note payable to a bank with a fixed interest rate of
10.81%. Principal payments of $154,762 plus interest
are due monthly, with a balloon payment at maturity on
November 28, 1999. Collateralized by substantially all
of the Company's property, equipment and
receivables............................................ $13,000,000 $ -- $ --
Promissory note payable to a bank bearing interest at
7.53% per annum. Interest is due monthly; principal is
due February 1997...................................... -- -- 7,000,000
Subordinated convertible notes bearing interest at 10%.
Interest is due quarterly, payable in cash or common
stock at $6.98 per share at the Company's option;
principal is due December 1, 1999. Convertible into
344,000 shares of the Company's common stock........... 2,400,000 -- --
Convertible debenture bearing interest at 8%. Interest is
due quarterly; principal is due November 30, 1999...... 1,500,000 1,500,000 1,500,000
Subordinated promissory note payable to a former Taylor
shareholder bearing interest at 8.0% per annum.
Interest is due quarterly; principal is due in
quarterly installments of $83,333...................... -- -- 1,750,000
Subordinated convertible note bearing interest at 10%.
Interest due quarterly, payable in cash or common stock
at $5.23 per share at the Company's option; principal
is due June 27, 1997................................... 150,000 -- --
Other notes payable to lenders and financing companies
bearing interest at rates ranging from 6% to 10% due in
monthly installments. Secured by various assets of the
Company................................................ 39,279 50,958 2,127,047
----------- ----------- -----------
Total long-term debt..................................... 17,089,279 1,550,958 12,377,047
Less current portion..................................... 1,611,289 20,055 9,246,947
----------- ----------- -----------
Long-term debt, net of current portion................... $15,477,990 $1,530,903 $ 3,130,100
=========== =========== ===========
</TABLE>

F-11
<PAGE> 91

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In July 1996, to finance a portion of the Taylor acquisition, the Company
obtained a loan from a bank in the amount of $7.0 million. The promissory note
carries an annual interest rate of 7.53% and has a maturity date of January 25,
1997. In September 1996, the Company obtained a take-out commitment for a term
loan in the amount of $7.0 million to replace the promissory note. The Company
subsequently decided to not take advantage of the take-out commitment, and
accordingly, the promissory note has been included as current portion of
long-term debt at September 30, 1996.

In September 1996, the Company signed a commitment letter for an
acquisition line of credit in the amount of up to $20.0 million and a working
capital line of credit with a maximum availability of the lesser of (i) $10.0
million or (ii) 80% of eligible accounts receivable that have been outstanding
less than 90 days. Borrowings under the acquisition line of credit would mature
seven years from the date of any such borrowings and would bear interest at a
per annum rate equal to the lesser of: (i) the prime rate of interest of the
bank as adjusted from time to time or (ii) a varying percentage ranging from 2%
to 3%, based on the total funded debt to cash flow ratio, over the 180-day LIBOR
rate of interest. The acquisition line of credit would be secured by assets of
the Company with a value not to exceed 70% of the loan amount. Borrowings under
the working capital line of credit would mature two years from the date of any
such borrowings and would bear interest at a per annum rate equal to the lesser
of: (i) the prime rate of interest of the bank as adjusted from time to time or
(ii) a varying percentage rate ranging from 1.75% to 2.75%, based on the total
funded debt to cash flow ratio, over the Company's choice of the 30-day, 90-day
or 180-day LIBOR rate of interest. The working of capital line of credit would
be secured by first lien security interest on all the Company's accounts
receivable and inventory. Under terms of the commitment, the Company must
maintain minimum working capital, tangible net worth, current ratios and debt to
capital ratios.

The Company has requested from its bank a modification to the commitment
letter to increase the maximum availability of funds under the working capital
line of credit to the lesser of (i) $50.0 million or (ii) 80% of eligible
accounts receivable that have been outstanding less than 90 days. The Company
expects to receive a commitment from its bank to such increase.

In March 1996, the Company elected to prepay the $13,000,000 note payable
to a bank. An extraordinary charge of $513,819 (net of income tax benefit of
$264,495) was incurred as a result of the early extinguishment of the note
payable.

Scheduled maturities of principal for long-term debt based on balances
outstanding at March 31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDING
MARCH 31, TOTAL
- ------------ ----------
<S> <C>
1997............................................................ $ 20,055
1998............................................................ 21,292
1999............................................................ 9,611
2000............................................................ 1,500,000
----------
$1,550,958
==========
</TABLE>

The Company has a revolving line of credit with a bank in an amount not to
exceed $4,000,000, secured by the Company's receivables, expiring January 1997.
The Company has not drawn against the line of credit as of March 31, 1996 but
has established a letter of credit in favor of its insurance carrier in the
amounts of $225,000 related to its workers compensation insurance program.
Borrowings against the line bear interest at 0.5% above the prime lending rate
and there is a commitment fee of 0.5% on unfunded amounts. The revolving line of
credit agreement requires the Company to maintain various loan covenants.

During the year ended March 31, 1994, 2,150 shares of common stock valued
at $7,500 were issued as payment of the interest on the $150,000 outstanding
under a $300,000 subordinated convertible note payable

F-12
<PAGE> 92

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to a preferred shareholder. The $150,000 subordinated note is convertible into
common stock of the Company beginning in August 1992 through August 1996 at
conversion rates varying from $4.07 to $5.81 per share. During each of fiscal
1994 and 1995, $75,000 in principal amount of subordinated notes were converted
into 18,430 and 16,125 shares of common stock. During fiscal 1996, $150,000 in
principal amount of subordinated notes were converted into 27,232 shares of
common stock.

Also, pursuant to the Conversion Agreement, $2.4 million of the Company's
subordinated debt converted into common stock at the rate of one share of common
stock for each $6.98 in principal amount of subordinated debt effective February
19, 1996.

(5) LEASES AND LEASE COMMITMENTS

The Company leases vehicles and office equipment under capital leases.
Total assets recorded under capital leases at March 31, 1995 and 1996 are
$2,283,951 and $5,197,835, respectively. Amortization expense related to assets
held under capital lease for the years ended March 31, 1994, 1995 and 1996 was
$319,686, $357,363 and $243,558, respectively.

The Company leases certain of its facilities under operating leases. Lease
terms generally range from one to five years. Rent expense for the years ended
March 31, 1994, 1995 and 1996 was approximately $144,830, $174,175 and $251,556,
respectively.

Future minimum lease payments as of March 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
MARCH 31, LEASES LEASES
------------------------------------------------------------- ---------- ---------
<S> <C> <C>
1997......................................................... $1,406,027 $ 163,612
1998......................................................... 1,096,233 150,412
1999......................................................... 773,466 95,562
2000......................................................... 429,837 80,262
2001......................................................... 179,986 13,377
---------- --------
Total minimum lease payments................................. $3,885,549 $ 503,225
========
Less amounts representing interest........................... (554,555)
----------
Present value of minimum lease payments...................... $3,330,994
==========
</TABLE>

(6) SHAREHOLDERS' EQUITY

(a) Equity Offering

In March 1996, the Company completed an initial public offering (the
"Offering") of 2,616,202 shares (net of 48 fractional shares paid in cash in
connection with the Recapitalization and Stock Split referred to below) of its
common stock for the purpose of raising funds to acquire additional businesses
and to retire debt. Net proceeds to the Company from the Offering, after
deduction of associated expenses, were approximately $23,522,000.

(b) Recapitalization and Stock Split

Effective January 17, 1996, the shareholders approved an amendment to the
Articles of Incorporation which, among other actions, increased the authorized
shares of all classes of capital stock to 20,560,600 and changed the par value
of the common stock to $.01 per share. Share and per share amounts for all
periods presented have been adjusted to reflect these changes. The Board of
Directors approved a 4.3-for-one stock split of the common stock which occurred
on March 1, 1996. Share and per share amounts for all periods presented have
been adjusted to reflect this stock split.

F-13
<PAGE> 93

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During fiscal 1996, the Company retired all of the common shares held in
treasury. The cost of acquired shares in excess of par value has been charged to
additional paid-in capital.

(7) STOCK WARRANTS AND OPTIONS

In fiscal 1995, 118,250 common stock warrants were issued by the Company to
several officers and directors of the Company. The warrants have an exercise
price of $4.65 per share. No warrants were exercised or granted during fiscal
1994. During fiscal 1995 and 1996, employees and officers of the Company
exercised their warrants to purchase 40,618 and 36,546 shares, respectively, of
common stock in exchange for notes payable to the Company of $66,878 and
$75,000. The notes are secured by the shares of common stock issued and the
personal guarantees of the officers receiving the stock.

In October 1995, the Company adopted the 1995 Incentive Plan (the "1995
Plan"). Under the 1995 Plan, incentive options, non-statutory options,
restricted stock awards, and/or stock appreciation rights may be granted to key
employees, non-employee directors and consultants to purchase the Company's
common stock at prices not less than the fair market value at the time of grant,
which become exercisable as described in the respective Award Agreement.
Pursuant to the 1995 Plan, an aggregate of 537,500 shares of the Company's
common stock is available for issuance upon the exercise of such options, awards
and rights, which may be granted over a ten-year period. On October 6, 1995,
options to purchase 133,300 shares of common stock at $7.44 per share were
granted under the 1995 Plan.

The following table summarizes the activity of stock options and warrants
granted by the Company:

<TABLE>
<CAPTION>
WARRANT PRICE
SHARES PER SHARE
------- --------------
<S> <C> <C>
OUTSTANDING, MARCH 31, 1994................................ 94,364 $.23 to $2.33
Granted.................................................. 118,250 $4.65
Exercised................................................ (57,818) $1.16 to $1.65
Cancelled................................................ -- --
------- --------------
OUTSTANDING, MARCH 31, 1995................................ 154,796 $.23 to $4.65
Granted.................................................. 133,300 $7.44
Exercised................................................ (36,546) $.23 to $2.33
Cancelled................................................ (10,750) $4.55
-------
OUTSTANDING, MARCH 31, 1996................................ 240,800 $4.65 to $7.44
=======
EXERCISABLE AT END OF YEAR................................. 84,710
=======
</TABLE>

(8) INCOME TAXES

The components of income tax expense applicable to continuing operations
are as follows:

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Current............................................ $454,989 $592,082 $ --
Deferred........................................... 70,292 88,740 709,306
-------- -------- --------
$525,281 $680,822 $709,306
======== ======== ========
</TABLE>

F-14
<PAGE> 94

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As discussed in note 1, the Company adopted SFAS 109 effective April 1,
1993. Income taxes for financial reporting purposes differs from the amount
computed by applying the statutory federal income tax rate of 34% to income
before income taxes as follows:

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Expected tax expense at U.S. statutory rate........ $449,315 $592,300 $707,984
Expenses not deductible............................ 15,858 11,220 35,501
State income taxes, net of federal effect.......... 45,663 47,190 (37,116)
Other.............................................. 14,445 30,112 2,937
-------- -------- --------
Provision for income taxes......................... $525,281 $680,822 $709,306
======== ======== ========
</TABLE>

The extraordinary loss of $513,819 in 1996 is net of deferred tax benefits
of $264,495.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1995 and 1996 are presented below:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for uncollectible accounts receivable........... $ 71,020 $ 109,065
State deferred income taxes............................... 55,729 --
Alternative minimum tax credit carryforwards.............. 53,322 435,455
Reserve for worker's compensation......................... -- 347,966
Accrued bonuses........................................... -- 195,110
Net operating loss carryforwards.......................... -- 1,119,522
Other..................................................... 54,309 12,456
---------- ----------
Total gross deferred tax assets................... 234,380 2,219,574
---------- ----------
Deferred tax liabilities:
Property and equipment...................................... 649,181 2,275,884
Investment in Dawson WellTech, L.C. ........................ 431,271 --
---------- ----------
Total gross deferred tax liabilities.............. 1,080,452 2,275,884
---------- ----------
Net deferred tax liability........................ $ 846,072 $ 56,310
========== ==========
</TABLE>

The Company anticipates the reversal of existing taxable temporary
differences will provide sufficient taxable income to realize the benefits of
its deferred tax assets.

For the year ended March 31, 1996, a decrease in deferred income tax
expense resulted primarily from the purchase of the remaining 39% interest in
the Company's majority owned subsidiary, Dawson WellTech, L.C. (note 2), a
reduction in deferred tax liabilities occurred of approximately $1,400,000 as a
result of the differences in basis of assets for financial reporting and income
tax purposes.

At March 31, 1995 and 1996, the Company had $53,322 and $435,455 of
alternative minimum tax credit carryforwards available to reduce regular Federal
income taxes which have no expiration date. The Company also has a tax net
operating loss carryforward of approximately $3,000,000 for federal income tax
purposes which expires in 2010 and 2011. Changes in ownership, as defined by
section 382 of the Internal Revenue Code, will limit the utilization of net
operating loss carryforwards to $2,000,000 per year.

F-15
<PAGE> 95

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) RELATED PARTY TRANSACTIONS

The Company retains a company owned by a member of the Board of Directors
to provide consulting services and makes payments to that company upon
completion of various financing and acquisition transactions. Payments for fees
and expenses for the years ended March 31, 1994, 1995 and 1996 were $46,466,
$147,916 and $47,475, respectively. The payment for the year ended March 31,
1995 includes $122,500 paid as a finder's fee by an investment banking firm from
the fee it received from the Company in connection with an acquisition.

(10) EMPLOYEE BENEFIT PLANS

The Company has a welfare benefit plan (the "Plan") to provide medical
benefits for eligible employees and their dependents. Contributions to the Plan
are made by the Company and covered employees. The Plan may be terminated at the
discretion of the Company. Contributions to the Plan in the amounts of $571,387
and $686,949 were made in fiscal 1995 and 1996, respectively.

In fiscal 1993, the Company established a 401(k) savings plan. Eligible
employees can make contributions to the plan. The Company may, at its option,
match a portion of the contributions made by the employees. The Company matched
50% of employee contributions up to a limit of $500 per employee in fiscal 1994,
resulting in total payments of $50,140, which amounts were paid in fiscal 1995.
The Company did not match employee contributions made in fiscal 1995 or fiscal
1996.

(11) COMMITMENTS AND CONTINGENCIES

Under the Company's worker's compensation insurance program, the Company
pays the first $300,000 of all claims with no aggregate limit in any one year.
Provision for claims under the program has been made in the financial statements
which represent the expected future payments based on the estimated ultimate
costs for incidents incurred through the end of each period. The insurance
carrier required the Company to make a deposit of $147,663. The deposit has been
included in other assets in the accompanying balance sheet. In addition, the
Company has established a letter of credit in favor of its respective insurance
carriers (note 4) and has entered into an agreement with an insurance carrier
for the guarantee of deductible reimbursement. The amount of the guarantee for
the year ended March 31, 1996 was $500,000.

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.

F-16
<PAGE> 96

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12) SUPPLEMENTARY BALANCE SHEET DATA

<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1995 1996
----------- ------------
<S> <C> <C>
Prepaid expenses and other:
Prepaid expenses................................................. $ 22,479 $ 108,957
Other current assets............................................. 121,506 106,540
----------- ------------
Total prepaids and other assets.......................... $ 143,985 $ 215,497
========== ===========
Property and equipment:
Land............................................................. $ 80,000 $ 143,228
Buildings........................................................ 814,508 1,087,308
Well servicing equipment......................................... 28,266,102 31,946,106
Automobiles, trucks and other vehicles........................... 5,092,053 8,519,707
Office furniture and other equipment............................. 269,906 354,077
----------- ------------
$34,522,569 $ 42,050,426
Less accumulated depreciation and depletion...................... (9,201,661) (12,935,755)
----------- ------------
Net property and equipment............................... $25,320,908 $ 29,114,671
========== ===========
Goodwill and other assets:
Goodwill (net of accumulated amortization of $120,274 and
$216,716)..................................................... $ 2,484,280 $ 2,059,696
----------- ------------
Other assets (net of accumulated amortization of $142,065 and
$248,392)..................................................... 663,955 1,107,224
Deposits and notes receivable.................................... 377,552 398,635
----------- ------------
$ 3,525,787 $ 3,565,555
========== ===========
Accrued liabilities:
Accrued payroll.................................................. $ 603,914 $ 839,446
Accrued insurance................................................ 808,941 927,911
Other accrued expenses........................................... 902,766 1,058,569
----------- ------------
$ 2,315,621 $ 2,825,926
========== ===========
</TABLE>

(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Summarized quarterly financial data for 1996 are as follows:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(A)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues............................ $12,647,883 $13,240,504 $13,058,459 $12,444,461
Operating income.................... 1,338,895 1,419,899 921,093 1,057,765
Net income (loss)................... 326,146 321,982 211,756 (705)(a)
Earnings per share -- primary....... 0.12 0.12 0.06 (0.01)(a)
Earnings per share -- fully
diluted........................... 0.12 0.12 0.06 (0.01)(a)
</TABLE>

- ---------------

(a) See discussion at note 4 regarding extraordinary item.

F-17
<PAGE> 97

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) RECENT DEVELOPMENTS -- ACQUISITIONS

On November 1, 1996, Dawson signed a letter of intent to acquire the
oilfield service assets of Mobley Environmental Services, Inc. for $5,500,000.
These assets primarily relate to liquid services operations. Pending fulfillment
of certain conditions, the Company expects this acquisition to close during the
quarter ending March 31, 1997.

On December 23, 1996, the Company entered into an Asset Purchase Agreement
pursuant to which the Company will acquire substantially all of Pride's U.S.
land-based well servicing assets for approximately $135,900,000 in cash. The
acquisition is expected to be financed through public offerings of senior
subordinated notes and common stock. The Company also expects the acquisition to
close during the quarter ending March 31, 1997.

F-18
<PAGE> 98

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:

We have audited the combined balance sheet of U.S. Land-Based Well
Servicing Operations of Pride Petroleum Services, Inc. (the "Division") as of
December 31, 1995 and 1994, and the related combined statements of operations
and changes in owner's equity and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Division's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the U.S. Land-Based
Well Servicing Operations of Pride Petroleum Services, Inc. as of December 31,
1995 and 1994, and the combined results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.

As discussed in Note 6 to the combined financial statements, the Division
changed its method of accounting for income taxes in 1993.

COOPERS & LYBRAND L.L.P.

Houston, Texas
February 26, 1996 (except for the
second paragraph of Note 1 as to which the date
is December 23, 1996)

F-19
<PAGE> 99

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED BALANCE SHEET
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 1,253 $ 1,154
Trade receivables, net of allowance for doubtful accounts of $426
and $394, respectively.......................................... 16,055 14,167
Parts and supplies................................................. 2,098 1,586
Deferred income taxes.............................................. 2,333 3,858
Other current assets............................................... 2,145 1,548
-------- --------
Total current assets....................................... 23,884 22,313
-------- --------
PROPERTY AND EQUIPMENT, at cost...................................... 133,641 126,535
ACCUMULATED DEPRECIATION............................................. (90,717) (91,825)
-------- --------
Net property and equipment................................. 42,924 34,710
-------- --------
OTHER ASSETS......................................................... 1,200 642
-------- --------
$ 68,008 $ 57,665
======== ========
LIABILITIES AND OWNER'S EQUITY
CURRENT LIABILITIES
Accounts payable................................................... $ 5,313 $ 4,460
Accrued expenses................................................... 7,993 8,884
Current portion of long-term debt.................................. 3,132 --
-------- --------
Total current liabilities....................................... 16,438 13,344
-------- --------
OTHER LONG-TERM LIABILITIES.......................................... 2,804 4,645
LONG-TERM DEBT, net of current portion............................... 8,028 --
DEFERRED INCOME TAXES................................................ 12,289 9,930
COMMITMENTS AND CONTINGENCIES
OWNER'S EQUITY....................................................... 28,449 29,746
-------- --------
$ 68,008 $ 57,665
======== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-20
<PAGE> 100

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF OPERATIONS AND
CHANGES IN OWNER'S EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
REVENUES.................................................... $113,115 $95,860 $105,865
-------- ------- --------
COSTS AND EXPENSES
Operating costs........................................... 86,177 76,820 85,984
Depreciation and amortization............................. 5,385 4,919 5,092
Selling, general and administrative....................... 14,504 12,772 13,333
-------- ------- --------
Total costs and expenses.......................... 106,066 94,511 104,409
-------- ------- --------
Earnings from operations..................... 7,049 1,349 1,456
OTHER INCOME (EXPENSE)
Other income (expense).................................... 1,260 11 13
Interest expense.......................................... (821) -- --
-------- ------- --------
Total other income, net........................... 439 11 13
-------- ------- --------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES............................ 7,488 1,360 1,469
INCOME TAX PROVISION........................................ 2,873 649 594
-------- ------- --------
NET EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES............................... 4,615 711 875
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES..................................................... -- -- 3,835
-------- ------- --------
NET EARNINGS................................................ 4,615 711 4,710
NET TRANSFERS TO PARENT..................................... (5,912) (4,395) (4,354)
OWNER'S EQUITY, BEGINNING OF YEAR........................... 29,746 33,430 33,074
-------- ------- --------
OWNER'S EQUITY, END OF YEAR................................. $ 28,449 $29,746 $ 33,430
======== ======= ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-21
<PAGE> 101

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings................................................ $ 4,615 $ 711 $ 4,710
Adjustments to reconcile net earnings to net cash provided
by operating activities --
Depreciation and amortization............................ 5,385 4,919 5,092
(Gain) loss on sale of assets............................ (905) (177) 407
Deferred tax provision (benefit)......................... 1,084 296 (548)
Cumulative effect of change in accounting for income
taxes............................................... -- -- (3,835)
Changes in assets and liabilities, net of effects of
acquisitions:
Trade receivables................................... 365 423 1,370
Parts and supplies.................................. (302) 23 (74)
Other current and noncurrent assets................. (681) 165 (207)
Accounts payable.................................... 155 (1,161) 1,360
Accrued expenses and other.......................... (3,492) (237) (400)
------- ------- -------
Net cash provided by operating activities......... 6,224 4,962 7,875
------- ------- -------
INVESTING ACTIVITIES
Purchase of net assets of acquired entities, including
acquisition costs, less cash acquired.................... (1,990) -- --
Purchases of property and equipment......................... (3,688) (2,272) (549)
Proceeds from sale of property and equipment................ 1,340 304 231
Other....................................................... (110) -- --
------- ------- -------
Net cash used in investing activities............. (4,448) (1,968) (318)
------- ------- -------
FINANCING ACTIVITIES
Proceeds from debt borrowings............................... 6,600 -- --
Reduction of debt........................................... (2,023) -- --
Net transfers to Parent..................................... (6,254) (4,306) (9,330)
------- ------- -------
Net cash used in financing activities............. (1,677) (4,306) (9,330)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... 99 (1,312) (1,773)
CASH AND CASH EQUIVALENTS, beginning of period................ 1,154 2,466 4,239
------- ------- -------
CASH AND CASH EQUIVALENTS, end of period...................... $ 1,253 $ 1,154 $ 2,466
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-22
<PAGE> 102

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The U.S. Land-Based Well Servicing Operations of Pride Petroleum Services,
Inc. (the "Division") consists of the U.S. land-based well servicing operations
of Pride Petroleum Services, Inc. (the "Parent"). In addition, the Division
provides hauling services and downhole tool rentals. The Division's operations
are located in the Texas and Louisiana Gulf Coast, the Permian Basin areas of
West Texas and New Mexico and California, and are principally conducted through
various operating subsidiaries directly or indirectly owned by the Parent.

On December 23, 1996, the Parent and Dawson Production Services, Inc.
entered into a Purchase Agreement whereby Dawson Production Services, Inc. will
acquire the operating subsidiaries comprising the Division for approximately
$135,900,000 in cash. The Parent will retain the Division's working capital
(other than parts and supplies), other long-term liabilities and long-term debt.

The accompanying combined financial statements reflect the financial
position, results of operations and cash flows of these subsidiaries plus
certain allocable corporate activities of the Parent.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash Equivalents

For purposes of the combined balance sheet and combined statement of cash
flows, the Division considers highly liquid debt instruments having maturities
of three months or less at the date of purchase to be cash equivalents.

Parts and Supplies

Parts and supplies consist of spare rig parts and supplies held for use in
operations and are valued at the lower of weighted average cost or estimated
market value.

Property and Equipment

Property and equipment are carried at original cost or adjusted net
realizable value, as applicable. Major renewals and improvements are capitalized
and depreciated over the respective asset's useful life. Maintenance and repair
costs are charged to expense as incurred. During the years ended December 31,
1995, 1994 and 1993, maintenance and repair costs included in operating costs
were $10,640,000, $9,402,000 and $10,710,000, respectively. When assets are sold
or retired, the remaining costs and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is included in income.

For financial reporting purposes, depreciation of property and equipment is
provided using primarily the straight line method based upon expected useful
lives of each class of assets. Estimated useful lives of the assets for
financial reporting purposes are as follows:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Rigs and rig equipment....................................................... 5-17
Transportation equipment..................................................... 3- 7
Buildings and improvements................................................... 10-20
Furniture and fixtures....................................................... 5
</TABLE>

F-23
<PAGE> 103

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Revenue Recognition

The Division recognizes revenue from domestic land well servicing
operations as services are performed based upon actual rig hours worked.
Revenues from related operations are recognized in the period in which such
services are performed.

Income Taxes

The Division joins with the Parent in filing a consolidated federal income
tax return. The Division records income tax expense as though it filed
separately. Effective January 1, 1993, the Division adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the asset is expected to be recovered or the
liability is expected to be settled.

Concentration of Credit Risk

Financial instruments which potentially subject the Division to
concentrations of credit risk consist principally of cash and trade receivables.
By policy, the Company limits the amount of credit exposure to any one financial
institution or issuer. The Division's customer base consists primarily of major
integrated oil companies and smaller independent oil and gas producers.
Management believes the credit quality of its customers is generally high. The
Division provides allowances for potential credit losses when necessary. Bad
debt expense was $174,000 and $116,000 for the years ended December 31, 1995 and
1993, respectively. The Division did not incur any bad debt expense during the
year ended December 31, 1994. During the years ended December 31, 1995, 1994 and
1993, no customer accounted for more than 10% of combined revenue.

Management Estimates

Conditions Affecting Ongoing Operations

Increases and decreases in domestic well servicing activity historically
have had a significant correlation with changes in oil and natural gas prices.
Domestic well servicing contracts are typically entered into for one or multiple
wells, but are typically short term and rig rates may be volatile.

F-24
<PAGE> 104

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 and 1994 consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 1,448 $ 1,330
Equipment........................................................ 125,358 121,058
Buildings and leasehold improvements............................. 3,690 2,849
Furniture and fixtures........................................... 706 599
Construction-in-progress......................................... 2,439 699
-------- --------
133,641 126,535
Accumulated depreciation......................................... (90,717) (91,825)
-------- --------
$ 42,924 $ 34,710
======== ========
</TABLE>

Depreciation expense was $5,114,000, $4,556,000 and $4,642,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.

4. ACQUISITIONS

In March 1995, the Division acquired all of the outstanding capital stock
of X-Pert Enterprises, Inc. ("X-Pert") for aggregate consideration of
approximately $10,000,000, consisting of $3,000,000 cash, a note payable to the
selling shareholders in the amount of $5,964,000, and 200,000 shares of the
Parent's common stock.

The assets acquired and liabilities assumed in the X-Pert acquisition were
as follows:

<TABLE>
<CAPTION>
ASSETS (LIABILITIES)
--------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents........................................... $ 1,719
Trade receivables................................................... 2,254
Other current assets................................................ 80
Property and equipment.............................................. 10,000
Other assets........................................................ 725
Accounts payable.................................................... (648)
Accrued expenses.................................................... (761)
Long-term debt...................................................... (569)
Deferred income taxes............................................... (2,800)
-------
$ 10,000
=======
</TABLE>

Unaudited pro forma results of operations assuming the acquisition of
X-Pert had occurred on January 1, 1994, are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues......................................................... $115,109 $110,679
Net Earnings..................................................... $ 4,720 $ 2,167
</TABLE>

F-25
<PAGE> 105

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The pro forma results of operations presented above do not purport to be
indicative of the results of operations of the Division that might have occurred
nor are they indicative of future results.

Also in March 1995, the Division acquired substantially all of the assets
of a fluids hauling business for total consideration of $400,000, consisting of
$350,000 in cash and a note payable to the sellers in the amount of $50,000.

Each of the acquisitions discussed above was recorded using the purchase
method of accounting. The operating results of each acquisition have been
included in combined results of operations from the date of acquisition.

5. DEBT

Long-Term Debt

Long-term debt at December 31, 1995 consists of the following:

<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Collateralized term loan............................................... $ 5,696
Notes payable.......................................................... 394
Note payable to selling shareholders................................... 5,070
------
11,160
Less current portion................................................... 3,132
------
$ 8,028
======
</TABLE>

The collateralized term loan is due in annual installments through 1999,
bears interest at prime plus 1/2%, (9.0% as of December 31, 1995), and is
collateralized by certain equipment of the Division. Notes payable includes two
notes payable to lending institutions totaling an aggregate $344,000 which are
collateralized by certain property and equipment and a note payable in the
amount of $50,000 issued to the sellers of certain assets acquired by the
Company during the first quarter of 1995.

In March 1995, the Company entered into a note payable to two individuals
in the amount of $5,964,000 as partial consideration for the acquisition of
X-Pert. The note bears interest at the rate of 8.5% per annum and is repayable
in quarterly installments through March 2000. The note payable to selling
shareholders is collateralized by certain of the property and equipment of the
acquired business.

Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1996................................................................... $3,132
1997................................................................... 2,749
1998................................................................... 2,742
1999................................................................... 2,239
2000................................................................... 298
</TABLE>

The Division has obtained bank commitments which provide for guidance lines
of credit of $18,000,000. As of December 31, 1995, letters of credit totaling
$10,672,000 were outstanding thereunder. Cash and cash equivalents and a portion
of accounts receivable have been pledged as collateral pursuant to these credit
facilities.

F-26
<PAGE> 106

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Based on rates currently available to the Parent for debt with similar
terms and remaining maturities, the Division believes that the recorded value of
long-term debt approximates fair market value at December 31, 1995.

6. INCOME TAXES

Effective January 1, 1993, the Division adopted SFAS 109 and in connection
therewith recorded a non-cash gain in the amount of $3,835,000, which represents
the reduction of the deferred tax liability as of January 1, 1993. The gain has
been recorded in the combined statement of operations as "cumulative effect of
change in accounting for income taxes".

The components of the provision for income taxes were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994 1993
------ ---- ------
(IN THOUSANDS)
<S> <C> <C> <C>
United States Federal:
Current....................................................... $1,690 $333 $1,079
Deferred...................................................... 1,024 280 (518)
------ ---- ------
2,714 613 561
------ ---- ------
State:
Current....................................................... 99 20 63
Deferred...................................................... 60 16 (30)
------ ---- ------
159 36 33
------ ---- ------
Total income tax provision............................ $2,873 $649 $ 594
====== ==== ======
</TABLE>

The difference between the effective federal income tax rate reflected in
the income tax provision and the amounts which would be determined by applying
the statutory federal tax rate to earnings before income taxes is summarized as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate............................................ 34.0% 34.0% 34.0%
State and local taxes.......................................... 2.0 2.0 2.0
Other (principally nondeductible expenses)..................... 2.4 11.7 4.4
---- ---- ----
Effective tax rate............................................. 38.4% 47.7% 40.4%
==== ==== ====
</TABLE>

F-27
<PAGE> 107

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation................................................... $12,239 $ 9,848
Other.......................................................... 50 82
------- -------
Total deferred tax liabilities......................... 12,289 9,930
------- -------
Deferred tax assets:
Insurance accruals............................................. (1,891) (3,345)
Bad debts...................................................... (153) (142)
Other.......................................................... (289) (371)
------- -------
Total deferred tax assets.............................. (2,333) (3,858)
------- -------
Net deferred tax liability....................................... $ 9,956 $ 6,072
======= =======
</TABLE>

7. EMPLOYEE BENEFITS

The Parent has a salary deferral plan covering its employees, including
those of the Division, whereby employees may elect to contribute up to 15% of
their annual compensation. The Parent may at its discretion make matching
contributions with respect to an employee's salary contribution of up to $1,000
or 6% of compensation, whichever is less. Total expense charged to the Division
for the years ended December 31, 1995, 1994 and 1993, were $134,000, $87,000 and
$61,000, respectively.

8. COMMITMENTS AND CONTINGENCIES

The Division is routinely involved in litigation incidental to its
business, which often involves claims for significant monetary amounts, some of
which would not be covered by insurance. In the opinion of management, none of
the existing litigation will have any material adverse effect on the Division's
financial position or results of operations.

The Division is self-insured with respect to physical damage or loss to its
domestic vehicles, land rigs, and equipment (except for thirteen of its largest
land rigs). Thirteen of the Division's largest land rigs are insured, with
deductibles of generally $25,000 per occurrence. Presently, the Division has
insurance deductibles of $250,000 per occurrence for workers' compensation
claims, $100,000 per occurrence for automobile liability claims, and $100,000
for general liability claims. The Division further limits its exposure by
maintaining, together with the Parent, an accident and health insurance policy
with respect to its employees with a deductible of $10,000 per occurrence.

In July 1995, one of the Division's land rigs was destroyed in an explosion
and fire. The damaged rig was covered by insurance and the Division received net
insurance proceeds, after repurchasing the salvage, of $1,094,000. The Division
recognized a gain from the insurance recovery of $1,049,000 which is included in
other income in the accompanying consolidated statement of operations.

As of December 31, 1995 and 1994, the Division had accrued approximately
$5,916,000 and $9,706,000, respectively for estimated claims liabilities, of
which $3,112,000 and $5,217,000, respectively, was included in current
liabilities and $2,804,000 and $4,489,000, respectively, was reflected as other
long-term liabilities in the accompanying balance sheet.

F-28
<PAGE> 108

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 1995, the Division had letters of credit outstanding
totaling $10,672,000. These letters of credit guarantee principally the funding
of the Division's share of insured claims. Cash and cash equivalents of the
Parent and a portion of trade receivables have been pledged as security for
these letters of credit. The credit facility provides flexibility to reduce the
pledge of the Parent's cash and cash equivalents by pledging additional trade
receivables.

Due to the nature of the Division's business and the structure of its
insurance program, the occurrence of a significant event against which the
Division is not fully insured or a number of lessor events for which the
Division is insured, but subject to substantial deductibles, could significantly
impact the operating results of the Division for a given period.

Rental expense for equipment, vehicles and various facilities of the
Division for the years ended December 31, 1995, 1994 and 1993 was $4,354,000,
$4,233,000 and $3,877,000, respectively. As of December 31, 1995, the Division
did not have any significant future minimum lease payments for operating leases
having initial or remaining noncancelable lease terms longer than one year. The
Division leases vehicles used in its operations under a revolving master lease.
Although any single lease is cancelable by the Division with 60 days notice, the
Division expects to incur this lease expense in increasing amounts for the
foreseeable future. Vehicle lease expense pursuant to the master lease
agreements included in the above rental expense for the years ended December 31,
1995, 1994 and 1993 was $2,218,000, $2,134,000 and $1,809,000, respectively.

9. RELATED PARTY TRANSACTIONS

Selling, general and administrative expense includes allocation of
corporate costs from the Parent of approximately $4,000,000, $4,500,000 and
$4,600,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Those costs relate principally to financial, marketing, management information,
risk management, legal and human resource services and were allocated based on
estimates of time incurred or the cost of the service provided. Although
management believes such methods of allocation are reasonable, they are not able
to determine whether the allocations are indicative of actual expenses that
would have been incurred if the Division operated as a separate entity.

The Division transfers underutilized equipment to the Parent from time to
time using the equipment's net book value. The amount of such transfers were
approximately $660,000, $489,000 and $529,000 for the years ended December 31,
1995, 1994 and 1993, respectively.

10. SUPPLEMENTAL FINANCIAL INFORMATION

Other Current Assets

Other current assets at December 31, 1995 and 1994 consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Other receivables............................................... $ 821 $ 383
Prepaid expenses................................................ 1,324 1,165
------- ------
$2,145 $1,548
======= ======
</TABLE>

F-29
<PAGE> 109

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Accrued Expenses

Accrued expenses at December 31, 1995 and 1994 consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Insurance (excluding the long-term portion of $2,804 and $4,489,
respectively)...................................................... $3,112 $5,217
Payroll............................................................ 3,454 2,008
Taxes, other than income........................................... 1,101 1,422
Other.............................................................. 326 237
------ ------
$7,993 $8,884
====== ======
</TABLE>

Cash Flow Information

Cash paid for interest and income taxes during the years ended December 31,
1995, 1994 and 1993 was as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................................. $786 $ -- $ --
Income taxes............................................. 500 1,893 2
</TABLE>

F-30
<PAGE> 110

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................................ $ 1,638 $ 1,253
Trade receivables, net of allowance for doubtful accounts of $426
and $426, respectively........................................ 17,451 16,055
Parts and supplies............................................... 2,045 2,098
Deferred income taxes............................................ 1,796 2,333
Other current assets............................................. 4,323 2,145
-------- --------
Total current assets..................................... 27,253 23,884
-------- --------
PROPERTY AND EQUIPMENT, at cost.................................... 134,133 133,641
ACCUMULATED DEPRECIATION........................................... (91,092) (90,717)
-------- --------
Net property and equipment............................... 43,041 42,924
-------- --------
OTHER ASSETS....................................................... 2,006 1,200
-------- --------
$ 72,300 $ 68,008
======== ========
LIABILITIES AND OWNER'S EQUITY
CURRENT LIABILITIES
Accounts payable................................................. $ 5,337 $ 5,313
Accrued expenses................................................. 3,988 7,993
Current portion of long-term debt................................ 9,026 3,132
-------- --------
Total current liabilities................................ 18,351 16,438
-------- --------
OTHER LONG-TERM LIABILITIES........................................ 2,066 2,804
LONG-TERM DEBT, net of current portion............................. 36,885 8,028
DEFERRED INCOME TAXES.............................................. 11,384 12,289
COMMITMENTS AND CONTINGENCIES
OWNER'S EQUITY..................................................... 3,614 28,449
-------- --------
$ 72,300 $ 68,008
======== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-31
<PAGE> 111

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
-------- -------
<S> <C> <C>
REVENUES................................................................ $ 87,290 $85,990
-------- -------
COSTS AND EXPENSES
Operating costs....................................................... 67,756 66,390
Depreciation and amortization......................................... 4,070 4,017
Selling, general and administrative................................... 11,012 10,870
-------- -------
Total costs and expenses...................................... 82,838 81,277
-------- -------
Earnings from operations.................................... 4,452 4,713
OTHER INCOME (EXPENSE)
Other income.......................................................... 230 1,264
Interest expense...................................................... (2,244) (551)
-------- -------
Total other income (expense), net............................. (2,014) 713
-------- -------
EARNINGS BEFORE INCOME TAXES............................................ 2,438 5,426
INCOME TAX PROVISION.................................................... 1,008 2,048
-------- -------
NET EARNINGS............................................................ 1,430 3,378
NET TRANSFERS TO PARENT................................................. (26,265) (7,574)
OWNER'S EQUITY, beginning of period..................................... 28,449 29,746
-------- -------
OWNER'S EQUITY, end of period........................................... $ 3,614 $25,550
======== =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-32
<PAGE> 112

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings........................................................ $ 1,430 $ 3,378
Adjustments to reconcile net earnings to net cash provided by
operating activities --
Depreciation and amortization.................................. 4,070 4,017
Gain on sale of assets......................................... (251) (906)
Deferred tax provision......................................... 2,974 1,057
Changes in assets and liabilities, net of effects of
acquisitions --
Trade receivables........................................... (1,396) (442)
Parts and supplies.......................................... 53 (358)
Other current and noncurrent assets......................... (3,061) (1,671)
Accounts payable............................................ 24 1,068
Accrued expenses and other.................................. (4,743) (1,527)
-------- -------
Net cash provided by operating activities................. (900) 4,616
-------- -------
INVESTING ACTIVITIES
Purchase of net assets of acquired entities, including acquisition
costs, less cash acquired........................................ (1,850) (1,990)
Purchases of property and equipment................................. (2,778) (2,573)
Proceeds from sales of property and equipment....................... 265 1,280
Other............................................................... (43) (110)
-------- -------
Net cash used in investing activities..................... (4,406) (3,393)
-------- -------
FINANCING ACTIVITIES
Proceeds from debt borrowings....................................... 45,000 6,600
Reduction of debt................................................... (10,249) (1,000)
Net transfers to Parent............................................. (29,060) (7,977)
-------- -------
Net cash provided by financing activities................. 5,691 (2,377)
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 385 (1,154)
CASH AND CASH EQUIVALENTS, beginning of period........................ 1,253 1,154
-------- -------
CASH AND CASH EQUIVALENTS, end of period.............................. $ 1,638 $ 0
======== =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-33
<PAGE> 113

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS

1. GENERAL

The unaudited combined financial statements included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to such rules and
regulations. These unaudited combined financial statements should be read in
conjunction with U.S. Land Based Well Servicing Operations of Pride Petroleum
Services, Inc.'s (the "Division's") audited combined financial statements and
notes thereto for the year ended December 31, 1995.

The unaudited combined financial information included herein reflects all
adjustments, consisting only of normal recurring adjustments, which are
necessary, in the opinion of management, for a fair presentation of the
Division's financial position, results of operations and cash flows for the
interim periods presented. The results of operations for the interim periods
presented herein are not necessarily indicative of the results to be expected
for full years.

2. COMMITMENTS AND CONTINGENCIES

The Division is self-insured with respect to physical damage or loss to its
vehicles, land rigs (except for thirteen of its largest land rigs), and other
equipment. Thirteen of the Division's largest land rigs are insured, with
deductibles of generally $25,000 per occurrence. Presently, the Division has
insurance deductibles of $250,000 per occurrence for workers' compensation
claims, $100,000 per occurrence for automobile liability claims, and $100,000
for general liability claims. The Division further limits its exposure by
maintaining an accident and health insurance policy with respect to its
employees with a deductible of $10,000 per occurrence.

As of September 30, 1996 and December 31, 1995, the Division had accrued
approximately $5,918,000 and $5,916,000, respectively, for estimated claims
liabilities, of which $3,852,000 and $3,112,000, respectively, was included in
current liabilities and $2,066,000 and $2,804,000, respectively, was included in
other long-term liabilities in the accompanying unaudited combined balance
sheet. As of September 30, 1996, the Division had letters of credit outstanding
totaling $8,652,000. These letters of credit principally guarantee the funding
of the Division's share of insured claims.

3. ACQUISITIONS

In February 1996, the Division acquired substantially all of the assets of
another operator in Freer, Texas for aggregate consideration of approximately
$1,879,000, consisting of $1,850,000 cash and 4,200 restricted shares of Pride
Petroleum Services, Inc. common stock. The assets acquired included seven
workover rigs, hauling and anchor trucks and other support assets.

The acquisition was recorded using the purchase method of accounting. The
operating results of each acquisition have been included in the Division's
consolidated results of operations from the date of acquisition.

F-34
<PAGE> 114

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. DEBT

Long-Term Debt

Long-term debt at September 30, 1996 and December 31, 1995 consists of the
following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Collateralized term loans.................................. $41,736 $ 5,696
Notes payable.............................................. -- 394
Acquisition note payable................................... 4,175 5,070
------- -------
45,911 11,160
Less: current portion...................................... 9,026 3,132
------- -------
$36,885 $ 8,028
======= =======
</TABLE>

In April 1996, the Division completed two separate financing arrangements
with lending institutions pursuant to which it borrowed an aggregate amount of
$40,000,000, net of repayment of $5,000,000 of borrowings to one of the lenders.
The collateralized term loans bear interest initially at a floating rate of
prime plus 1/2% and are repayable in monthly installments of principal and
interest over a period of five to six years. The Division may elect to convert
the interest payable to a fixed rate basis at any time during the term of the
loans. The loans are collateralized by substantially all of the land-based rig
fleet and ancillary equipment.

F-35
<PAGE> 115

INDEPENDENT AUDITOR'S REPORT

To the Stockholders, Members, and Owners
Taylor Acquisition Group
Carthage, Texas

We have audited the accompanying combined balance sheets of the Taylor
Acquisition Group (the Group) as of December 31, 1995 and 1994, and the related
statements of income, changes in stockholder equity, and cash flows for the
years then ended. These combined financial statements are the responsibility of
the Group's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

The Taylor Acquisition Group is an unincorporated combination of entities
consisting of Taylor Companies, Inc. (a Texas corporation) and its wholly owned
subsidiaries (excluding Cavern Disposal, Inc.), Taylor Water Injections, Inc. (a
Texas corporation), Teague Interests, Inc. (a Texas corporation), Taylor
Caldwell Properties, LLC (a Texas limited liability company), and the
unincorporated land and buildings owned by John Randall Taylor which constitute
the Carthage yard facilities. The wholly owned subsidiaries of Taylor Companies,
Inc. which are included consist of Taylor Interests, Inc., Taylor SWD Operating,
Inc., Taylor Environmental, Inc., Taylor Disposal, Inc., Production Disposal,
Inc., Taylor Injection Systems, Inc., DeBerry SWD, Inc., Tatum SWD, Inc., and
Newton County SWD, Inc. (all Texas corporations).

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Taylor Acquisition
Group as of December 31, 1995 and 1994, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.

Chapman, Williams & Co.
Certified Public Accountants
Carthage, Texas

May 21, 1996

F-36
<PAGE> 116

TAYLOR ACQUISITION GROUP

COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 563,105 $ 283,054 $ 239,160
Accounts receivable -- trade, (net)................. 3,669,784 2,973,206 3,299,590
Accounts receivable -- affiliates................... 81,399 -- --
Accounts receivable -- officer...................... 445,655 164,135 202,628
Accounts receivable -- other........................ 286,256 122,273 298,003
Prepaid expenses.................................... 141,336 110,496 226,058
----------- ----------- -----------
Total current assets........................ 5,187,535 3,653,164 4,265,439
Property, plant and equipment:
Heavy trucks and trailers........................... 2,415,384 2,331,400 2,371,053
Frac tanks.......................................... 3,961,543 3,980,401 3,992,401
Other equipment..................................... 2,776,437 2,667,291 2,707,025
Disposal wells...................................... 2,348,249 2,816,349 2,810,600
Land................................................ 45,953 55,627 55,627
----------- ----------- -----------
11,547,566 11,851,068 11,936,706
Less: accumulated depreciation...................... 6,790,230 8,073,760 8,749,869
Net property, plant and equipment........... 4,757,336 3,777,308 3,186,837
Other assets:
Equipment not in service............................ 87,964 9,528 --
----------- ----------- -----------
Total assets................................ $10,032,835 $ 7,440,000 $ 7,452,276
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable -- current portion.................... $ 2,497,684 $ 2,026,198 $ 1,469,604
Obligation under capital leases -- current
portion.......................................... 16,941 18,275 18,275
Accounts payable -- trade........................... 916,657 478,519 628,106
Accounts payable -- affiliates...................... -- 89,241 --
Accrued expenses.................................... 745,452 455,912 631,013
Deferred revenues................................... 17,215 48,800 43,959
----------- ----------- -----------
Total current liabilities................... 4,193,949 3,116,945 2,790,957
Long-term debt:
Notes payable....................................... 1,640,936 852,817 820,173
Obligation under capital leases..................... 36,288 18,013 18,013
Subordinated payable to stockholder................. 3,999,610 2,896,201 2,505,629
----------- ----------- -----------
Total long-term debt........................ 5,676,834 3,767,031 3,343,815
Other non-current liabilities:
Deferred revenue.................................... 242,005 193,205 186,398
Deferred taxes...................................... 380,235 224,827 122,484
----------- ----------- -----------
Total non-current liabilities............... 622,240 418,032 308,882
----------- ----------- -----------
Total liabilities........................... 10,493,023 7,302,008 6,443,654
Stockholder's equity:
Common Stock, $1 par value; 30,000 shares
authorized; 15,000 shares issued and
outstanding...................................... 66,100 67,100 67,100
Paid-in surplus..................................... 5,000 743,011 1,129,083
Retained earnings................................... (531,288) (672,119) (187,561)
----------- ----------- -----------
Total stockholder's equity.................. (460,188) 137,992 1,008,622
----------- ----------- -----------
Total liabilities and stockholder's
equity.................................... $10,032,835 $ 7,440,000 $ 7,452,276
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-37
<PAGE> 117

TAYLOR ACQUISITION GROUP

COMBINED STATEMENT OF INCOME (LOSS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1994 1995 1995 1996
----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES................................ $19,651,930 $16,713,246 $8,369,304 $8,943,005
DIRECT COST OF OPERATIONS............... 16,291,016 14,281,231 7,024,849 7,112,371
----------- ----------- ---------- ----------
Gross profit.......................... 3,360,914 2,432,015 1,344,455 1,830,634
General and administrative expenses... 3,443,168 2,831,866 1,167,660 1,086,408
----------- ----------- ---------- ----------
Net operating income (loss)........... (82,254) (399,851) 176,795 744,226
Other income and expense.............. 140,046 (100,896) 78,288 (3,330)
----------- ----------- ---------- ----------
Net income (loss) before tax.......... (222,300) (298,955) 255,083 747,556
Provision for income taxes (benefit)
Current............................ (7,973) (2,716) 135,335 365,341
Deferred........................... 380,235 (155,408) 236,718 (102,343)
----------- ----------- ---------- ----------
372,262 (158,124) 372,053 262,998
----------- ----------- ---------- ----------
Net income (loss)............. $ (594,562) $ (140,831) $ (116,970) $ 484,558
=========== =========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements

F-38
<PAGE> 118

TAYLOR ACQUISITION GROUP

COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------- ----------------------
1994 1995 1995 1996
----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................... $ (594,562) $ (140,831) $(116,970) $ 484,558
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............. 1,645,314 1,607,042 839,977 676,109
Gain on sale of assets.................... (15,058) (86,904) (70,454) (1,789)
Decrease (increase) in accounts
receivable............................. (362,011) 696,578 502,441 (502,114)
Decrease (increase) in prepaid expenses
and other assets....................... (57,645) 119,829 (121,101) (106,034)
Decrease (increase) in due to
affiliates............................. (64,354) 170,640 48,668 (89,241)
Decrease (increase) in accounts payable... 265,419 (438,138) (347,550) 149,587
Decrease (increase) in accrued expenses... 147,618 (289,543) (165,235) 175,101
Decrease (increase) in deferred revenue... 259,220 (17,215) (11,535) (11,648)
Decrease (increase) in income tax
receivable............................. (107,973) 75,000 143,308 --
Decrease (increase) in deferred taxes..... 380,235 (155,408) 236,718 (102,343)
Decrease in officer note receivable for
operations............................. -- 105,509 -- --
Decrease in fixed and other assets used
for operations......................... -- 28,924 -- --
----------- ----------- --------- ---------
Net cash provided by operating
activities...................... 1,496,203 1,675,483 938,267 672,186
----------- ----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................... (1,143,548) (1,007,592) (875,809) (85,638)
Proceeds on sale of assets.................. 31,415 343,186 313,503 1,789
Advances on officer note receivable......... -- (321,806) (55,908) (38,493)
Collections on officer note receivable...... 259,320 174,474 -- --
Purchase equipment not in service........... (87,964) -- -- --
----------- ----------- --------- ---------
Net cash used in investing
activities...................... (940,777) (811,738) (618,214) (122,342)
----------- ----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
New loans................................... 1,158,560 250,000 342,066 --
Repayment of capital lease.................. (16,961) (16,941) -- --
Repayment of debt........................... (1,674,845) (1,509,605) (997,739) (589,238)
Repayment of note payable -- shareholder.... (326,339) (100,000) -- (4,500)
Loans from shareholder...................... 2,406,574 231,750 11,250 --
Distribution of Subchapter S earnings....... (2,406,574) -- -- --
Issue capital stock......................... 2,000 1,000 1,000 --
----------- ----------- --------- ---------
Net cash used in financing activities..... (857,585) (1,143,796) (643,423) (593,738)
----------- ----------- --------- ---------
Net decrease in cash and cash
equivalents..................... (302,159) (280,051) (323,370) (43,894)
Cash and cash equivalents at the beginning
of the period............................. 865,264 563,105 563,105 283,054
----------- ----------- --------- ---------
Cash and cash equivalents at the end of the
period.................................... $ 563,105 $ 283,054 $ 239,735 $ 239,160
=========== =========== ========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Additional paid-in surplus.................. $ 738,011 $ -- $ 386,072
Reduction in notes payable -- officer....... (738,011) -- (386,072)
----------- --------- ---------
$ -- $ -- $ --
=========== ========= =========
Acquisition of equipment
Cost of equipment........................... $ 1,617,653
Equipment loans............................. (474,105)
-----------
Cash paid for equipment................... $ 1,143,548
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-39
<PAGE> 119

TAYLOR ACQUISITION GROUP

COMBINED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
CAPITAL PAID-IN RETAINED
STOCK SURPLUS EARNINGS
------- ---------- -----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993.............................. $64,100 $ -- $ 2,589,538
Issue stock: Taylor Companies, Inc.................... 1,000 -- --
Newton SWD, Inc.................................... 1,000 -- --
Capitalize Taylor Caldwell Properties, LLC............ -- 5,000 --
Distribution of Subchapter-S earnings................. -- -- (2,526,264)
Net loss...................................... -- -- (594,562)
------- ---------- -----------
BALANCE, DECEMBER 31, 1994.............................. 66,100 5,000 (531,288)
Issue stock: Teague Interests, Inc.................... 1,000 -- --
Contribution of officer note payable.................. -- 738,011 --
Net loss...................................... -- -- (140,831)
------- ---------- -----------
BALANCE, DECEMBER 31, 1995.............................. 67,100 743,011 (672,119)
Contribution of officer note payable.................. -- 386,072 --
Net income.................................... -- -- 484,558
------- ---------- -----------
BALANCE, JUNE 30, 1996 (UNAUDITED)...................... $67,100 $1,129,083 $ (187,561)
======= ========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements

F-40
<PAGE> 120

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. The Group was organized for the purpose of providing oil field services
to major oil companies and drilling companies by providing vacuum trucks, frac
tanks, saltwater disposal and other services necessary for the drilling,
completion and production processes. Operational areas exist primarily in the
east, southeast, and central regions of Texas. The Group maintains facilities in
Carthage, Caldwell, Bryan, Giddings, Pineland, Freestone, and Easton, Texas. The
Group had a facility in Laredo, Texas which was closed in December 1994.

B. The combined financial statements include the accounts of Taylor
Companies, Inc. and its wholly owned subsidiaries Taylor Interests, Inc., Taylor
SWD Operating, Inc., Taylor Environmental, Inc., Taylor Disposal, Inc.,
Production Disposal, Inc., Taylor Injection Systems, Inc., DeBerry SWD, Inc.,
Tatum SWD, Inc. and Newton County SWD, Inc. Cavern Disposal, Inc., which is also
a wholly owned subsidiary of Taylor Companies, Inc. is not included. Also
included are Taylor Water Injections, Inc., Teague Interests, Inc., Taylor
Caldwell Properties, LLC and the real property representing the Carthage yard,
all of which are owned by Mr. John Randall Taylor. Intercompany transactions
have been eliminated.

C. Fixed assets are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Virtually
all assets, excluding buildings, are depreciated over an estimated useful life
of five years.

Depreciation expense on equipment, vehicles and disposal wells is included
in cost of operations. Depreciation expense on these assets totaled $1,526,491
and $1,619,505 in 1995 and 1994, respectively. Depreciation expense on office
furnishing and equipment and leasehold improvements totaled $80,551 and $25,809
for 1995 and 1994, respectively. These amounts are included in general and
administrative expenses.

For federal income tax purposes, depreciation is computed using the
modified accelerated cost recovery system. Expenditures for major renewals and
betterments that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred.

D. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

E. Cash and cash equivalents are comprised of checking accounts, savings
accounts, and short-term cash investment accounts maintained at various
financial institutions.

The Group has had monies invested into a special account with Premier Bank
into which excess operating funds are transferred on a daily basis. The monies
in this account earn a floating interest rate and are collateralized by U.S.
Government obligations.

F. As explained in Note 1B, the Group consists of various companies and
assets which do not exist as a taxable entity. However, the tax provisions
reflected in the financial statements have been computed as if the companies and
assets did exist as a single taxable entity.

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of depreciation and bad debt
reserves for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized for operating losses
that are available to offset future federal income taxes.

F-41
<PAGE> 121

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 ACCOUNTS RECEIVABLE -- TRADE

The Group's receivables consist of amounts due from major oil companies and
oilfield drilling companies for frac tank and vacuum truck services and disposal
fees. Receivables are uncollateralized with 30 day terms.

<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
AMOUNT % AMOUNT %
---------- --- ---------- ---
<S> <C> <C> <C> <C>
Current.......................................... $1,992,448 65 $2,477,303 66
30 Days.......................................... 712,236 23 895,283 24
60 Days.......................................... 193,362 6 254,940 7
90 Days and Over................................. 186,482 6 117,729 3
---------- --- ---------- ---
$3,084,528 100 $3,745,255 100
========== === ========== ===
</TABLE>

An allowance for doubtful accounts of $111,322 and $75,471 has been
established as of December 31, 1995 and 1994, respectively.

NOTE 3 NOTES PAYABLE

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Installment notes payable to The Associates, secured by frac
tanks and trailers, payable monthly at 7.6% to 8.5%
interest.................................................... $ 162,271 $ 404,744
Installment note payable to The Associates, secured by
vehicles, payable monthly at 8.15% interest................. 8,741 120,635
Installment notes payable to General Motors Acceptance
Corporation, secured by vehicles, payable monthly at
interest rates of 7.9% to 9.5% interests.................... 26,163 58,831
Installment notes payable to insurance companies for current
policies.................................................... 14,689 64,048
Installment notes payable to MetLife Capital Corporation,
secured by frac tanks, certain vacuum trailers and vehicles,
payable monthly at 6.66% to 7.33% interest.................. 629,934 970,214
Installment note payable to Premier Bank, secured by frac
tanks, payable in monthly installments floating at 1.5% over
the Chase Manhattan prime rate.............................. 258,750 393,750
Installment note payable to Premier Bank, secured by frac
tanks, payable in monthly installments floating at 1.5% over
the Premier Bank prime rate................................. 61,655 281,250
Line of credit from Premier Bank, secured by equipment, with
interest at prime plus 1.5%................................. 250,000 --
Line of credit from Premier Bank, secured by accounts
receivable, with interest at prime plus 1.5%................ 1,000,000 1,000,000
Installment note payable to Case Credit, secured by equipment,
payable monthly at 7.31% interest........................... 9,962 21,144
Installment note payable to Panola National Bank, secured by
portable office buildings, payable in monthly installments
at 9.25% interest........................................... 59,266 72,605
Installment note payable to Premier Bank secured by disposal
wells, payable in monthly installments at 1% over the
Premier Bank prime rate..................................... -- 58,334
Installment note payable to Texas Workers Compensation
Insurance Fund, payable in monthly installments............. -- 221,432
</TABLE>

F-42
<PAGE> 122

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1995 1994
-------- ----------
<S> <C> <C>
Installment notes payable to Concord Commercial Corporation,
secured by vacuum trailers and frac tanks, at 12.5%
interest.................................................... $ -- $ 7,510
Installment notes payable to U. S. Leasing (formerly Ford
Leasing), secured by frac tanks, at 11.7% interest.......... -- 29,991
Installment notes payable to SafeCo, secured by equipment and
vehicles, at 12.25% interest................................ -- 15,705
Installment notes payable to Panola National Bank secured by
vehicles, payable in monthly installments at 2% over Texas
Commerce Bank, Houston base rate............................ -- 18,187
Installment note payable to Premier Bank secured by real
estate, payable in monthly installments of $2,500.00 over a
remaining period of 108 months floating at 1% over the Chase
Manhattan prime rate........................................ 269,500 302,500
Installment note payable to Citizens State Bank secured by
real estate, payable in monthly installments of $2,230 at 8%
interest.................................................... 78,084 97,740
Note payable to an individual secured by two winch trucks,
payable in annual installments of $10,000 over a remaining
period of 5 years at 0% interest............................ 50,000 --
-------- ----------
Total notes payable........................................... 2,879,015 4,138,620
Less: current portion......................................... 2,026,198 2,497,684
-------- ----------
Long-term debt................................................ $ 852,817 $1,640,936
======== ==========
</TABLE>

Maturities of the above notes are summarized below:

<TABLE>
<S> <C>
1996............................................................. $2,026,198
1997............................................................. 550,084
1998............................................................. 93,223
1999............................................................. 48,775
2000 and thereafter.............................................. 160,735
----------
$2,879,015
=========
</TABLE>

Interest expense was $461,326 and $473,448 for 1995 and 1994, respectively.

Taylor Companies, Inc. also has a line of credit available with Premier
Bank of $800,000 for the purchase of new equipment or salt water disposal wells.
The loan agreement contains a restrictive covenant which requires net worth to
be at least $2,740,000 and the ratio of debt to net worth to be less than 2.25
to 1.00.

The Group had loans from its sole shareholder, Randy Taylor, for $2,896,201
and $3,999,610 at December 31, 1995 and 1994 respectively. These loans are
subordinated to the Premier Bank loans and is considered as equity for
determining the debt to net worth ratio required by the Premier covenant.

F-43
<PAGE> 123

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 CAPITAL LEASES

In 1992 Taylor Interests, Inc. entered into a capital lease with The
Associates for three vacuum trailers.

The future minimum lease payments under capital leases together with the
present value of the net minimum lease payments are as follows:

<TABLE>
<CAPTION>
YEAR
ENDING
DECEMBER
31,
--------
<S> <C> <C>
1996 $20,405
1997 20,405
-------
Total minimum lease payments....................................... 40,810
Less: amount representing interest................................. 4,522
-------
Present value of net minimum lease payments........................ $36,288
=======
</TABLE>

NOTE 5 FEDERAL INCOME TAXES

As explained in Note 1B, the Group consists of various companies and assets
which do not exist as a taxable entity. However, the tax provisions reflected in
the financial statements have been computed as if the companies and assets did
exist as a single taxable entity.

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of depreciation and bad debt
reserve for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized for operating losses
that are available to offset future federal income taxes.

The Group utilizes different methods of recognizing depreciation expense
and bad debt expense for financial statement and income tax purposes. The Group
also elected to expense certain costs relating to saltwater disposal wells for
tax purposes that have been capitalized under generally accepted accounting
principles.

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Net loss before taxes........................................ $(298,955) $(222,300)
--------- ---------
Temporary differences
Depreciation............................................... 329,282 137,641
Basis in assets sold....................................... 110,978 4,601
Bad debts.................................................. 35,851 47,371
Capitalization policies.................................... (180,110) (353,310)
--------- ---------
Total temporary differences........................ 296,001 (163,397)
Permanent differences........................................ 41,186 (72,475)
--------- ---------
Total differences.................................. 337,187 (236,172)
--------- ---------
Taxable income............................................... $ 38,232 $(458,472)
========= =========
Tax at statutory rates....................................... $ 5,735 $ --
Fuel tax credit.............................................. 8,451 7,973
--------- ---------
Net tax............................................ $ (2,716) $ (7,973)
========= =========
</TABLE>

F-44
<PAGE> 124

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax liability is computed as follows:

<TABLE>
<S> <C> <C>
Depreciation expense (liability).................... $1,251,644 $1,563,124
Bad debt expense (asset)............................ (111,322) (139,018)
Net operating loss (asset).......................... (479,065) (222,300)
---------- ----------
Net differences................................... 661,257 1,201,806
Rate.............................................. 34% 31%
Deferred tax liability.............................. $ 224,827 $ 380,235
========== ==========
</TABLE>

The deferred tax liability for 1994 was recognized as an expense all in 1994
since the companies had previously been taxed as Subchapter S corporations. No
deferral existed in prior years.

NOTE 6 DEFERRED REVENUES

Taylor Interests, Inc. entered into an agreement with a major oil company
whereby that company would contribute $285,900 toward the cost of drilling and
constructing a salt water disposal well. Taylor Interests, Inc., would bear the
remaining cost of placing the facility in operation. The oil company would
receive a credit of $.05 per barrel for each barrel disposed until such time as
its investment of $285,900 was recovered. Taylor Interests, Inc. had disposed of
877,900 barrels under this agreement as of December 31, 1995. Deferred revenues
recognized were $48,800 and $43,895 in 1995 and 1994, respectively.

NOTE 7 EMPLOYEE BENEFIT PLAN

Taylor Interests, Inc. has established a 401(k) savings plan for its
employees. All persons employed by the Company on April 1, 1990, are eligible to
participate regardless of age or length of service. Persons employed after this
date become eligible upon the attainment of age 18 and the completion of six
months of service. At December 31, 1995, a total of 81 employees were
participants in the plan.

This plan is a defined contribution plan in which the Company has the
option to match 50% of each employee's contributions which do not exceed 6% of
the employee's annual compensation. All contributions are paid into a trust fund
which has been established solely for the participants in the plan. Total plan
expense to the Company in 1995 was $101,663 and $53,602 in 1995 and 1994,
respectively.

A valuation of plan assets is prepared by an independent actuary. At
December 31, 1995, plan assets totaled $661,156. The Company has a liability to
the plan in the amount of $30,482 which is reflected in accrued expenses.

F-45
<PAGE> 125

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 RELATED PARTY TRANSACTIONS

John Randall Taylor owns 100 percent of the stock of Taylor Companies,
Inc., Taylor Water Injections, Inc., Teague Interests, Inc., and Taylor Caldwell
Properties, LLC. On January 1, 1995, Mr. Taylor exchanged 100% of the stocks of
Newton County SWD, Inc. and Cavern Disposal, Inc. for additional stock in Taylor
Companies, Inc.

Various members of the Group had outstanding notes payable to Mr. Taylor.
The note from Taylor Companies, Inc. is subordinated to the notes payable to
Premier Bank and bears an interest rate of 5% per annum.

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Taylor Companies, Inc....................................... $2,505,629 $2,505,629
Taylor SWD Operating, Inc................................... 5,500 5,000
Teague Interests, Inc....................................... 231,500 --
Taylor Caldwell Properties, LLC............................. 17,000 17,000
Taylor Water Injectors, Inc................................. 137,072 137,072
Taylor Disposal, Inc........................................ -- 243,493
Production Disposal, Inc.................................... -- 109,920
Taylor Injection Systems, Inc............................... -- 65,049
DeBerry SWD, Inc............................................ -- 42,215
Tatum SWD, Inc.............................................. -- 244,371
Newton SWD, Inc............................................. -- 629,861
---------- ----------
$2,896,201 $3,999,610
========== ==========
</TABLE>

Mr. Taylor contributed to paid-in surplus $738,011 of the notes payable
from Taylor Disposal, Inc., Production Disposal, Inc., Taylor Injection Systems,
Inc., DeBerry SWD, Inc., Tatum SWD, Inc., and Newton SWD, Inc. in 1995. The
balance of the notes were distributed to Mr. Taylor.

Taylor Interests, Inc. leases its office and shop facilities in Carthage
from Mr. Taylor. The lease is renewable annually with lease payments of $72,000
per annum. The Company also leases its Caldwell facilities from Taylor Caldwell
Properties, LLC, which is a member of the Group. The Company also leases the
administrative office in Carthage from Tay-Rob Interests, Inc., a company in
which Mr. Taylor is president and sole stockholder. The lease is renewable
annually with lease payments of $12,000 per annum. Taylor SWD Operating, Inc.
also leases its facilities from Mr. Taylor for $12,000 per annum.

NOTE 9 COMMITMENTS AND CONTINGENT LIABILITIES

A. Taylor Interests, Inc. leases certain heavy trucks and vehicles from
various leasing companies. These leases are accounted for as operating leases
for financial statement purposes. Future minimum lease payments on these leases
for the next three years are as follows:

B. The Group leases land for its salt water disposal wells from various
individuals at a monthly total of $5,525.

F-46
<PAGE> 126

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

C. A suit is pending in District Court against Taylor Interests, Inc. and
Taylor SWD Operating, Inc. seeking relief based on property rights relating to a
salt water disposal well. The Company prevailed at trial of this suit; however,
the Court has granted Plaintiffs a new trial. An adverse verdict could be for a
material amount.

D. Four suits are pending in various State Courts involving vehicular
accidents against Taylor Interests, Inc. The Company has sufficient insurance to
cover the claims.

NOTE 10 ECONOMIC DEPENDENCY

The Group generated approximately 12% of its revenues from one customer in
1995. Total sales to this company were $1,918,841. In 1994, the Group generated
approximately 24% of its revenue from two customers. Total sales to these two
companies were $4,393,749. No other one customer generated more than 10% of
total revenues.

The Group grants credit to customers in the oil and gas and related
industries in the normal course of business. Consequently, the Group's ability
to collect the amounts due from customers is affected by economic fluctuations
in the oil and gas industry.

NOTE 11 MOTOR CARRIER PERMIT

Taylor Interests, Inc. had previously invested in an intrastate motor
carrier permit for which it had paid $57,200 to another carrier. Intrastate
trucking was deregulated by the federal government as of January 1, 1995,
resulting in a permanent impairment of the value of the permit held by the
Company. This permanent impairment in value has been recognized as an expense in
1994.

NOTE 12 SUBSEQUENT EVENT

On January 1, 1996, Mr. Taylor contributed all the capital stock of Taylor
Water Injections, Inc. and Teague Interests, Inc. to Taylor Companies, Inc. in
exchange for additional shares in Taylor Companies, Inc.

F-47
<PAGE> 127

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Dawson WellTech, L.C.:

We have audited the accompanying balance sheets of Well Solutions, Inc. (a
Delaware Corporation), as of March 31, 1994 and 1993, and the related statements
of income, shareholder's equity and cash flows for each of the three years in
the period ended March 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Well Solutions, Inc., as of
March 31, 1994 and 1993, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1994, in conformity
with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

San Antonio, Texas
April 10, 1995

F-48
<PAGE> 128

WELL SOLUTIONS, INC.

BALANCE SHEETS -- MARCH 31, 1994 AND 1993

<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................ $ 53,379 $ 61,312
Unbilled accounts receivable.................................... 581,988 134,827
Receivable due from affiliate, net.............................. 1,440,970 1,552,909
Prepaid expenses and other...................................... 61,198 58,016
------------ ------------
Total current assets.................................... 2,137,535 1,807,064
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Buildings and land.............................................. 1,191,623 1,361,664
Machinery and equipment......................................... 22,545,581 22,385,224
------------ ------------
23,737,204 23,746,888
Less accumulated depreciation and amortization.................. (12,807,166) (11,237,822)
------------ ------------
10,930,038 12,509,066
------------ ------------
DEFERRED INCOME TAX ASSETS........................................ 335,519 --
------------ ------------
OTHER ASSETS, net................................................. 1,025,903 1,306,309
------------ ------------
Total assets............................................ $ 14,428,995 $ 15,622,439
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............................ $ 1,249,175 $ 1,197,499
Current deferred income taxes................................... 215,336 49,886
------------ ------------
Total current liabilities............................... 1,464,511 1,247,385
------------ ------------
DEFERRED INCOME TAXES............................................. -- 70,253
------------ ------------
LONG-TERM DEBT, less current maturities........................... 829,677 1,730,579
------------ ------------
NOTE PAYABLE TO AN AFFILIATED COMPANY............................. 8,000,000 8,000,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDER'S EQUITY:
Common stock, par value $.01 per share; 10,000 shares
authorized, issued and outstanding at March 31, 1994 and
1993......................................................... 100 100
Additional paid-in capital...................................... 483,479 483,479
Retained earnings............................................... 3,651,228 4,090,643
------------ ------------
Total shareholder's equity.............................. 4,134,807 4,574,222
------------ ------------
Total liabilities and shareholder's equity.............. $ 14,428,995 $ 15,622,439
============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-49
<PAGE> 129

WELL SOLUTIONS, INC.

STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992

<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES...................................... $24,459,735 $28,460,282 $23,618,211
----------- ----------- -----------
OPERATING EXPENSES:
Cost of services...................................... 20,459,157 22,217,657 17,904,721
General and administrative............................ 1,011,260 801,448 1,407,722
Depreciation and amortization......................... 2,372,040 2,202,732 1,974,938
----------- ----------- -----------
Total operating expenses...................... 23,842,457 25,221,837 21,287,381
----------- ----------- -----------
INCOME FROM OPERATIONS.................................. 617,278 3,238,445 2,330,830
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Loss on sale of assets................................ (326,350) (228,892) (12,093)
Interest and other income............................. 22,451 29,947 140,375
Interest expense...................................... (993,116) (1,009,494) (1,067,544)
----------- ----------- -----------
Total other income (expense).................. (1,297,015) (1,208,439) (939,262)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES....................... (679,737) 2,030,006 1,391,568
INCOME TAX EXPENSE (BENEFIT)............................ (240,322) 800,375 557,563
----------- ----------- -----------
NET INCOME (LOSS)....................................... $ (439,415) $ 1,229,631 $ 834,005
=========== =========== ===========
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK................................................. $ (43.94) $ 122.96 $ 83.40
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-50
<PAGE> 130

WELL SOLUTIONS, INC.

STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
--------------- PAID-IN EARNINGS SHAREHOLDER'S
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
------ ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, March 31, 1991...................... 10,000 $100 $ 483,479 $2,027,007 $ 2,510,586
Net income................................. -- -- -- 834,005 834,005
------ ---- -------- ---------- ----------
BALANCE, March 31, 1992...................... 10,000 100 483,479 2,861,012 3,344,591
Net income................................. -- -- -- 1,229,631 1,229,631
------ ---- -------- ---------- ----------
BALANCE, March 31, 1993...................... 10,000 100 483,479 4,090,643 4,574,222
Net loss................................... -- -- -- (439,415) (439,415)
------ ---- -------- ---------- ----------
BALANCE, March 31, 1994...................... 10,000 $100 $ 483,479 $3,651,228 $ 4,134,807
====== ==== ======== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-51
<PAGE> 131

WELL SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992

<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. $ (439,415) $ 1,229,631 $ 834,005
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities --
Depreciation and amortization.................. 2,372,040 2,202,732 1,974,938
Loss on sale of assets......................... 326,350 228,892 12,093
Deferred income tax expense (benefit).......... (240,322) 302,998 557,563
Changes in operating accounts
(Increase) decrease in --
Unbilled accounts receivable................... (447,161) (107,130) 36,247
Receivable due from affiliate, net............. (1,576,243) (3,855,940) (3,464,209)
Prepaid expenses and other..................... (3,182) 8,463 (10,535)
Other assets, net.............................. -- -- --
----------- ----------- -----------
Net cash provided by (used in) operating
activities.............................. (7,933) 9,646 (59,898)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH..................... (7,933) 9,646 (59,898)
CASH, beginning of year............................. 61,312 51,666 111,564
----------- ----------- -----------
CASH, end of year................................... $ 53,379 $ 61,312 $ 51,666
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-52
<PAGE> 132

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

General

The financial statements include the accounts of Well Solutions, Inc., a
Delaware corporation (the Company). The Company is a wholly owned subsidiary of
New London Inc. (New London) and is engaged in the oilfield service business
operating in Texas and Oklahoma. The Company provides rental tools, frac tank
and vacuum truck services, waste water disposal, production testing and wireline
services.

Cash

The Company's cash balance consists of petty cash funds maintained at the
Company's field offices.

Unbilled Accounts Receivable

Revenues and costs applicable to oilfield services are recognized as the
services are performed.

Receivable Due From Affiliate, Net

Since the Company does not maintain an operating cash account, all
operating and general and administrative expenses, debt payments and any other
cash requirements are paid by the Company's parent, New London. New London also
invoices and collects all trade accounts receivable on behalf of the Company.
The Company is charged by New London for accounts receivable invoiced by New
London on behalf of the Company which are considered to be uncollectible.
Charges to the Company for uncollectible accounts amounted to $240,000, $80,000
and $150,000 for the years ended March 31, 1994, 1993 and 1992, respectively.
All payments made by New London on behalf of the Company are netted against
receivables invoiced by New London on behalf of the Company and included as a
net receivable due from affiliate in the accompanying balance sheet. All
applicable general and administrative expenses incurred by New London on behalf
of the Company are allocated to the Company and are netted against the
receivable due from affiliate. The net receivable balance is payable by the
affiliate on demand and is noninterest bearing.

Concentrations of Credit Risk

The Company's revenues are derived principally from uncollateralized sales
to customers in the oil and gas industry. This industry concentration has the
potential to impact the Company's exposure to credit risk, either positively or
negatively, because the customers may be similarly affected by changes in
economic or other conditions. Management believes that charges to the Company
from New London for amounts deemed uncollectible are adequate to absorb total
estimated losses related to uncollectible accounts.

Property, Plant and Equipment

Property, plant and equipment is carried at cost. Depreciation of assets is
computed primarily using the straight-line method (three-year to thirty-year
lives for buildings and improvements and two-year to twelve-year lives for
machinery and equipment). When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is reflected in income for the period. The cost of
maintenance and repairs is charged to income as incurred; significant renewals
and betterments are capitalized.

Other Assets

Other assets consist primarily of deferred debt and acquisition costs and
other intangible assets and is presented net of accumulated amortization of
$792,185 and $491,779 at March 31, 1994 and 1993,

F-53
<PAGE> 133

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

respectively. Amortization expense amounted to $300,406, $284,094 and $98,237
for 1994, 1993 and 1992, respectively.

Sales to Significant Customers

During the years ended March 31, 1994, 1993 and 1992, sales to the
Company's largest customer accounted for approximately 35 percent, 36 percent
and 27 percent, respectively, of the Company's total operating revenues. No
other single customer accounted for 10 percent or more of the Company's total
operating revenues for any of the years ended March 31, 1994, 1993 and 1992.

Earnings Per Share

Earnings per share of common stock were computed based on the weighted
average number of common shares outstanding during each year. There were no
common stock equivalents outstanding for the three years ended March 31, 1994.
The weighted average numbers of common shares outstanding for the years ended
March 31, 1994, 1993 and 1992, was 10,000.

2. LONG-TERM DEBT:

The prime rate on substantially all of the Company's variable interest debt
was 6.25 percent and 6.00 percent at March 31, 1994 and 1993, respectively. As
of March 31, 1994 and 1993, long-term debt consisted of:

<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Note payable to an affiliated company, interest at 10 percent,
payable in January 2004......................................... $ 8,000,000 $ 8,000,000
Capitalized financing leases payable in monthly installments of
principal and interest, maturing on various dates ranging from
June 1994 through September 1998, at interest rates ranging from
prime plus 2.125 percent to fixed rates ranging from 7.29
percent to 10.1 percent, collateralized by equipment............ 1,555,854 1,734,752
Notes payable to individuals, interest at the rate of the average
90-day certificate of deposit rates (3.23 percent and 2.69
percent at March 31, 1994 and 1993, respectively), payable in
aggregate annual principal installments of $278,332 through
December 1994................................................... 278,332 556,666
Notes payable to individuals and a corporation, interest at 4.68
percent, payable in September 1995.............................. 138,000 414,000
Note payable to an individual, interest at the rate of the average
90-day certificate of deposit rates (3.23 percent and 2.69
percent at March 31, 1994 and 1993, respectively), payable in
annual principal installments of $106,666 through January
1995............................................................ 106,666 213,333
</TABLE>

F-54
<PAGE> 134

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Mortgage note payable to a bank, interest at 9.25 percent, payable
in monthly installments of principal and interest aggregating
$13,585 per year through December 1993, secured by land and
buildings....................................................... -- $ 9,327
----------- -----------
$10,078,852 10,928,078
Less --
Current maturities of long-term debt............................ 1,249,175 1,197,499
Note payable to an affiliated company........................... 8,000,000 8,000,000
----------- -----------
Long-term debt, less current maturities........................... $ 829,677 $ 1,730,579
========== ==========
</TABLE>

The aggregate annual maturities of long-term debt and capital lease
obligations during the five years following March 31, 1994, and thereafter are
as follows:

<TABLE>
<CAPTION>
ANNUAL
FISCAL YEARS MATURITIES
---------------------------------------------- -----------
<S> <C>
1995.......................................... $ 1,249,175
1996.......................................... 417,529
1997.......................................... 261,538
1998.......................................... 127,040
1999.......................................... 23,570
Thereafter.................................... 8,000,000
-----------
Total............................... $10,078,852
===========
</TABLE>

3. LEASES:

Equipment accounts include the following amounts for leases that have been
capitalized:

<TABLE>
<CAPTION>
MARCH 31
-------------------------
1994 1993
---------- ----------
<S> <C> <C>
Equipment........................... $4,102,081 $3,559,517
Less -- Accumulated
depreciation................... 1,809,600 1,294,045
---------- ----------
Net....................... $2,292,481 $2,265,472
========== ==========
</TABLE>

F-55
<PAGE> 135

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The net present value of future minimum lease payments are reflected as a
component of long-term debt. The following table sets forth future minimum lease
payment obligations under capital leases as of March 31, 1994:

<TABLE>
<CAPTION>
EQUIPMENT
----------
<S> <C>
Fiscal years
1995................................................... $ 893,207
1996................................................... 396,712
1997................................................... 283,353
1998................................................... 132,947
1999................................................... 24,020
----------
Minimum lease payments................................... 1,730,239
Less -- Amounts representing interest.................... 174,385
----------
Net present value of future minimum lease payments....... 1,555,854
Less -- Current maturities............................... 795,177
----------
Long-term obligations at March 31, 1994.................. $ 760,677
==========
</TABLE>

The Company also has noncancelable operating leases with remaining terms
ranging from one year to seven years. The related future minimum lease payments
as of March 31, 1994, are as follows:

<TABLE>
<CAPTION>
PROPERTY/FACILITY EQUIPMENT
----------------- ---------
<S> <C> <C>
Fiscal years
1995.................................... $ 52,776 $19,802
1996.................................... 43,950 8,253
1997.................................... 42,000 280
1998.................................... 42,000 --
1999.................................... 34,200 --
Thereafter................................ 44,400 --
-------- -------
$ 259,326 $28,335
======== =======
</TABLE>

The future minimum lease payments listed above exclude certain operating
lease commitments having a remaining noncancelable term of one year or less.
Rent expense amounted to $140,131, $134,603 and $80,745 for 1994, 1993 and 1992,
respectively, and includes various month-to-month and other short-term rentals
in addition to rents paid and accrued under long-term lease commitments.

4. COMMITMENTS AND CONTINGENCIES:

The Company is exposed to a number of asserted and unasserted potential
claims in the normal course of business. In the opinion of management, the
resolution of the matters will not have a material adverse effect on the
Company's financial position or results of operations.

5. CASH FLOWS:

As discussed in Note 1, all cash requirements of the Company are paid by
New London, therefore, the Company had no cash payments for interest or income
taxes for the years ended March 31, 1994, 1993 and 1992.

F-56
<PAGE> 136

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Supplemental schedule of noncash investing and financing activities is as
follows:

<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Sale of operating assets....................... $ 356,909 $ 205,101 $ 287,275
Reductions in long-term debt................... 1,391,790 1,336,604 2,316,149
Additions to property, plant and equipment..... 633,301 1,798,364 3,001,420
Leases capitalized............................. 542,564 542,345 424,248
Refinance of capital leases.................... -- -- 1,296,089
Additions to other assets...................... 20,000 305,301 1,171,131
</TABLE>

6. INCOME TAXES:

Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) which
provides for the recognition of deferred tax assets and liabilities for future
tax consequences of existing differences between the financial reporting and tax
reporting bases of assets and liabilities and operating loss and tax credit
carryforwards for tax purposes. The cumulative impact of adoption of SFAS 109 in
the 1994 statement of income was insignificant.

New London files consolidated tax returns which include the accounts of the
Company. Pursuant to an informal intercompany tax-sharing agreement between the
Company and New London, the Company provides for federal and state income taxes
at rates approximating the statutory tax rates and records the related payable
or receivable as an intercompany payable or receivable with New London.

Income tax expense (benefit) for the years ended March 31, 1994, 1993 and
1992, was as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Current--
Federal................................. $ -- $460,760 $ --
State................................... -- 36,617 --
--------- -------- --------
Total current................... $ -- $497,377 $ --
========= ======== ========
Deferred--
Federal................................. $(220,837) $274,720 $512,355
State................................... (19,485) 28,278 45,208
--------- -------- --------
Total deferred.................. $(240,322) $302,998 $557,563
========= ======== ========
</TABLE>

Total income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to income (loss) before income
taxes. The reasons for these differences for the tax years ended March 31, 1994,
1993 and 1992, are as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Income (loss) before income taxes.............. $(679,737) $2,030,006 $1,391,568
--------- ---------- ----------
Income tax at statutory rate of 34 percent..... $(231,110) $ 690,202 $ 473,133
State taxes, net of federal income tax
benefit...................................... (20,392) 60,900 41,747
Other.......................................... 11,180 49,273 42,683
--------- ---------- ----------
Income tax expense (benefit)......... $(240,322) $ 800,375 $ 557,563
========= ========== ==========
</TABLE>

F-57
<PAGE> 137

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The tax effect of significant temporary differences representing income tax
assets and liabilities for the years ended March 31, 1994 and 1993, are as
follows:

<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Deferred income tax assets --
Deferred income tax assets, long term --
Alternative minimum tax credit carryforward............. $ 45,763 $ 45,763
Property, plant and equipment........................... 289,756 --
-------- ---------
Total deferred income tax assets, long term........ 335,519 45,763
-------- ---------
Total deferred income tax assets................... $335,519 $ 45,763
======== =========
Deferred income tax liabilities --
Deferred income tax liabilities, current --
Unbilled accounts receivable............................ $215,336 $ 49,886
-------- ---------
Total deferred income tax liabilities, current..... 215,336 49,886
======== =========
Deferred income tax liabilities, long term --
Property, plant and equipment.............................. -- 116,016
-------- ---------
Total deferred income tax liabilities, long term... -- 116,016
-------- ---------
Total deferred income tax liabilities.............. $215,336 $ 165,902
======== =========
Net deferred income tax assets (liabilities)....... $120,183 $(120,139)
======== =========
</TABLE>

The Company has alternative minimum tax credit carryforwards of $45,763
with no expiration date.

7. SUBSEQUENT EVENTS (UNAUDITED):

Effective November 1, 1994, the Company sold the majority of its operating
assets for $17.5 million to Dawson WellTech, L.C., at a gain of approximately
$4.2 million.

F-58
<PAGE> 138

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
DESCRIBED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 13
Disclosure Regarding Forward-Looking
Statements.......................... 14
Equity Offering....................... 14
Use of Proceeds....................... 15
Capitalization........................ 16
Pro Forma Condensed Consolidated
Financial Statements................ 17
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 26
Pride Acquisition..................... 34
Management............................ 35
Certain Relationships and Related
Transactions........................ 41
Security Ownership of Management and
Principal and Selling
Shareholders........................ 44
Description of Notes.................. 45
Description of Capital Stock.......... 71
Underwriting.......................... 74
Legal Matters......................... 76
Experts............................... 76
Available Information................. 77
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

$110,000,000

[LOGO]

DAWSON PRODUCTION
SERVICES, INC.

% SENIOR NOTES
DUE 2007

PROSPECTUS

JEFFERIES & COMPANY, INC.

, 1997

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 139

********************************************************************************
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This Prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy nor *
* shall there be any sale of these securities in any State in which such *
* offer, solicitation or sale would be unlawful prior to registration or *
* qualification under the securities laws of any such State. *
********************************************************************************

SUBJECT TO COMPLETION, DATED JANUARY 8, 1997

PROSPECTUS

[DAWSON INC. LOGO] DAWSON PRODUCTION SERVICES, INC.

COMMON STOCK

------------------------

Dawson Production Services, Inc. ("Dawson" or the "Company") is offering
4,000,000 shares, and certain selling shareholders (the "Selling Shareholders")
are offering shares, of common stock (the "Common Stock") of the Company
(the "Equity Offering"). Concurrently with the Equity Offering, the Company is
offering $110.0 million of % Senior Notes due February 1, 2007 (the
"Notes") pursuant to a separate prospectus (the "Debt Offering" and, together
with the Equity Offering, the "Offerings"). The Company will use approximately
$135.9 million of the aggregate net proceeds from the Offerings to purchase the
U.S. land-based well servicing operations (the "Pride Acquisition") of Pride
Petroleum Services, Inc. ("Pride"), approximately $12.3 million to prepay
certain indebtedness (including accrued interest) of the Company and the
remainder for fees and expenses of the Pride Acquisition, working capital and
general corporate purposes. See "Use of Proceeds" and "Pride Acquisition." The
closing of the Debt Offering and the Equity Offering are each conditioned upon
the simultaneous closing of the other and upon the simultaneous closing of the
Pride Acquisition.

The Common Stock is listed on the Nasdaq National Market under the symbol
"DPSI." On January 7, 1997, the closing price of the Common Stock on the Nasdaq
National Market was $14.75. See "Price Range of Common Stock and Dividend
Policy."
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
------------------------

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) SHAREHOLDERS
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total(3)....................... $ $ $ $
</TABLE>

- ---------------

(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $300,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional shares of Common Stock on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Shareholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."
------------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by the Underwriters. The
Underwriters reserve the right to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor in New York, New York, on or about , 1997.
------------------------

JEFFERIES & COMPANY, INC. SOUTHCOAST CAPITAL
CORPORATION

, 1997
<PAGE> 140

[GRAPHIC]

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING
GROUP MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

2
<PAGE> 141

PROSPECTUS SUMMARY

THE COMPANY

BUSINESS STRATEGY

PRIDE ACQUISITION

3
<PAGE> 142

MOBLEY ACQUISITION

OPERATIONS

4
<PAGE> 143

5
<PAGE> 144

THE EQUITY OFFERING

Common Stock Offered
by the Company........... 4,000,000 Shares

Common Stock Offered by
the Selling
Shareholders............. Shares

Common Stock Outstanding:
Before the Equity
Offering(1).............. 6,391,126 Shares

After the Equity
Offering(1).............. 10,391,126 Shares

Use of Proceeds............ The net proceeds to the Company from the sale of
shares of Common Stock are estimated to be
approximately $55.2 million. The Company will use
the net proceeds from the sale of the shares of
Common Stock, together with the estimated net
proceeds to the Company from the Debt Offering of
approximately $106.0 million, to fund the
approximately

6
<PAGE> 145

$135.9 million purchase price of the Pride
Acquisition, to prepay certain existing
indebtedness (including accrued interest) of the
Company, and for fees and expenses of the Pride
Acquisition, working capital and general corporate
purposes. The Company will not receive any proceeds
from the sale of shares of Common Stock by the
Selling Shareholders. See "Use of Proceeds."

Nasdaq National Market
Symbol................... DPSI

Debt Offering.............. Concurrently with the Equity Offering, the Company
is offering $110.0 million of % Senior Notes
due 2007 to the public. The closing of the Equity
Offering and the Debt Offering are each conditioned
upon the simultaneous closing of the other and upon
the simultaneous closing of the Pride Acquisition.
- ---------------

(1) Does not include 557,250 shares issuable upon exercise of outstanding
options as of December 31, 1996, of which 172,079 were exercisable at that
date.

7
<PAGE> 146

SUMMARY OF CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
AT OR FOR SIX MONTHS
AT OR FOR YEARS ENDED MARCH 31, ENDED SEPTEMBER 30,
--------------------------------------------------------------- ------------------------------
1996 1996
PRO PRO
1992 1993 1994 1995 1996 FORMA(1) 1995 1996 FORMA(1)
------- ------- ------- ------- ------- -------- ------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................... $15,784 $20,822 $27,942 $36,005 $52,391 $182,219 $25,888 $33,811 $100,229
Costs and expenses:
Operating.................. 11,440 14,772 19,937 24,241 34,320 131,052 16,875 21,893 71,994
General and
administrative........... 2,443 3,040 3,854 5,574 8,937 24,676 4,238 5,339 13,350
Depreciation and
amortization............. 1,062 1,374 1,707 2,608 4,396 19,144 2,016 2,876 9,662
------- ------- ------- ------- ------- -------- ------- ------- --------
Operating income............. 839 1,636 2,444 3,582 4,738 7,347 2,759 3,703 5,223
Interest expense............. 352 301 282 789 1,848 11,810 953 296 5,905
Other (income) expense....... (8) 84 (61) (41) (129) (1,490) (27) (122) (71)
Minority interest............ -- 358 902 1,092 937 937 787 -- --
------- ------- ------- ------- ------- -------- ------- ------- --------
Income (loss) before income
taxes and extraordinary
item....................... 495 893 1,321 1,742 2,082 (3,910) 1,046 3,529 (611)
Provision for income taxes... 236 320 525 681 709 (1,525) 398 1,354 (239)
------- ------- ------- ------- ------- -------- ------- ------- --------
Income (loss) before
extraordinary item......... 259 573 796 1,061 1,373 (2,385) 648 2,175 (372)
Extraordinary item(2)........ 38 -- (92) -- (514) (514) -- -- --
------- ------- ------- ------- ------- -------- ------- ------- --------
Net income (loss)............ 297 573 704 1,061 859 (2,899) 648 2,175 (372)
Preferred stock dividends.... 101 101 101 101 88 88 50 -- --
------- ------- ------- ------- ------- -------- ------- ------- --------
Net income (loss) applicable
to common stock............ $ 196 $ 472 $ 603 $ 960 $ 771 $ (2,987) $ 598 $ 2,175 $ (372)
======= ======= ======= ======= ======= ======== ======= ======= ========
Primary earnings (loss) per
share...................... $ .11 $ .23 $ .29 $ .45 $ .27 $ (.43) $ .25 $ .33 $ (.04)
Fully diluted earnings (loss)
per share.................. $ .11 $ .23 $ .29 $ .42 $ .27 $ (.43) $ .23 $ .33 $ (.04)
Average number of shares
outstanding --
primary.................... 1,768,613 2,020,664 2,052,168 2,155,380 2,931,234 6,882,896 2,384,359 6,510,428 10,390,984
Average number of shares
outstanding -- fully
diluted.................... 1,768,613 2,020,664 2,450,791 2,648,740 3,207,622 6,882,896 3,095,826 6,527,796 10,390,984
BALANCE SHEET DATA:
Cash and cash equivalents.... $ 400 $ 1,139 $ 2,172 $ 2,797 $13,863 $ 9,364 $ 20,860
Net property and equipment... 6,261 8,625 8,978 25,321 29,115 39,209 145,859
Total assets................. 11,685 15,828 16,714 40,525 56,368 74,092 226,938
Long-term debt and other
obligations, net of current
portion.................... 1,938 1,722 1,623 15,989 3,695 4,609 112,750
Total shareholders' equity... 5,487 6,009 6,720 10,098 45,694 47,933 103,093
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges(3)................. 2.3x 3.6x 5.0x 3.1x 2.1x 0.7x 2.1x 10.9x 0.9x
EBITDA(4).................... $ 1,901 $ 3,010 $ 4,151 $ 6,190 $ 9,134 $ 26,491 $ 4,775 $ 6,579 $ 14,885
EBITDA interest
coverage(5)................ 5.4x 10.0x 14.7x 7.9x 4.9x 2.2x 5.0x 22.2x 2.5x
Long-term debt/EBITDA(6)..... 1.0x 0.6x 0.4x 2.6x 0.4x
</TABLE>

- ---------------

(2) Includes a $92,000 charge in fiscal 1994 to reflect the cumulative effect of
change in accounting principle.

(5) Represents the ratio of EBITDA to interest expense for the period presented.

(6) Represents the ratio of total long-term debt and other obligations, net of
current portion, to EBITDA for the period presented.

8
<PAGE> 147

RISK FACTORS

INCURRENCE OF SUBSTANTIAL INDEBTEDNESS

9
<PAGE> 148
DEPENDENCE ON VOLATILE OIL AND GAS INDUSTRY

10
<PAGE> 149

ACQUISITION RISKS

11
<PAGE> 150

SUBSTANTIAL COMPETITION

OPERATING RISKS AND INSURANCE

RISKS RELATING TO INJECTION WELLS

The Company's injection operations pose certain risks of environmental
liability to the Company. Although the Company monitors the injection process,
any leakage from the subsurface portions of the wells could cause degradation
of fresh groundwater resources, potentially resulting in cancellation of
operation of the well, fines and penalties from governmental agencies,
expenditures for remediation of the affected resource, and liability to third
parties for property damages and personal injuries. In addition, the sale by
the Company of residual crude oil collected as part of the saltwater injection
process could impose liability on the Company in the event the entity to which
the oil was transferred fails to manage the material in accordance with
applicable environmental health and safety laws.

RISK OF ENVIRONMENTAL COSTS AND LIABILITIES

12
<PAGE> 151

DEPENDENCE ON KEY PERSONNEL

DEPENDENCE ON MAJOR CUSTOMERS

DIVIDEND POLICY

The Company has never paid cash dividends on the Common Stock and does not
anticipate that cash dividends will be paid in the foreseeable future.
Furthermore, certain provisions of the Credit Facility and the Indenture
relating to the Notes will restrict the Company's ability to pay cash dividends
on the Common Stock. The Company currently intends to retain any future earnings
to finance the expansion and continuing development of the Company's business.
The declaration and payment in the future of any cash dividends will be at the
election of the Company's Board of Directors and will depend upon the earnings,
capital requirements and financial position of the Company, future loan
covenants, general economic conditions and other pertinent factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of
Notes -- Certain Covenants -- Restricted Payments."

SUBSTANTIAL AMOUNT OF SECURITIES SUBJECT TO REGISTRATION RIGHTS

Pursuant to a registration rights agreement (the "Registration Rights
Agreement"), shareholders (the "Rights Holders") that beneficially own
approximately 2,500,000 shares of Common Stock, or approximately 39% of the
currently issued and outstanding shares of Common Stock, are entitled to
registration of such shares under the Securities Act of 1933, as amended (the
"Securities Act"), subject to certain exceptions and limitations. All of the
shares of Common Stock being offered by the Selling Shareholders in the Equity
Offering are being registered and sold pursuant to the Registration Rights
Agreement for the account of the

13
<PAGE> 152

Rights Holders. Following the Equity Offering, the Rights Holders will
beneficially own shares of Common Stock (the "Registrable Securities"),
or approximately % of the issued and outstanding shares of Common Stock,
subject to the Registration Rights Agreement.

Under the Registration Rights Agreement, the Company is obligated,
beginning July 20, 1997, to file a registration statement (the "Shelf
Registration Statement") for the Registrable Securities. The holders of a
majority of the Registrable Securities can require that the Shelf Registration
Statement be in the form of an underwritten offering. Additionally, if the
Company proposes to register any of its securities under the Securities Act for
its own account or for the account of the other security holders, the Rights
Holders are entitled to notice of such registration and are entitled to include
all or a portion of the Registrable Securities in such registration, subject to
certain exceptions and limitations, including the right of the underwriters (if
any) of any such offering to exclude for marketing reasons some or all of the
Registrable Securities from such registration. The Company generally is required
to pay all of the expenses relating to the registration of the Registrable
Securities, except for the Rights Holders' share of any underwriting discounts
and commissions. The Registration Rights Agreement prohibits the Company from
granting any new registration rights under the Securities Act that would
adversely impact the rights of the Rights Holders. Sales of substantial amounts
of the Common Stock in the public market could adversely affect prevailing
market prices and the ability of the Company to raise equity capital in the
future. See "Description of Capital Stock -- Registration Rights."

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

The Company's Articles of Incorporation and Bylaws contain certain
provisions that may have the effect of discouraging potential unsolicited offers
or other efforts to obtain control of the Company that are not approved by the
Board. Upon a change of control of the Company, holders of the Notes will have
the right to require the Company to purchase the Notes at a price equal to 101%
of the aggregate principal amount thereof, together with accrued and unpaid
interest to the date of purchase. Such provisions may adversely affect the
market price of the Common Stock and may also deprive the shareholders of
opportunities to sell shares of Common Stock at prices higher than prevailing
market prices. Such provisions include the requirement that all shareholder
action must be taken at a duly called annual or special meeting of shareholders
unless a majority of the entire Board provides its prior approval for
shareholder action to be taken by written consent of shareholders. See
"Description of Capital Stock -- Provisions Having Possible Anti-takeover
Effect." The Board will have the authority, without further action by the
shareholders, to issue up to 560,600 shares of the Company's preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof, and to issue over 9,000,000 additional shares of Common
Stock after the Equity Offering. The issuance of the Company's preferred stock
or additional shares of Common Stock could adversely affect the voting power of
the purchasers of Common Stock in the Equity Offering and could have the effect
of delaying, deferring or preventing a change in control of the Company. See
"Description of Capital Stock -- Provisions Having Possible Anti-takeover
Effect."

THE COMPANY

14
<PAGE> 153

The Company's principal executive office is located at 901 N.E. Loop 410,
Suite 700, San Antonio, Texas 78209, and its telephone number is (210) 828-1838.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

15
<PAGE> 154

DEBT OFFERING

Concurrently with the Equity Offering, the Company is offering $110.0
million of % Senior Notes due 2007 to the public. The Indenture relating to
the Notes will contain certain covenants, including covenants that limit: (i)
indebtedness; (ii) restricted payments, (iii) issuances and sales of capital
stock of restricted subsidiaries; (iv) sale/leaseback transactions; (v)
transactions with affiliates; (vi) liens; (vii) asset sales; (viii) dividends
and other payment restrictions affecting restricted subsidiaries; (ix) conduct
of business; and (x) mergers, consolidations or sales of assets. The
consummation of the Equity Offering and the Debt Offering are each conditioned
upon the simultaneous closing of the other and upon the simultaneous closing of
the Pride Acquisition. See "Description of Notes."

USE OF PROCEEDS

The net proceeds to the Company from the issuance and sale of the
Common Stock offered hereby, after deducting the underwriting discount and
expenses of the Equity Offering payable by the Company, are estimated to be
approximately $55.2 million ($ million if the Underwriters' over-allotment
option is exercised in full), assuming an offering price of $14.75 per share.
The net proceeds to the Company from the sale of the Notes offered by the
Company pursuant to the Debt Offering, after deducting the underwriting discount
and expenses of the Debt Offering, are estimated to be approximately $106.0
million.

The following table illustrates the sources and uses of the gross proceeds
to the Company, as estimated by the Company's management, in connection with the
Offerings (dollars in millions):

- ---------------

(1) The Pride Acquisition purchase price is subject to certain adjustments.

Pending application of the net proceeds of the Offerings, the Company will
invest such net proceeds in short-term, interest-bearing, investment grade
securities.

16
<PAGE> 155

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock commenced trading on the Nasdaq National Market
on March 20, 1996 under the symbol "DPSI." The following table sets forth the
high and low sale prices per share of the Common Stock as reported by the Nasdaq
National Market for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal 1996
Fourth Quarter (March 20, 1996 - March 31, 1996).................... $11 7/8 $10
Fiscal 1997
First Quarter (April 1 - June 30, 1996)............................. $14 1/2 $10 3/4
Second Quarter (July 1 - September 30, 1996)........................ $14 $ 9 3/4
Third Quarter (October 1 - December 31, 1996)....................... $16 1/4 $11 1/2
Fourth Quarter (January 1 - January 7, 1997)........................ $15 5/8 $14
</TABLE>

On January 7, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $14.75 per share. At December 31, 1996, the Company
had 124 shareholders of record of the Common Stock. The Company believes that
there are at least 400 beneficial owners of the Common Stock.

The Company has never paid cash dividends on the Common Stock and does not
anticipate that cash dividends will be paid in the foreseeable future.
Furthermore, certain provisions of the Credit Facility and the Indenture will
restrict the Company's ability to pay cash dividends on the Common Stock. The
Company currently intends to retain any future earnings to finance the expansion
and continuing development of the Company's businesses. The declaration and
payment in the future of any cash dividends will be at the election of the
Company's Board of Directors and will depend upon the earnings, capital
requirements and financial position of the Company, future loan covenants,
general economic conditions and other pertinent factors. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of
Notes -- Certain Covenants -- Restricted Payments."

17
<PAGE> 156

CAPITALIZATION

- ---------------

18
<PAGE> 157

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
PRIDE PRO FORMA
DAWSON TAYLOR ACQUISITION COMBINED
SIX MONTHS ACQUISITION SIX MONTHS SIX MONTHS
ENDED APRIL 1 - ENDED ENDED
SEPTEMBER 30, JULY 29, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1996 ADJUSTMENTS 1996
------------- ----------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues...................................... $33,811 $ 6,988 $59,430 $ -- $ 100,229
Operating costs............................... 21,893 5,272 45,929 (1,100)A 71,994
General and administrative expenses........... 5,339 979 7,468 (436)B 13,350
Depreciation and amortization................. 2,876 384 2,659 3,743 C 9,662
------- ------ ------- ------- -------
Operating income.............................. 3,703 353 3,374 (2,207) 5,223
Interest expense.............................. 296 194 986 4,429 D 5,905
Other (income) expense........................ (122) 218 (167) -- (71)
------- ------ ------- ------- -------
Income (loss) before income taxes............. 3,529 (59) 2,555 (6,636) (611)
Provision for income taxes.................... 1,354 65 1,007 (2,665)E (239)
------- ------ ------- ------- -------
Net income (loss)............................. $ 2,175 $ (124) $ 1,548 $(3,971) $ (372)
======= ====== ======= ======= =======
Primary earnings (loss) per share............. $ .33 $ (.04)
Fully diluted earnings (loss) per share....... $ .33 $ (.04)
Average shares outstanding -- primary......... 6,510,428 3,880,556F 10,390,984
Average shares outstanding -- fully diluted... 6,527,796 3,863,188F 10,390,984
</TABLE>

19
<PAGE> 158

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

- ---------------

NOTES TO PRO FORMA FINANCIAL STATEMENTS:

(A) To record the elimination of approximately $2.2 million of Pride's operating
lease expenses ($1.1 million for the six month period).

(B) To reflect the elimination of certain general corporate cost allocations
that will not be assumed by the Company in connection with the Pride
Acquisition.

(D) To adjust interest expense to reflect the issuance of $110.0 million of
Notes at an assumed interest rate of 10.5% per annum, adjusted for the
retirement of existing bank debt and capital leases.

(E) To record the tax effect of pro forma adjustments based on the effective
tax rate of the Company.

(F) To record the issuance of 4,000,000 shares to be issued in the Equity
Offering, adjusted for the elimination of certain antidilutive common stock
equivalents.

(G) To record the Pride Acquisition for $135.9 million, such amount to be
financed using a portion of the proceeds to the Company from the Offerings.

(I) To reflect the retirement of the Company's existing debt and capital leases
totaling approximately $12.3 million.

20
<PAGE> 159

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
AT OR FOR SIX
MONTHS ENDED
AT OR FOR YEARS ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................................. $15,784 $20,822 $27,942 $36,005 $52,391 $25,888 $33,811
Costs and expenses:
Operating........................................... 11,440 14,772 19,937 24,241 34,320 16,875 21,893
General and administrative.......................... 2,443 3,040 3,854 5,574 8,937 4,238 5,339
Depreciation and amortization....................... 1,062 1,374 1,707 2,608 4,396 2,016 2,876
-------- -------- -------- -------- -------- -------- --------
- - - - - - -
Operating income...................................... 839 1,636 2,444 3,582 4,738 2,759 3,703
Interest expense...................................... 352 301 282 789 1,848 953 296
Other (income) expense................................ (8) 84 (61) (41) (129) (27) (122)
Minority interest..................................... -- 358 902 1,092 937 787 --
-------- -------- -------- -------- -------- -------- --------
- - - - - - -
Income before income taxes and extraordinary item..... 495 893 1,321 1,742 2,082 1,046 3,529
Provision for income taxes............................ 236 320 525 681 709 398 1,354
-------- -------- -------- -------- -------- -------- --------
- - - - - - -
Income before extraordinary item...................... 259 573 796 1,061 1,373 648 2,175
Extraordinary item(1)................................. 38 -- (92) -- (514) -- --
-------- -------- -------- -------- -------- -------- --------
- - - - - - -
Net income............................................ 297 573 704 1,061 859 648 2,175
Preferred stock dividends............................. 101 101 101 101 88 50 --
-------- -------- -------- -------- -------- -------- --------
- - - - - - -
Net income applicable to common stock................. $ 196 $ 472 $ 603 $ 960 $ 771 $ 598 $ 2,175
========= ========= ========= ========= ========= ========= =========
Primary earnings per share............................ $ .11 $ .23 $ .29 $ .45 $ .27 $ .25 $ .33
Fully diluted earnings per share...................... $ .11 $ .23 $ .29 $ .42 $ .27 $ .23 $ .33
Average number of shares outstanding -- primary....... 1,768,613 2,020,664 2,052,168 2,155,380 2,931,234 2,384,359 6,510,428
Average number of shares outstanding -- fully
diluted............................................. 1,768,613 2,020,664 2,450,791 2,648,740 3,207,622 3,095,826 6,527,796
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 400 $ 1,139 $ 2,172 $ 2,797 $13,863 $ 9,364
Net property and equipment............................ 6,261 8,625 8,978 25,321 29,115 39,209
Total assets.......................................... 11,685 15,828 16,714 40,525 56,368 74,092
Long-term debt and other obligations, net of current
portion............................................. 1,938 1,722 1,623 15,989 3,695 4,609
Total shareholders' equity............................ 5,487 6,009 6,720 10,098 45,694 47,933
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(2)................. 2.3x 3.6x 5.0x 3.1x 2.1x 2.1x 10.9x
EBITDA(3)............................................. $ 1,901 $ 3,010 $ 4,151 $ 6,190 $ 9,134 $ 4,775 $ 6,579
EBITDA interest coverage(4)........................... 5.4x 10.0x 14.7x 7.9x 4.9x 5.0x 22.2x
Long-term debt/EBITDA(5).............................. 1.0x 0.6x 0.4x 2.6x 0.4x
</TABLE>

- ---------------

(1) Includes a $92,000 charge in fiscal 1994 to reflect the cumulative effect of
change in accounting principle.

(4) Represents the ratio of EBITDA to interest expense for the period presented.

(5) Represents the ratio of total long-term debt and other obligations, net of
current portion, to EBITDA for period presented.

21
<PAGE> 160

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

22
<PAGE> 161

RESULTS OF OPERATIONS

Six Months Ended September 30, 1996 Compared to Six Months Ended September 30,
1995

Year Ended March 31, 1996 Compared to the Year Ended March 31, 1995

23
<PAGE> 162

Year Ended March 31, 1995 Compared to the Year Ended March 31, 1994

24
<PAGE> 163

LIQUIDITY AND CAPITAL RESOURCES

25
<PAGE> 164

INFLATION AND SEASONALITY

Inflation has not had a significant impact on the Company's operations to
date and the Company's operating revenues have not historically been subject to
significant seasonal changes.

NEW ACCOUNTING PRONOUNCEMENTS -- ACCOUNTING FOR ASSET IMPAIRMENT; ACCOUNTING FOR
STOCK-BASED COMPENSATION

26
<PAGE> 165

amount of an asset may not be recoverable. Adoption of this pronouncement had no
material effect on the financial statements.

27
<PAGE> 166

BUSINESS

GENERAL

Dawson Production Services, Inc. is a leading provider of a broad range of
workover, liquid and production services used in the production of oil and gas.
The Company's services are utilized by major oil and gas companies as well as
independent producers to optimize performance of oil and gas wells. The Company
recently entered into an agreement to acquire the U.S. land-based well servicing
operations of Pride in a transaction that will position Dawson as the second
largest provider of workover rigs in the United States.

The Company commenced operations in 1951. In 1982, the current management
team joined the Company and initiated a strategy to expand and diversify the
Company's workover rig services. Since 1982, the Company has grown from four
workover rigs in a single yard to 91 workover rigs in 10 yards through a series
of strategic acquisitions of businesses and assets. Upon the closing of the
Pride Acquisition, the Company will own and operate 498 workover rigs. In
addition, in November 1994 the Company broadened the array of services it
provides by acquiring the liquid services and production services businesses of
Well Solutions, Inc. and expanded such businesses in July 1996 with the Taylor
Acquisition. The Company believes that it generally has been successful in
acquiring businesses and assets and subsequently reducing overhead, enhancing
internal controls, improving marketing and related operations through management
incentives and improving the utilization of its assets by redeploying equipment.

BUSINESS STRATEGY

28
<PAGE> 167

OVERVIEW OF SERVICES

Workover Rig Services

29
<PAGE> 168

Set forth below is certain information pertaining to the Company's
land-based workover rigs currently owned and to be acquired in the Pride
Acquisition.

Workover rig services are categorized by the type of job performed:
completion, maintenance, workover and plugging and abandonment.

30
<PAGE> 169

Liquid Services

The Company utilizes its injection wells primarily for the disposal of
salt water and incidental, non-hazardous oil and gas waste transported from the
well site by vacuum trucks owned and operated by the Company. Although the
Company is authorized to inject salt water and non-hazardous oil and gas wastes
transported by other licensed vacuum truck operators, the Company does not
currently permit such uses by third parties. The Company also maintains
separators at each of its injection wells permitting it to salvage residual
crude oil, which is later sold for the account of the Company.

The Company's injection operations pose certain risks of environmental
liability to the Company. Although the Company monitors the injection process,
any leakage from the subsurface portions of the wells could cause degradation
of fresh groundwater resources, potentially resulting in cancellation of
operation of the well, fines and penalties from governmental agencies,
expenditures for remediation of the affected resource, and liability to third
parties for property damages and personal injuries. In addition, the sale by
the Company of residual crude oil collected as part of the saltwater injection
process could impose liability on the Company in the event the entity to which
the oil was transferred fails to manage the material in accordance with the
applicable environmental health and safety laws.

31
<PAGE> 170
Production Services

32
<PAGE> 171

CUSTOMERS

OPERATING RISKS AND INSURANCE

The Company's operations are subject to hazards inherent in the oil and gas
industry, such as blowouts, explosions, craterings, fires and oil spills, that
can cause personal injury or loss of life, damage to or destruction of property,
equipment, the environment and marine life, and suspension of operations. In
addition, claims for loss of oil and gas production and damage to formations can
occur in the workover business. If a serious accident was to occur at a location
where the Company's equipment and services are used, it could result in the
Company being named as a defendant in lawsuits asserting potentially large
claims.

33
<PAGE> 172

COMPETITION

ENVIRONMENTAL REGULATION

34
<PAGE> 173

EMPLOYEES

LEGAL PROCEEDINGS

PROPERTIES

35
<PAGE> 174

PRIDE ACQUISITION

The closing of the Debt Offering and the Equity Offering are each
conditioned upon the simultaneous closing of the other and upon the simultaneous
closing of the Pride Acquisition.

36
<PAGE> 175

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company and their respective
ages and positions are as follows:

- ---------------

(1) Member of the Nominations Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.

37
<PAGE> 176

38
<PAGE> 177

COMMITTEES OF THE BOARD OF DIRECTORS

COMPENSATION OF DIRECTORS

39
<PAGE> 178

COMPENSATION OF EXECUTIVE OFFICERS

SUMMARY COMPENSATION TABLE

- ---------------

STOCK OPTION GRANTS IN 1996

The following table shows information concerning individual grants of
options during the year ended March 31, 1996 to the Named Executive Officers.

- ---------------

40
<PAGE> 179

STOCK OPTION EXERCISES AND HOLDINGS

- ---------------

(1) In calculating the value realized and the value of unexercised in-the-money
options at year end, the Company used the closing price on March 31, 1996 of
$10.75 per share.

OUTSTANDING OPTIONS AND CERTAIN PRIOR EXERCISES

1995 INCENTIVE PLAN

41
<PAGE> 180

401(K) PLAN

EMPLOYMENT AGREEMENTS

42
<PAGE> 181

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

43
<PAGE> 182

44
<PAGE> 183

Jefferies & Company, Inc. is serving as the underwriter for purposes of
the Debt Offering and will receive customary compensation for such services
consisting of the underwriting discount.

45
<PAGE> 184

SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL AND SELLING SHAREHOLDERS

- ---------------

46
<PAGE> 185

47
<PAGE> 186
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,560,600 shares
of Common Stock, $.01 par value, and 560,600 shares of undesignated preferred
stock, no par value per share.

COMMON STOCK

48
<PAGE> 187

As of December 31, 1996, the outstanding shares of Common Stock were owned
of record by approximately 121 shareholders.

PREFERRED STOCK

There are 560,600 shares of undesignated preferred stock authorized and no
shares of preferred stock issued or outstanding.

REGISTRATION RIGHTS

49
<PAGE> 188

pursuant to the Registration Rights Agreement for the account of the Rights
Holders. See "Security Ownership of Management and Principal and Selling
Shareholders."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is KeyCorp
Shareholder Services, Inc., Houston, Texas.

PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECT

INDEMNIFICATION OF OFFICERS AND DIRECTORS; LIMITATION OF DIRECTOR LIABILITY

50
<PAGE> 189

DESCRIPTION OF NOTES

Concurrently with the Equity Offering, the Company is offering $110.0
million aggregate principal amount of the Notes pursuant to the Debt Offering.
The following is a summary of certain terms of the Notes and is qualified in its
entirety by reference to the Indenture (the "Indenture") relating to the Notes.
A copy of the proposed form of Indenture has been filed with the Securities and
Exchange Commission and is available as set forth under "Available Information."

The Notes mature on February 1, 2007, and bear interest at the rate of
% per annum payable semi-annually. The Notes are redeemable at the option
of the Company, in whole or in part, at any time on or after February 1, 2002,
at a premium declining ratably to par on or after February 1, 2005, together
with accrued and unpaid interest to the date of redemption. In the event the
Company consummates a Public Equity Offering (as defined in the Indenture) on or
prior to February 1, 2000, the Company may at its option use all or a portion of
the proceeds from such offering to redeem up to $38.5 million principal amount
of the Notes at a redemption price equal to % of the aggregate principal
thereof, together with accrued and unpaid interest to the date of redemption,
provided that at least $71.5 million in aggregate principal amount of the Notes
remain outstanding immediately after such redemption.

Upon the occurrence of a Change in Control (as defined in the Indenture),
each holder of Notes will have the right to require the Company to purchase all
or a portion of such holder's Notes at a price equal to 101% of the aggregate
principal amount thereof, together with accrued and unpaid interest to the date
of purchase.

The Notes will be unconditionally guaranteed on a senior unsecured basis by
each of the Company's principal operating subsidiaries, and such subsidiary
guarantees will rank pari passu in right of payment with all senior indebtedness
of the subsidiary guarantors. The subsidiary guarantees may be released under
certain circumstances.

The Notes will be senior unsecured obligations of the Company, ranking pari
passu in right of payment will all subordinated indebtedness of the Company. The
Notes and the subsidiary guarantees will be effectively subordinated to secured
indebtedness of the Company and the subsidiary guarantors, including any
indebtedness under the Credit Facility, which is secured by liens on the
accounts receivable and inventory of the Company. Subject to certain
limitations, the Company, including its subsidiaries, may incur additional
indebtedness in the future.

The Indenture will contain certain covenants, including covenants that
limit: (i) indebtedness, (ii) restricted payments, (iii) issuances and sales of
capital stock of restricted subsidiaries, (iv) sale/leaseback transactions, (v)
transactions with affiliates, (vi) liens, (vii) asset sales, (viii) dividends
and other payment restrictions affecting restricted subsidiaries, (ix) conduct
of business and (x) mergers, consolidations or sales of assets.

51
<PAGE> 190

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Shareholders have agreed to sell to the
Underwriters named below (the "Underwriters"), for whom Jefferies & Company,
Inc. and Southcoast Capital Corporation are acting as the representatives (the
"Representatives"), and the Underwriters have severally agreed to purchase, the
number of shares of Common Stock set forth opposite their respective names in
the table below at the public offering price less the underwriting discount set
forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
-------------------------------------------------------------------------- ----------
<S> <C>
Jefferies & Company, Inc. ................................................
Southcoast Capital Corporation............................................

---------
Total...........................................................
=========
</TABLE>

The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock offered hereby is subject to certain
conditions. The Underwriters are committed to purchase all of the shares of
Common Stock offered hereby (other than those covered by the over-allotment
option described below), if any are purchased.

The Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share to certain other
dealers. After the public offering of the shares of Common Stock, the public
offering price, the concession to selected dealers and the reallowance to other
dealers may be changed by the Representatives.

The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to additional shares of
Common Stock at the public offering price, less the underwriting discount. To
the extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase additional shares of Common Stock
proportionate to such Underwriter's initial commitment as indicated in the
preceding table. The Underwriters may exercise such right of purchase only for
the purpose of covering over-allotments, if any, made in connection with the
shares of Common Stock offered by this Prospectus.

The Company and each executive officer and director of the Company have
agreed not to offer for sale, sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable for

52
<PAGE> 191

shares of Common Stock for a period of 90 days from the date of this Prospectus,
without the prior written consent of Jefferies & Company, Inc.

The Representatives have advised the Company and the Selling Shareholders
that they do not expect the Underwriters to confirm sales of shares of Common
Stock offered by this Prospectus to any accounts over which they exercise
discretionary authority.

The closing of the Equity Offering is conditioned upon the simultaneous
closing of the Debt Offering and the Pride Acquisition.

At the request of the Company, the Underwriters have reserved up to 200,000
shares of the Common Stock offered hereby for sale at the initial public
offering price to one or more affiliates of RIMCO Associates, Inc., which has
expressed an interest in purchasing shares of Common Stock. In addition, up to
$5.5 million of the Notes offered in the Debt Offering have been reserved for
sale at the initial public offering price to one or more affiliates of RIMCO
Associates, Inc., which has expressed an interest in purchasing Notes. The
number of shares of Common Stock and the amount of Notes available to the
general public will be reduced to the extent one or more affiliates of RIMCO
Associates, Inc. purchases the reserved shares of Common Stock and Notes.

Certain of the Underwriters and selling group members that currently act as
market makers for the Common Stock may engage in "passive market making" in the
Common Stock on the Nasdaq National Market in accordance with Rule 10b-6A under
the Exchange Act. Rule 10b-6A permits, upon the satisfaction of certain
conditions, underwriters and selling group members participating in a
distribution that are also Nasdaq market makers in the security being
distributed to engage in limited market-making transactions during the period
when Rule 10b-6 under the Exchange Act would otherwise prohibit such activity.
Rule 10b-6A prohibits underwriters and selling group members engaged in passive
market making generally from entering a bid or effecting a purchase at a price
that exceeds the highest bid for those securities reported on the Nasdaq
National Market by a market maker that is not participating in the distribution.
Under Rule 10b-6A, each underwriter or selling group member engaged in passive
market making is subject to a daily net purchase limitation equal to 30% of such
entity's average daily trading volume during the two full consecutive calendar
months immediately preceding the date of the filing of the registration
statement under the Securities Act pertaining to the security to be distributed.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection with
the Equity Offering, including liabilities under the Securities Act, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.

Jefferies & Company, Inc. has in the past provided investment banking
services to the Company and acted as an underwriter in the IPO. Southcoast
Capital Corporation also acted as an underwriter in the IPO. Jefferies &
Company, Inc. performed investment banking services for the Company in
connection with the Well Solutions Acquisition in November 1994 for which
Jefferies & Company, Inc. received usual and customary fees in the amount of
$295,000. Jefferies & Company, Inc. paid to affiliates of Mr. Greenwood in the
year ended March 31, 1995, a finder's fee of $122,500 from the fee it received
from the Company in connection with the Well Solutions Acquisition. Jefferies &
Company, Inc. also has acted as financial advisor to the Company in connection
with the Pride Acquisition for which it will be paid a fee of approximately $1.2
million, and is being reimbursed for its reasonable out-of-pocket expenses in
connection therewith.

Jefferies & Company, Inc. is serving as the underwriter for purposes of the
Debt Offering and will receive customary compensation for such services
consisting of the underwriting discount.

53
<PAGE> 192

LEGAL MATTERS

Certain legal matters with respect to the legality of the Common Stock
offered hereby will be passed upon for the Company by Jenkens & Gilchrist, A
Professional Corporation, Austin, Texas. Fulbright & Jaworski L.L.P., Houston,
Texas, has acted as counsel for the Underwriters in connection with the Equity
Offering and will pass upon certain legal matters relating to the Equity
Offering.

EXPERTS

54
<PAGE> 193

AVAILABLE INFORMATION

55
<PAGE> 194

DAWSON PRODUCTION SERVICES, INC. AND ACQUISITIONS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1
<PAGE> 195

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Dawson Production Services, Inc.:

As discussed in note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in fiscal 1994.

KPMG Peat Marwick LLP

San Antonio, Texas
June 11, 1996, except as
to note (14) which is as
of December 23, 1996

F-2
<PAGE> 196

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 197

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 198

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 199

DAWSON PRODUCTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 200

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated. (See note 2).

MANAGEMENT ESTIMATES

CASH EQUIVALENTS

For purposes of the statement of cash flows, cash and short-term
investments with an original maturity of three months or less from the date of
purchase are considered to be cash equivalents.

REVENUE RECOGNITION

The Company generally recognizes revenue when services are rendered.

PROPERTY AND EQUIPMENT

Property and equipment are depreciated over their estimated useful lives on
the straight-line method as follows:

INCOME TAXES

F-7
<PAGE> 201

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTANGIBLE AND OTHER ASSETS

FAIR VALUES OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of short-term,
variable rate items or recently issued debt instruments for which management
believes fair value approximates carrying value.

TREASURY STOCK

Treasury stock is recorded under the cost method.

EARNINGS PER SHARE

RECLASSIFICATION

Certain amounts, as previously presented, have been reclassified to conform
with the current year financial statement presentation.

F-8
<PAGE> 202

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

Accounting for Asset Impairment

Accounting for Stock-Based Compensation

CONCENTRATION OF CREDIT RISK

UNAUDITED INFORMATION

(2) ACQUISITIONS

WELL SOLUTIONS, INC.

F-9
<PAGE> 203

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

TAYLOR COMPANIES, INC.

Assuming the purchase of Taylor Companies, Inc. had been consummated as of
the beginning of the fiscal year 1996, unaudited pro forma operating results of
the Company would be as follows:

The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the purchase been made
at the beginning of the respective period.

OTHER ACQUISITIONS:

In May 1996, the Company acquired the Texas-based well servicing division
of a non-affiliated company. The aggregate purchase price was $779,000.

F-10
<PAGE> 204

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Taylor acquisition, the effect on results of operations would not have been
material if such acquisitions had occurred at the beginning of the year.

(3) MANDATORILY REDEEMABLE PREFERRED STOCK

(4) NOTES PAYABLE AND LONG-TERM DEBT

Long-term debt consists of the following:

F-11
<PAGE> 205

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Scheduled maturities of principal for long-term debt based on balances
outstanding at March 31, 1996 are summarized as follows:

F-12
<PAGE> 206

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LEASES AND LEASE COMMITMENTS

Future minimum lease payments as of March 31, 1996 are as follows:

(6) SHAREHOLDERS' EQUITY

(a) Equity Offering

(b) Recapitalization and Stock Split

F-13
<PAGE> 207

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During fiscal 1996, the Company retired all of the common shares held in
treasury. The cost of acquired shares in excess of par value has been charged to
additional paid-in capital.

(7) STOCK WARRANTS AND OPTIONS

The following table summarizes the activity of stock options and warrants
granted by the Company:

(8) INCOME TAXES

The components of income tax expense applicable to continuing operations
are as follows:

F-14
<PAGE> 208

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The extraordinary loss of $513,819 in 1996 is net of deferred tax benefits
of $264,495.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1995 and 1996 are presented below:

The Company anticipates the reversal of existing taxable temporary
differences will provide sufficient taxable income to realize the benefits of
its deferred tax assets.

F-15
<PAGE> 209

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) RELATED PARTY TRANSACTIONS

(10) EMPLOYEE BENEFIT PLANS

(11) COMMITMENTS AND CONTINGENCIES

F-16
<PAGE> 210

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12) SUPPLEMENTARY BALANCE SHEET DATA

(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Summarized quarterly financial data for 1996 are as follows:

- ---------------

(a) See discussion at note 4 regarding extraordinary item.

F-17
<PAGE> 211

DAWSON PRODUCTION SERVICES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) RECENT DEVELOPMENTS -- ACQUISITIONS

F-18
<PAGE> 212

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:

As discussed in Note 6 to the combined financial statements, the Division
changed its method of accounting for income taxes in 1993.

COOPERS & LYBRAND L.L.P.

Houston, Texas
February 26, 1996 (except for the
second paragraph of Note 1 as to which the date
is December 23, 1996)

F-19
<PAGE> 213

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED BALANCE SHEET
(IN THOUSANDS)

The accompanying notes are an integral part of the combined financial
statements.

F-20
<PAGE> 214

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF OPERATIONS AND
CHANGES IN OWNER'S EQUITY
(IN THOUSANDS)

The accompanying notes are an integral part of the combined financial
statements.

F-21
<PAGE> 215

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

The accompanying notes are an integral part of the combined financial
statements.

F-22
<PAGE> 216

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying combined financial statements reflect the financial
position, results of operations and cash flows of these subsidiaries plus
certain allocable corporate activities of the Parent.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash Equivalents

Parts and Supplies

Parts and supplies consist of spare rig parts and supplies held for use in
operations and are valued at the lower of weighted average cost or estimated
market value.

Property and Equipment

F-23
<PAGE> 217

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Revenue Recognition

Income Taxes

Concentration of Credit Risk

Management Estimates

Conditions Affecting Ongoing Operations

F-24
<PAGE> 218

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 and 1994 consists of the
following:

Depreciation expense was $5,114,000, $4,556,000 and $4,642,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.

4. ACQUISITIONS

The assets acquired and liabilities assumed in the X-Pert acquisition were
as follows:

Unaudited pro forma results of operations assuming the acquisition of
X-Pert had occurred on January 1, 1994, are as follows:

F-25
<PAGE> 219

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The pro forma results of operations presented above do not purport to be
indicative of the results of operations of the Division that might have occurred
nor are they indicative of future results.

5. DEBT

Long-Term Debt

Long-term debt at December 31, 1995 consists of the following:

Future maturities of long-term debt are as follows:

F-26
<PAGE> 220

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

The components of the provision for income taxes were as follows:

F-27
<PAGE> 221

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1995 and 1994 were as follows:

7. EMPLOYEE BENEFITS

8. COMMITMENTS AND CONTINGENCIES

F-28
<PAGE> 222

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. RELATED PARTY TRANSACTIONS

10. SUPPLEMENTAL FINANCIAL INFORMATION

Other Current Assets

Other current assets at December 31, 1995 and 1994 consists of the
following:

F-29
<PAGE> 223

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Accrued Expenses

Accrued expenses at December 31, 1995 and 1994 consists of the following:

Cash Flow Information

Cash paid for interest and income taxes during the years ended December 31,
1995, 1994 and 1993 was as follows:

F-30
<PAGE> 224

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

The accompanying notes are an integral part of the combined financial
statements.

F-31
<PAGE> 225

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)

The accompanying notes are an integral part of the consolidated financial
statements.

F-32
<PAGE> 226

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

The accompanying notes are an integral part of the consolidated financial
statements.

F-33
<PAGE> 227

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS

1. GENERAL

2. COMMITMENTS AND CONTINGENCIES

3. ACQUISITIONS

F-34
<PAGE> 228

U.S. LAND-BASED WELL SERVICING OPERATIONS
OF PRIDE PETROLEUM SERVICES, INC.

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. DEBT

Long-Term Debt

Long-term debt at September 30, 1996 and December 31, 1995 consists of the
following:

F-35
<PAGE> 229

INDEPENDENT AUDITOR'S REPORT

To the Stockholders, Members, and Owners
Taylor Acquisition Group
Carthage, Texas

Chapman, Williams & Co.
Certified Public Accountants
Carthage, Texas

May 21, 1996

F-36
<PAGE> 230

TAYLOR ACQUISITION GROUP

COMBINED BALANCE SHEET

The accompanying notes are an integral part of these financial statements.

F-37
<PAGE> 231

TAYLOR ACQUISITION GROUP

COMBINED STATEMENT OF INCOME (LOSS)

The accompanying notes are an integral part of these financial statements

F-38
<PAGE> 232

TAYLOR ACQUISITION GROUP

COMBINED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

F-39
<PAGE> 233

TAYLOR ACQUISITION GROUP

COMBINED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY

The accompanying notes are an integral part of these financial statements

F-40
<PAGE> 234

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

E. Cash and cash equivalents are comprised of checking accounts, savings
accounts, and short-term cash investment accounts maintained at various
financial institutions.

F-41
<PAGE> 235

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 ACCOUNTS RECEIVABLE -- TRADE

An allowance for doubtful accounts of $111,322 and $75,471 has been
established as of December 31, 1995 and 1994, respectively.

NOTE 3 NOTES PAYABLE

F-42
<PAGE> 236

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Maturities of the above notes are summarized below:

Interest expense was $461,326 and $473,448 for 1995 and 1994, respectively.

F-43
<PAGE> 237

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 CAPITAL LEASES

In 1992 Taylor Interests, Inc. entered into a capital lease with The
Associates for three vacuum trailers.

The future minimum lease payments under capital leases together with the
present value of the net minimum lease payments are as follows:

NOTE 5 FEDERAL INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of depreciation and bad debt
reserve for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized for operating losses
that are available to offset future federal income taxes.

F-44
<PAGE> 238

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax liability is computed as follows:

The deferred tax liability for 1994 was recognized as an expense all in 1994
since the companies had previously been taxed as Subchapter S corporations. No
deferral existed in prior years.

NOTE 6 DEFERRED REVENUES

NOTE 7 EMPLOYEE BENEFIT PLAN

F-45
<PAGE> 239

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 RELATED PARTY TRANSACTIONS

NOTE 9 COMMITMENTS AND CONTINGENT LIABILITIES

B. The Group leases land for its salt water disposal wells from various
individuals at a monthly total of $5,525.

F-46
<PAGE> 240

TAYLOR ACQUISITION GROUP

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

D. Four suits are pending in various State Courts involving vehicular
accidents against Taylor Interests, Inc. The Company has sufficient insurance to
cover the claims.

NOTE 10 ECONOMIC DEPENDENCY

NOTE 11 MOTOR CARRIER PERMIT

NOTE 12 SUBSEQUENT EVENT

F-47
<PAGE> 241

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Dawson WellTech, L.C.:

ARTHUR ANDERSEN LLP

San Antonio, Texas
April 10, 1995

F-48
<PAGE> 242

WELL SOLUTIONS, INC.

BALANCE SHEETS -- MARCH 31, 1994 AND 1993

The accompanying notes are an integral part of these financial statements.

F-49
<PAGE> 243

WELL SOLUTIONS, INC.

STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992

The accompanying notes are an integral part of these financial statements.

F-50
<PAGE> 244

WELL SOLUTIONS, INC.

STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992

The accompanying notes are an integral part of these financial statements.

F-51
<PAGE> 245

WELL SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992

The accompanying notes are an integral part of these financial statements.

F-52
<PAGE> 246

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

General

Cash

The Company's cash balance consists of petty cash funds maintained at the
Company's field offices.

Unbilled Accounts Receivable

Revenues and costs applicable to oilfield services are recognized as the
services are performed.

Receivable Due From Affiliate, Net

Concentrations of Credit Risk

Property, Plant and Equipment

Other Assets

Other assets consist primarily of deferred debt and acquisition costs and
other intangible assets and is presented net of accumulated amortization of
$792,185 and $491,779 at March 31, 1994 and 1993,

F-53
<PAGE> 247

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

respectively. Amortization expense amounted to $300,406, $284,094 and $98,237
for 1994, 1993 and 1992, respectively.

Sales to Significant Customers

Earnings Per Share

2. LONG-TERM DEBT:

F-54
<PAGE> 248

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate annual maturities of long-term debt and capital lease
obligations during the five years following March 31, 1994, and thereafter are
as follows:

3. LEASES:

Equipment accounts include the following amounts for leases that have been
capitalized:

F-55
<PAGE> 249

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company also has noncancelable operating leases with remaining terms
ranging from one year to seven years. The related future minimum lease payments
as of March 31, 1994, are as follows:

4. COMMITMENTS AND CONTINGENCIES:

5. CASH FLOWS:

F-56
<PAGE> 250

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Supplemental schedule of noncash investing and financing activities is as
follows:

6. INCOME TAXES:

Income tax expense (benefit) for the years ended March 31, 1994, 1993 and
1992, was as follows:

F-57
<PAGE> 251

WELL SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The tax effect of significant temporary differences representing income tax
assets and liabilities for the years ended March 31, 1994 and 1993, are as
follows:

The Company has alternative minimum tax credit carryforwards of $45,763
with no expiration date.

7. SUBSEQUENT EVENTS (UNAUDITED):

Effective November 1, 1994, the Company sold the majority of its operating
assets for $17.5 million to Dawson WellTech, L.C., at a gain of approximately
$4.2 million.

F-58
<PAGE> 252

- ------------------------------------------------------
- ------------------------------------------------------

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 9
The Company........................... 14
Disclosure Regarding Forward-Looking
Statements.......................... 15
Debt Offering......................... 16
Use of Proceeds....................... 16
Price Range of Common Stock and
Dividend Policy..................... 17
Capitalization........................ 18
Pro Forma Condensed Consolidated
Financial Statements................ 19
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 28
Pride Acquisition..................... 36
Management............................ 37
Certain Relationships and Related
Transactions........................ 43
Security Ownership of Management and
Principal and Selling
Shareholders........................ 46
Description of Capital Stock.......... 48
Description of Notes.................. 51
Underwriting.......................... 52
Legal Matters......................... 54
Experts............................... 54
Available Information................. 55
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

[LOGO]

DAWSON PRODUCTION
SERVICES, INC.

COMMON STOCK

PROSPECTUS

JEFFERIES & COMPANY, INC.

SOUTHCOAST CAPITAL
CORPORATION

, 1997

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 253

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following sets forth estimated expenses (other than the underwriting
discount) to be incurred in connection with the issuance and distribution of the
securities offered hereby:

<TABLE>
<S> <C>
Commission registration fee............................................... $ 53,982
NASD filing fee........................................................... 18,314
Nasdaq National Market listing fee........................................ 17,500
Accounting fees and expenses.............................................. *
Legal fees and expenses................................................... *
Blue sky fees and expenses (including fees and expenses of counsel)....... *
Printing and engraving fees and expenses.................................. *
Trustee fees.............................................................. *
Rating agency fee......................................................... *
Fees of transfer agent and registrant..................................... *
Miscellaneous............................................................. *
--------
Total........................................................... $ *
========
</TABLE>

- ---------------

* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant has authority under Articles 2.02A. (16) and 2.02-1 of the
Texas Business Corporation Act (the "TBCA") to indemnify its directors and
officers to the extent provided for in such statute. The Registrant's Articles
of Incorporation and Bylaws allow indemnification of directors and officers to
the full extent permitted by said provisions of the TBCA.

The TBCA provides in part that a corporation may indemnify a director or
officer or other person who was, is, or is threatened to be made a named
defendant or respondent in a proceeding because the person is or was a director,
officer, employee or agent of the corporation, if it is determined that (i) such
person conducted himself in good faith; (ii) reasonably believed, in the case of
conduct in his official capacity as a director or officer of the corporation,
that his conduct was in the corporation's best interest, and, in all other
cases, that his conduct was not opposed to the corporation's best interests; and
(iii) in the case of any criminal proceeding, had no reasonable cause to believe
that his conduct was unlawful.

A corporation may indemnify a person under the TBCA against judgments,
penalties (including excise and similar taxes), fines, settlements, and
reasonable expenses actually incurred by the person in connection with the
proceeding. If the person is found liable to the corporation or is found liable
on the basis that personal benefit was improperly received by the person, the
indemnification is limited to reasonable expenses actually incurred by the
person in connection with the proceeding, and 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 the corporation.

A corporation may also pay or reimburse expenses incurred by a person in
connection with his appearance as a witness or other participation in a
proceeding at a time when he is not a named defendant or respondent in the
proceeding.

Reference is also made to the Articles of Incorporation, which limit or
eliminate a director's liability for monetary damages to the Registrant or its
shareholders for acts or omissions in the director's capacity as a director,
except that the Articles of Incorporation do not eliminate the liability of a
director for (i) a breach of the director's duty of loyalty to the Registrant or
its shareholders, (ii) an act or omission not in good faith that constitutes a
breach of duty of the director to the Registrant or an act or omission that
involves intentional misconduct or a knowing violation of the law, (iii) a
transaction from which a director received in an improper

II-1
<PAGE> 254

benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office, or (iv) an act or omission for which the
liability of a director is expressly provided by an applicable statute. The
Registrant's Bylaws further provide that the Registrant shall indemnify its
officers and directors to the fullest extent permitted by law.

The Company will seek to obtain director's and officers' liability
insurance that covers certain liabilities and expenses of the Company's
directors and officers. In addition, the Company has entered into
indemnification against certain liabilities, including those arising under the
Securities Act, in connection with the Offering.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

All references to numbers of shares and per share prices give effect to the
4.3-for-one stock split ("Stock Split") which occurred on March 1, 1996.

Within the past three years, the Registrant has sold the following
securities which were not registered under the Securities Act:

1. On March 1, 1996, the Registrant effected a 4.3-for-one stock split
of the issued and outstanding shares of Common Stock. The transaction was
exempt from the registration requirements as not involving any "sale,"
"offer," or "offer to sell" within the meaning of Section 2(3) of the
Securities Act.

2. On October 18, 1995 and February 19, 1996, the Company issued an
aggregate of 347,440 shares of Common Stock upon conversion of its Series A
10% Cumulative Convertible Preferred Stock, and on February 19, 1996, the
Company issued 344,000 shares of Common Stock upon conversion of $2.4
million of convertible debt. Also in February 1996, the Company issued
12,900 shares of Common Stock to Triad Ventures Limited II upon conversion
of $75,000 due under a subordinated convertible debenture. These
transactions were exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereunder.

3. On November 1, 1995, the Registrant issued 1,329,495 shares of
Common Stock to WellTech, Inc. in connection with the Minority Interest
Acquisition. The terms of the transaction required that WellTech, Inc.
distribute its shares to its shareholders and directors, a total of 29
persons or entities which was completed on February 16, 1996. This
transaction was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereunder.

4. On October 1, 1994, the Registrant granted options to purchase an
aggregate of 21,500 shares of Common Stock to five of the Outside
Directors, and options to purchase an aggregate of 96,750 shares to three
senior executives. On October 6, 1995, the Registrant granted options to
purchase an aggregate of 34,400 shares of Common Stock to seven of the
Outside Directors and Mr. Greenwood, and options to purchase an aggregate
of 98,900 shares to nine employees. On April 1, 1996, the Registrant
granted options to purchase 34,400 of Common Stock to its eight
non-employee directors, and on July 3, 1996 granted options to purchase
290,750 shares of Common Stock to 34 employees. The Registrant has issued
98,905 shares of Common Stock in connection with exercises of options
granted to employees and directors, as follows:

<TABLE>
<CAPTION>
PER SHARE
DATE NUMBER OF SHARES EXERCISE PRICE
------------------------------------------------------- ---------------- --------------
<S> <C> <C>
October 27, 1994....................................... 7,405 $ 1.16
October 27, 1994....................................... 40,618 $ 1.65
November 1, 1994....................................... 4,300 $ 1.16
November 4, 1994....................................... 4,300 $ 1.16
February 1, 1996....................................... 32,250 $ 2.33
February 27, 1996...................................... 1,432 $ 2.33
April 5, 1996.......................................... 4,300 $ 7.44
May 30, 1996........................................... 4,300 $ 7.44
</TABLE>

These transactions were exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) and, for transactions occurring prior to
March 20, 1996, also pursuant to Rule 701 thereunder.

II-2
<PAGE> 255

5. On April 28, 1993 and July 22, 1993, the Registrant issued 2,197 and
2,176 shares of Common Stock, respectively, to Triad Ventures Limited II as
payment of interest on a promissory note. On September 3, 1993, the Registrant
issued 18,430 shares of Common Stock to Triad Ventures Limited II upon
conversion of $75,000 of principal outstanding under a promissory note and on
July 1, 1994, the Registrant issued 16,125 shares of Common Stock to Triad
Ventures Limited II upon conversion of $75,000 of principal outstanding under a
promissory note held by Triad Ventures Limited II. Each of these transactions is
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereunder.

6. On November 28, 1994 and January 1, 1995, the Registrant sold an
aggregate of 201,240 and 132,760 shares of Common Stock, respectively to RIMCO
Partners, L.P. IV. On November 30, 1994, the Registrant sold an aggregate of
$2.4 million in convertible subordinated notes to RIMCO Partners L.P., RIMCO
Partners, L.P. II, RIMCO Partners, L.P. III and Triad Ventures Limited II. Each
of these transactions is exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereunder.

7. From time to time over the past three years, the Registrant has issued
shares of Common Stock pursuant to provisions of the Certificate of Designation
of Series A Preferred Stock in payment of dividends on the Series A Preferred
Stock. Since January 1, 1993, a total of 14,357 shares have been issued for this
purpose to Triad Ventures Limited II, NationsBanc Capital Corporation and Nueces
Ventures, Inc. In addition, on October 18, 1995, 20,200 shares of the Series A
Preferred Stock were converted into 86,860 shares of Common Stock in accordance
with the terms of the Registrant's Certificate of Designation of Series A
Preferred Stock. Each of these dividend transactions was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereunder, and each of these conversions was so exempt pursuant to Section
3(a)(9) thereunder.

8. On October 27, 1994, the Registrant issued 40,618 shares of Common Stock
to two executive officers in exchange for a promissory note from each officer.
This issuance was exempt from registration under Section 4(2) of the Securities
Act.

The securities referred to above as having been issued in reliance on the
exemption from registration under Section 4(2) of the Securities Act were
subject to restrictions on transfer and appropriate restrictive legends were
affixed to the certificates or instruments issued in each transaction. All
recipients were furnished with, or had adequate access to, information regarding
the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

II-3
<PAGE> 256

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------------------------
<C> <S>
10.1 -- Dawson Production Services, Inc. 1995 Incentive Plan (incorporated by
reference as Exhibit 10.1 of the Registrant's Registration Statement on
Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.2 -- Employment Agreement between the Company and Michael E. Little dated as of
April 1, 1996 (incorporated by reference as Exhibit 10.2 of the
Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
March 14, 1996)).
10.3 -- Service contract between the Company and Union Pacific Resources Company
dated December 8, 1992 and Purchase Order dated April 27, 1995
(incorporated by reference as Exhibit 10.4 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.4 -- First Amendment to Loan Agreement between the Company, Dawson WellTech,
L.C. and the Frost National Bank dated October 12, 1995 and the
Modification, Renewal and Extension Agreement among The Frost National
Bank, the Company and Dawson WellTech, L.C. dated November 28, 1995
(incorporated by reference as Exhibit 10.5 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
+10.5 -- Agreement Regarding Election of Directors dated as of November 21, 1996,
by and between Dawson Production Services, Inc., and RIMCO Partners, L.P.,
RIMCO Partners, L.P. II, RIMCO Partners, L.P. III, and RIMCO Partners,
L.P. IV.
10.6 -- Non-Negotiable Convertible Debenture dated December 1, 1994 executed by
Dawson WellTech, L.C., as maker, and payable to Well Solutions, Inc., and
Amendment and Modification of Non-Negotiable Convertible Debenture
(incorporated by reference as Exhibit 10.11 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.7 -- Agreement for the Acquisition of Minority Interest in Dawson WellTech,
L.C. between the Company and WellTech, Inc. dated as of November 1, 1995
(incorporated by reference as Exhibit 10.12 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.8 -- Agreement for the Conversion of Securities of Dawson Well Servicing, Inc.
among the Company, RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO
Partners, L.P. III, Triad Ventures Limited II and Nueces Ventures, Inc.,
dated as of November 1, 1995, and Joinder Agreement executed by
NationsBanc Capital Corporation (incorporated by reference as Exhibit
10.13 of the Registrant's Registration Statement on Forms S-1 (No.
333-00452 dated March 14, 1996)).
10.9 -- Registration Rights Agreement among the Company, WellTech, Inc., RIMCO
Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III, RIMCO
Partners, L.P. IV, Triad Ventures Limited II, NationsBanc Capital
Corporation and Nueces Ventures, Inc., dated as of November 1, 1995
(incorporated by reference as Exhibit 10.14 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.10 -- Letter agreements between the Company and Nueces Ventures, Inc. Relating
to consulting services dated August 14, 1992, with amendment dated January
10, 1995 and termination dated October 13, 1995 (incorporated by reference
as Exhibit 10.15 of the Registrant's Registration Statement on Forms S-1
(No. 333-00452 dated March 14, 1996)).
10.11 -- Form of Indemnification Agreement between the Company and each of its
directors and executive officers (incorporated by reference as Exhibit
10.16 of the Registrant's Registration Statement on Forms S-1 (No.
333-00452 dated March 14, 1996)).
10.12 -- Employment Agreement between the Company and P. Mark Stark dated as of
April 1, 1996 (incorporated by reference as Exhibit 10.17 of the
Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
March 14, 1996)).
</TABLE>

II-4
<PAGE> 257

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------------------------
<C> <S>
10.13 -- Employment Agreement between the Company and Joseph Eustace dated as of
April 1, 1996 (incorporated by reference as Exhibit 10.18 of the
Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
March 14, 1996)).
10.14 -- Promissory Notes dated November 1, 1994 and February 1, 1996 payable to
the Company by Michael E. Little (incorporated by reference as Exhibit
10.19 of the Registrant's Registration Statement on Forms S-1 (No.
333-00452 dated March 14, 1996)).
10.15 -- First [sic] Amendment to Loan Agreement by and among the Company, Dawson
WellTech, L.C., and The Frost National Bank dated November 25, 1995
(incorporated by reference as Exhibit 10.21 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
+10.16 -- Purchase Agreement between the Company and Pride Petroleum Services, Inc.
dated as of December 23, 1996.
10.17 -- Stock Purchase Agreement dated July 8, 1996 among Dawson Production
Services, Inc., a Texas corporation (the "Buyer"), PSD Investments, Ltd.,
a Texas limited partnership (the "Seller"), John Randall Taylor, an
individual residing in Panola County, Texas, in his individual capacity,
and as general partner and sole managing partner of the Seller and his
spouse, Kathy Dianne Taylor, who is also an individual residing in Panola
County, Texas, in her individual capacity and as a general partner of the
Seller (incorporated by reference as Exhibit 10.23 of the Registrant's
Current Report on Form 8-K (No. 0-27732 dated July 29, 1996)).
10.18 -- First Amendment dated July 29, 1996 to Stock Purchase Agreement dated July
8, 1996 by and among Dawson Production Services, Inc., a Texas corporation
(the "Buyer"), PSD Investments, Ltd., a Texas limited partnership (the
"Seller"), John Randall Taylor, an individual residing in Panola County,
Texas, in his individual capacity, and as general partner and sole
managing partner of the Seller and his spouse, Kathy Diane Taylor, who is
also an individual residing in Panola County, Texas, in her individual
capacity and as a general partner of the Seller (incorporated by reference
as Exhibit 10.24 of the Registrant's Current Report on Form 8-K (No.
0-27732 dated July 29, 1996)).
+10.19 -- Second Amendment to Loan Agreement dated as of December 4, 1996 between
Dawson Production Services, Inc. and The Frost National Bank relating to
the renewal of a $4.0 million Revolving Credit Facility, and related
Promissory Note dated November 28, 1996.
+10.20 -- Promissory Note of Dawson Production Services, Inc. to The Frost National
Bank dated November 25, 1996 relating to the renewal of a $7.0 million
term loan.
+11.1 -- Statement Regarding Computation of Per Share Earnings (incorporated by
reference as Exhibit 11.1 of the Registrant's Registration Statement on
Forms S-1 (No. 333-00452 dated March 14, 1996)).
+12.1 -- Statement of Ratio of Earnings to Fixed Charges for each of the last five
fiscal years.
*21.1 -- Subsidiaries of the Registrant.
*23.1 -- Consent of Jenkens & Gilchrist, A Professional Corporation (included in
Exhibit 5.1).
+23.2 -- Consent of KPMG Peat Marwick LLP (included at Page S-1).
+23.3 -- Consent of Chapman, Williams & Co.
+23.4 -- Consent of Coopers & Lybrand L.L.P.
+23.5 -- Consent of Arthur Andersen LLP.
+24.1 -- Power of Attorney (contained on the signature page of this Registration
Statement).
*25.1 -- Statement of Eligibility of , as trustee.
</TABLE>

- ---------------

* To be filed by amendment.

+ Filed herewith.

II-5
<PAGE> 258

As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant
has not filed with this Registration Statement certain instruments defining the
rights of holders of long-term debt of the Registrant and its subsidiaries
because the total amount of securities authorized under any such instruments
does not exceed 10% of the total assets of the Registrant and its subsidiaries
on a consolidated basis. The Registrant agrees to furnish a copy of any such
agreement to the Commission upon request.

(b) Financial Statement Schedules

The following financial statement schedules are included in Part II of this
Registration Statement, can be found on the pages indicated and should be read
in conjunction with the financial statements and notes thereto:

<TABLE>
<CAPTION>
ITEM
------------------------------------------------------------------------------
<S> <C>
Independent Auditors' Consent and Report on Consolidated Financial Statement
Schedule.................................................................... S-1
Schedule II -- Valuation and Qualifying Accounts.............................. S-2
</TABLE>

All other financial statement schedules for which provision is made in the
applicable accounting regulations of the Commission are omitted because they are
not required under the related instructions, are inapplicable or the required
information is included elsewhere in the financial statements.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Securities Act or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If 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.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
the Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus 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 the
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.

II-6
<PAGE> 259

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 San Antonio, State of
Texas, on January 8, 1997.

DAWSON PRODUCTION SERVICES, INC.

By: /s/ MICHAEL E. LITTLE
--------------------------------------
Michael E. Little
Chairman of the Board, President and
Chief Executive Officer

Each person whose signature appears below hereby constitutes and appoints
Michael E. Little and P. Mark Stark, and each of them, each with full power to
act without the other, his true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this Registration Statement (including post-effective amendments), and to file
the same with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person hereby
ratifying and confirming that each of said attorneys-in-fact and agents or his
substitutes may lawfully do or cause to be done by virtue hereof.

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:

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------------------------------------------- ------------------------------ -----------------
<C> <S> <C>

/s/ MICHAEL E. LITTLE Chairman of the Board, January 8, 1997
- --------------------------------------------- President, Chief Executive
Michael E. Little Officer and Director
(Principal Executive
Officer)

/s/ P. MARK STARK Chief Financial Officer January 8, 1997
- --------------------------------------------- (Principal Accounting and
P. Mark Stark Financial Officer)

/s/ WM. WARD GREENWOOD Director January 6, 1997
- ---------------------------------------------
Wm. Ward Greenwood

/s/ J. MICHAEL BELL Director January 6, 1997
- ---------------------------------------------
J. Michael Bell

/s/ DOUGLAS D. LEWIS Director January 6, 1997
- ---------------------------------------------
Douglas D. Lewis

/s/ PAUL E. MCCOLLAM Director January 7, 1997
- ---------------------------------------------
Paul E. McCollam

/s/ RUSSELL BANKS Director January 6, 1997
- ---------------------------------------------
Russell Banks

/s/ STEPHEN F. OAKES Director January 6, 1997
- ---------------------------------------------
Stephen F. Oakes

/s/ LAWRENCE C. PETRUCCI Director January 6, 1997
- ---------------------------------------------
Lawrence C. Petrucci
</TABLE>

II-7
<PAGE> 260

INDEPENDENT AUDITORS' CONSENT AND REPORT ON
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

The Board of Directors
Dawson Production Services, Inc.

The audits referred to in our report dated June 11, 1996, included the
related financial statement schedule as of and for the years ended March 31,
1994, 1995 and 1996, included in the Registration Statement. This consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this consolidated financial
statement schedule based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

Our report refers to a change in method of accounting for income taxes in
1994.

We consent to the use of our reports included herein and to the references
to our firm under the heading "Experts" in the prospectus.

/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP

San Antonio, Texas
January 6, 1997

S-1
<PAGE> 261

SCHEDULE II

DAWSON PRODUCTION SERVICES, INC.

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE OF ADDITIONS DEDUCTIONS BALANCE
BEGINNING CHARGED TO FROM AT END
DESCRIPTION OF PERIOD EXPENSE ACCOUNTS OF PERIOD
- --------------------------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended March 31, 1994........................ $ 93,043 $450,590 $353,502 $ 190,131
Year ended March 31, 1995........................ 190,131 223,475 65,554 348,052
Year ended March 31, 1996........................ 348,052 21,714 78,927 290,839
</TABLE>

S-2
<PAGE> 262

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------------------------
<C> <S>
*1.1 -- Form of Underwriting Agreement relating to Equity Offering.
*1.2 -- Form of Underwriting Agreement relating to Debt Offering.
3.1 -- Amended and Restated Articles of Incorporation of the Company, as amended
by Articles of Amendment to the Amended and Restated Articles of
Incorporation (incorporated by reference as Exhibit 3.1 of the
Registrant's Registration Statement on Form S-1 (No. 333-00452 dated March
14, 1996)).
3.2 -- Bylaws of the Company, as amended (incorporated by reference as Exhibit
3.2 of the Registrant's Registration Statement on Form S-1 (No. 333-00452
dated March 14, 1996)).
4.1 -- Specimen stock certificate evidencing the Common Stock (incorporated by
reference as Exhibit 4.1 of the Registrant's Registration Statement on
Forms S-1 (No. 333-00452 dated March 14, 1996)).
4.2 -- See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation
and Bylaws of the Company defining the rights of the holders of Common
Stock.
* 4.3 -- Indenture dated as of . , 1997, between the Company and
* 5.1 -- Opinion of Jenkens & Gilchrist, a Professional Corporation.
10.1 -- Dawson Production Services, Inc. 1995 Incentive Plan (incorporated by
reference as Exhibit 10.1 of the Registrant's Registration Statement on
Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.2 -- Employment Agreement between the Company and Michael E. Little dated as of
April 1, 1996 (incorporated by reference as Exhibit 10.2 of the
Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
March 14, 1996)).
10.3 -- Service contract between the Company and Union Pacific Resources Company
dated December 8, 1992 and Purchase Order dated April 27, 1995
(incorporated by reference as Exhibit 10.4 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.4 -- First Amendment to Loan Agreement between the Company, Dawson WellTech,
L.C. and the Frost National Bank dated October 12, 1995 and the
Modification, Renewal and Extension Agreement among The Frost National
Bank, the Company and Dawson WellTech, L.C. dated November 28, 1995
(incorporated by reference as Exhibit 10.5 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
+10.5 -- Agreement Regarding Election of Directors dated as of November 21, 1996,
by and between Dawson Production Services, Inc., and RIMCO Partners, L.P.,
RIMCO Partners, L.P. II, RIMCO Partners, L.P. III, and RIMCO Partners,
L.P. IV.
10.6 -- Non-Negotiable Convertible Debenture dated December 1, 1994 executed by
Dawson WellTech, L.C., as maker, and payable to Well Solutions, Inc., and
Amendment and Modification of Non-Negotiable Convertible Debenture
(incorporated by reference as Exhibit 10.11 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.7 -- Agreement for the Acquisition of Minority Interest in Dawson WellTech,
L.C. between the Company and WellTech, Inc. dated as of November 1, 1995
(incorporated by reference as Exhibit 10.12 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
</TABLE>
<PAGE> 263

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------------------------
<C> <S>
10.8 -- Agreement for the Conversion of Securities of Dawson Well Servicing, Inc.
among the Company, RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO
Partners, L.P. III, Triad Ventures Limited II and Nueces Ventures, Inc.,
dated as of November 1, 1995, and Joinder Agreement executed by
NationsBanc Capital Corporation (incorporated by reference as Exhibit
10.13 of the Registrant's Registration Statement on Forms S-1 (No.
333-00452 dated March 14, 1996)).
10.9 -- Registration Rights Agreement among the Company, WellTech, Inc., RIMCO
Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III, RIMCO
Partners, L.P. IV, Triad Ventures Limited II, NationsBanc Capital
Corporation and Nueces Ventures, Inc., dated as of November 1, 1995
(incorporated by reference as Exhibit 10.14 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
10.10 -- Letter agreements between the Company and Nueces Ventures, Inc. Relating
to consulting services dated August 14, 1992, with amendment dated January
10, 1995 and termination dated October 13, 1995 (incorporated by reference
as Exhibit 10.15 of the Registrant's Registration Statement on Forms S-1
(No. 333-00452 dated March 14, 1996)).
10.11 -- Form of Indemnification Agreement between the Company and each of its
directors and executive officers (incorporated by reference as Exhibit
10.16 of the Registrant's Registration Statement on Forms S-1 (No.
333-00452 dated March 14, 1996)).
10.12 -- Employment Agreement between the Company and P. Mark Stark dated as of
April 1, 1996 (incorporated by reference as Exhibit 10.17 of the
Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
March 14, 1996)).
10.13 -- Employment Agreement between the Company and Joseph Eustace dated as of
April 1, 1996 (incorporated by reference as Exhibit 10.18 of the
Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
March 14, 1996)).
10.14 -- Promissory Notes dated November 1, 1994 and February 1, 1996 payable to
the Company by Michael E. Little (incorporated by reference as Exhibit
10.19 of the Registrant's Registration Statement on Forms S-1 (No.
333-00452 dated March 14, 1996)).
10.15 -- First [sic] Amendment to Loan Agreement by and among the Company, Dawson
WellTech, L.C., and The Frost National Bank dated November 25, 1995
(incorporated by reference as Exhibit 10.21 of the Registrant's
Registration Statement on Forms S-1 (No. 333-00452 dated March 14, 1996)).
+10.16 -- Purchase Agreement between the Company and Pride Petroleum Services, Inc.
dated as of December 23, 1996.
10.17 -- Stock Purchase Agreement dated July 8, 1996 among Dawson Production
Services, Inc., a Texas corporation (the "Buyer"), PSD Investments, Ltd.,
a Texas limited partnership (the "Seller"), John Randall Taylor, an
individual residing in Panola County, Texas, in his individual capacity,
and as general partner and sole managing partner of the Seller and his
spouse, Kathy Dianne Taylor, who is also an individual residing in Panola
County, Texas, in her individual capacity and as a general partner of the
Seller (incorporated by reference as Exhibit 10.23 of the Registrant's
Current Report on Form 8-K (No. 0-27732 dated July 29, 1996)).
10.18 -- First Amendment dated July 29, 1996 to Stock Purchase Agreement dated July
8, 1996 by and among Dawson Production Services, Inc., a Texas corporation
(the "Buyer"), PSD Investments, Ltd., a Texas limited partnership (the
"Seller"), John Randall Taylor, an individual residing in Panola County,
Texas, in his individual capacity, and as general partner and sole
managing partner of the Seller and his spouse, Kathy Diane Taylor, who is
also an individual residing in Panola County, Texas, in her individual
capacity and as a general partner of the Seller (incorporated by reference
as Exhibit 10.24 of the Registrant's Current Report on Form 8-K (No.
0-27732 dated July 29, 1996)).
</TABLE>
<PAGE> 264

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------------------------
<C> <S>
+10.19 -- Second Amendment to Loan Agreement dated as of December 4, 1996 between
Dawson Production Services, Inc. and The Frost National Bank relating to
the renewal of a $4.0 million Revolving Credit Facility, and related
Promissory Note dated November 28, 1996.
+10.20 -- Promissory Note of Dawson Production Services, Inc. to The Frost National
Bank dated November 25, 1996 relating to the renewal of a $7.0 million
term loan.
+11.1 -- Statement Regarding Computation of Per Share Earnings (incorporated by
reference as Exhibit 11.1 of the Registrant's Registration Statement on
Forms S-1 (No. 333-00452 dated March 14, 1996)).
+12.1 -- Statement of Ratio of Earnings to Fixed Charges for each of the last five
fiscal years.
*21.1 -- Subsidiaries of the Registrant.
*23.1 -- Consent of Jenkens & Gilchrist, A Professional Corporation (included in
Exhibit 5.1).
+23.2 -- Consent of KPMG Peat Marwick LLP (included at Page S-1).
+23.3 -- Consent of Chapman, Williams & Co.
+23.4 -- Consent of Coopers & Lybrand L.L.P.
+23.5 -- Consent of Arthur Andersen LLP.
24.1 -- Power of Attorney (contained on the signature page of this Registration
Statement).
*25.1 -- Statement of Eligibility of , as trustee.
</TABLE>

- ---------------

* To be filed by amendment.

+ Filed herewith.

<PAGE> 1
EXHIBIT 10.5

AGREEMENT REGARDING ELECTION OF DIRECTORS

This Agreement Regarding Election of Directors is made and entered into by
and between Dawson Production Services, Inc. (the "Company"), and RIMCO
Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III, and RIMCO
Partners, L.P. IV (collectively "RIMCO"), as of November 21, 1996.

WHEREAS, in section 4.2 of the Asset Purchase Agreement dated September
27, 1991, by and between RIMCO Partners, L.P., RIMCO Partners, L.P. II, and
RIMCO/NYL, L.P., RIMCO Well Service Company, Inc., and Dawson Well Servicing,
Inc. (now known as Dawson Production Services, Inc.), the Company agreed to use
its best efforts to seek the election of Paul E. McCollam to its Board of
Directors, or a person designated in writing by RIMCO Associates, Inc. and
reasonably satisfactory to the Company; and

WHEREAS, in a letter agreement dated November 28, 1994 (the "1994 Voting
Agreement"), from RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO
Partners, L.P. III and RIMCO Partners, L.P. IV, and acknowledged and accepted
by Michael Little, Triad Ventures Limited II ("Triad") and the Company, Triad
and the Company agreed to elect two nominees of RIMCO to the Company's Board of
Directors; and

WHEREAS, in a letter agreement dated January 16, 1996, RIMCO Partners,
L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III and RIMCO Partners,
L.P. IV released and discharged Michael E. Little from the provisions of the
1994 Voting Agreement; and

WHEREAS, in a letter agreement dated September ___, 1996, RIMCO Partners,
L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III and RIMCO Partners,
L.P. IV has released and discharged Triad Ventures Limited, II from the
provisions of the 1994 Voting Agreement; and

WHEREAS, the Company now seeks to clarify any ambiguities in these
agreements and to more precisely define its obligations;

The Company hereby agrees to use its best efforts to cause the election of
two persons, designated by RIMCO and reasonably acceptable to the Company, to
the Company's Board of Directors as long as RIMCO owns ten percent or more of
the Company's issued and outstanding common stock on a fully diluted basis; if
RIMCO owns less than ten percent, but five percent or more, of the Company's
common stock, the Company agrees to use its best efforts to cause the election
of one person, designated by RIMCO and reasonable acceptable to the Company, to
the Company's Board of Directors. At such time as RIMCO's stock ownership is
less than five percent, the above obligations of the Company shall terminate.
This agreement shall supersede any prior agreements by the Company regarding
the election of Paul McCollam or any RIMCO nominees to the Company's Board of
Directors.

<PAGE> 2
EXECUTED as of the date first above written.

DAWSON PRODUCTION SERVICES, INC.

By: /s/ MICHAEL E. LITTLE
--------------------------------------------
Name: Michael E. Little
------------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------

RIMCO PARTNERS, L.P.
RIMCO PARTNERS, L.P. II
RIMCO PARTNERS, L.P. III
RIMCO PARTNERS, L.P. IV

By: Resource Investors Management Company
Limited Partnership, their General Partner

By: RIMCO Associates, Inc.,
its General Partner

By: /s/ PAUL E. McCOLLAM
---------------------------------------
Name: Paul E. McCollam
-------------------------------------
Title: President
------------------------------------

<PAGE> 1

EXHIBIT 10.16

PURCHASE AGREEMENT

BETWEEN

DAWSON PRODUCTION SERVICES, INC., PURCHASER

AND

PRIDE PETROLEUM SERVICES, INC., SELLER

THIS AGREEMENT CONTAINS IMPORTANT INDEMNITY PROVISIONS.
SEE PARTICULARLY ARTICLE VI.
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C>
ARTICLE I - PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement to Sell . . . . . . . . . . . . . . . . . . . . . 1
(a) Included Assets . . . . . . . . . . . . . . . . . . 2
(b) Excluded Assets . . . . . . . . . . . . . . . . . . 3
1.2 Agreement to Purchase . . . . . . . . . . . . . . . . . . . 4
1.3 The Purchase Price . . . . . . . . . . . . . . . . . . . . . 4
(a) Purchase Price . . . . . . . . . . . . . . . . . . 4
(b) Fair Market Value . . . . . . . . . . . . . . . . . 4
(c) Federal Income Tax Elections . . . . . . . . . . . 4
1.4 Assumption of Liabilities . . . . . . . . . . . . . . . . . 4
1.5 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Transfer Taxes; Recording Fees . . . . . . . . . . . . . . . 5
1.7 Certain Environmental Matters. . . . . . . . . . . . . . . . 6
1.8 Adjustment for Certain Liabilities. . . . . . . . . . . . . 6

ARTICLE II - CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS
AND FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . 6
2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Items to be Delivered at Closing . . . . . . . . . . . . . . 7
2.3 Third Party Consents . . . . . . . . . . . . . . . . . . . . 7
2.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . 8
2.5 Conditions of Assets. . . . . . . . . . . . . . . . . . . . 8

ARTICLE III - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 8
3.1 Representations and Warranties of Seller . . . . . . . . . . 8
(a) Corporate Existence . . . . . . . . . . . . . . . . 8
(b) Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . . 9
(c) Validity of Contemplated Transactions, Etc . . . . 9
(d) No Third Party Options . . . . . . . . . . . . . . 10
(e) Financial Statements . . . . . . . . . . . . . . . 10
(f) Taxes; Tax and Other Returns and Reports . . . . . 10
(g) Books of Account . . . . . . . . . . . . . . . . . 11
(h) Existing Condition . . . . . . . . . . . . . . . . 11
(i) Title to Properties . . . . . . . . . . . . . . . . 11
(j) Compliance with Laws; Authorizations . . . . . . . 12
(k) Transactions With Affiliates . . . . . . . . . . . 12
(l) Litigation . . . . . . . . . . . . . . . . . . . . 12
(m) Contracts and Commitments . . . . . . . . . . . . . 12
(n) Environmental Matters . . . . . . . . . . . . . . . 13
(o) Real Properties . . . . . . . . . . . . . . . . . . 13
(p) Availability of Documents . . . . . . . . . . . . . 15
(q) Assets . . . . . . . . . . . . . . . . . . . . . . 15
(r) Restrictions . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(s) Conditions Affecting the Business . . . . . . . . . 15
(t) Employee Benefit Plans . . . . . . . . . . . . . . 15
(u) Personnel. . . . . . . . . . . . . . . . . . . . . 20
(v) Condition of Rigs . . . . . . . . . . . . . . . . . 21
3.2 Representations and Warranties of Purchaser . . . . . . . . 21
(a) Corporation . . . . . . . . . . . . . . . . . . . . 21
(b) Corporate Power and Authorization . . . . . . . . . 21
(c) Validity of Contemplated Transactions, Etc . . . . 21
(d) Financing . . . . . . . . . . . . . . . . . . . . . 22
3.3 Survival of Representations and Warranties and Covenants . . 22
3.4 Representations by Seller Refer to the Business. . . . . . . 22

ARTICLE IV - AGREEMENTS PENDING CLOSING . . . . . . . . . . . . . . . . . . . 22
4.1 Agreements of Seller Pending the Closing . . . . . . . . . . 22
(a) Business in the Ordinary Course . . . . . . . . . . 22
(b) Conduct of Business . . . . . . . . . . . . . . . . 22
(c) Litigation . . . . . . . . . . . . . . . . . . . . 23
(d) Access . . . . . . . . . . . . . . . . . . . . . . 23
(e) Press Release . . . . . . . . . . . . . . . . . . . 23
(f) Actions of Directors and Shareholders . . . . . . . 23
(g) Hart-Scott-Rodino . . . . . . . . . . . . . . . . . 24
(h) Employee Matters. . . . . . . . . . . . . . . . . 24
(i) Actions of Seller . . . . . . . . . . . . . . . . . 24
4.2 Agreements of Purchaser Pending the Closing . . . . . . . . 24
(a) Confidentiality . . . . . . . . . . . . . . . . . . 24
(b) Press Release . . . . . . . . . . . . . . . . . . . 24
(c) Hart-Scott-Rodino . . . . . . . . . . . . . . . . . 24
(d) Actions of Purchaser . . . . . . . . . . . . . . . 25

ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING . . . . . . . . . . . . . . . 25
5.1 Conditions Precedent to Purchaser's Obligations . . . . . . 25
(a) Representations and Warranties True as of the
Closing Date . . . . . . . . . . . . . . . . . . . 25
(b) Compliance with this Agreement . . . . . . . . . . 25
(c) Closing Certificate . . . . . . . . . . . . . . . . 25
(d) Opinion of Counsel for Seller . . . . . . . . . . . 25
(e) Good Standing. . . . . . . . . . . . . . . . . . . 25
(f) No Threatened or Pending Litigation . . . . . . . . 25
(g) Consents and Approvals . . . . . . . . . . . . . . 26
(h) Material Adverse Changes . . . . . . . . . . . . . 26
(i) Approval of Counsel; Corporate Matters . . . . . . 26
(j) Hart-Scott-Rodino Approval. . . . . . . . . . . . . 26
(k) Financing . . . . . . . . . . . . . . . . . . . . . 26
(l) Securities Filings. . . . . . . . . . . . . . . . . 26
5.2 Conditions Precedent to the Obligations of Seller . . . . . 26
(a) Representations and Warranties True as of the
Closing Date . . . . . . . . . . . . . . . . . . . 27
(b) Compliance with this Agreement . . . . . . . . . . 27
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
(c) Closing Certificates . . . . . . . . . . . . . . . 27
(d) No Threatened or Pending Litigation . . . . . . . . 27
(e) Consent of Shareholders . . . . . . . . . . . . . . 27
(f) Opinion of Counsel for Purchaser. . . . . . . . . . 27
(g) Hart-Scott-Rodino Approval . . . . . . . . . . . . 27

ARTICLE VI - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2 Indemnification by Seller . . . . . . . . . . . . . . . . . 28
6.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . 29
6.4 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Failure to Pay Indemnification . . . . . . . . . . . . . . . 30
6.6 Adjustment of Liability . . . . . . . . . . . . . . . . . . 30
6.7 Express Negligence . . . . . . . . . . . . . . . . . . . . . 30
6.8 DISCLAIMER. . . . . . . . . . . . . . . . . . . . . . . . . 30
6.9 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Negotiation Period . . . . . . . . . . . . . . . . 31
(b) Commencement of Arbitration . . . . . . . . . . . . 31
(c) Consolidation of Hearings . . . . . . . . . . . . . 31
(d) Discovery . . . . . . . . . . . . . . . . . . . . . 31
(e) Conclusion of Arbitration . . . . . . . . . . . . . 32
(f) Expenses of Arbitrators . . . . . . . . . . . . . . 32
6.10 Other Rights and Remedies Not Affected . . . . . . . . . . . 32

ARTICLE VII - POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . 32
7.1 Seller's Affected Employees. . . . . . . . . . . . . . . . 32
7.2 Discharge of Business Obligations. . . . . . . . . . . . . . 34
7.3 Maintenance of Books and Records . . . . . . . . . . . . . . 34
7.4 Payments Received . . . . . . . . . . . . . . . . . . . . . 35
7.5 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . 35
7.6 Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.7 Covenant Not to Compete . . . . . . . . . . . . . . . . . . 35
7.8 Subsequent Acquisitions by Seller. . . . . . . . . . . . . . 36
7.9 Transition Period . . . . . . . . . . . . . . . . . . . . . 36
(a) Collections . . . . . . . . . . . . . . . . . . . . 36
(b) Accounting . . . . . . . . . . . . . . . . . . . . 36
(c) Licenses and Permits . . . . . . . . . . . . . . . 36
(d) Access to Corporate Headquarters . . . . . . . . . 36
7.10 Accounting Records . . . . . . . . . . . . . . . . . . . . . 36
7.11 Nondisclosure of Proprietary Information. . . . . . . . . . 37
7.12 Contact with Former Employees . . . . . . . . . . . . . . . 37
7.13 Assumed Obligations. . . . . . . . . . . . . . . . . . . . . 37

ARTICLE VIII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Events of Termination . . . . . . . . . . . . . . . . . . . 37
8.2 Liability Upon Termination . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
8.3 Notice of Termination . . . . . . . . . . . . . . . . . . . 38
8.4 Break-Up Fee. . . . . . . . . . . . . . . . . . . . . . . . 38

ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.1 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 Assignment and Binding Effect . . . . . . . . . . . . . . . 39
9.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 40
9.6 No Benefit to Others . . . . . . . . . . . . . . . . . . . . 40
9.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 40
9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 40
9.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 41
9.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . 41
9.12 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.13 Specific Performance . . . . . . . . . . . . . . . . . . . . 41
9.14 Good Faith . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.15 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
<PAGE> 6
DEFINITIONS:
- -----------

The definition of "401(K) PLAN" can be found in Section 3.1(t)(i).
The definition of "AFFECTED EMPLOYEES" can be found in Section 3.1(t)(xxiv)(A).
The definition of "AGREEMENT" can be found on page 1.
The definition of "ASSETS" can be found in Section 1.1.
The definition of "ASSUMED LIABILITIES" can be found in Section 1.4(a).
The definition of "AUTHORIZATIONS" can be found in Section 3.1(j).
The definition of "BALANCE SHEET" can be found in Section 3.1(e)(ii).
The definition of "BALANCE SHEET DATE" can be found in Section 3.1(e)(ii).
The definition of "BREAK-UP FEE" can be found in Section 8.4.
The definition of "BUSINESS" can be found on page 1.
The definition of "CAUSE" can be found in Section 7.1(c).
The definition of "CLOSING" can be found in Section 2.1.
The definition of "CLOSING DATE" can be found in Section 2.1.
The definition of "CODE" can be found in Section 1.3(c).
The definition of "CONTAMINANT" can be found in Section 3.1(n).
The definition of "CONTRACTS" can be found in Section 3.1(c)(iv).
The definition of "DAMAGES" can be found in Section 6.2.
The definition of "DISPUTE NOTICE" can be found in Section 6.9(a).
The definition of "DOL" can be found in Section 3.1(t)(ii).
The definition of "EFFECTIVE DATE" can be found on page 1.
The definition of "EMPLOYEE" can be found in Section 3.1(t)(xxiv)(C).
The definition of "EMPLOYEE BENEFIT PLAN" can be found in Section
3.1(t)(xxiv)(B).
The definition of "EQUIPMENT" can be found in Section 1.1(a)(vi).
The definition of "EQUIPMENT LEASES" can be found in Section 1.1(a)(iv).
The definition of "ERISA" can be found in Section 3.1(t)(xxiv)(D).
The definition of "ERISA AFFILIATE" can be found in Section 3.1(t)(xxiv)(E).
The definition of "EXCLUDED ASSETS" can be found in Section 1.1(b).
The definition of "EXCLUDED PARCEL" can be found in Section 1.7.
The definition of "FEE PROPERTIES" can be found in Section 1.1(a)(i).
The definition of "FINAL ARBITRATOR" can be found in Section 6.9(b).
The definition of "FINANCIAL STATEMENTS" can be found in Section 3.1(e)(i).
The definition of "FUEL AND INVENTORY" can be found in Section 1.1(a)(x).
The definition of "GOVERNMENTAL ENTITY" can be found in Section 6.1(a).
The definition of "GP" can be found on page 1.
The definition of "HOLDINGS" can be found on page 1.
The definition of "HOLDINGS CONTRACTS" can be found in Section 1.1(a)(iii).
The definition of "HSR ACT" can be found in Section 4.1(g).
The definition of "INDEMNITEE" can be found in Section 6.1(b).
The definition of "INDEMNITOR" can be found in Section 6.1(c).
The definition of "IRS" can be found in Section 3.1(t)(ii).
The definition of "LEASED PROPERTIES" can be found in Section 1.1(a)(ii).
The definition of "LP" can be found on page 1.
The definition of "MULTIEMPLOYER PLAN" can be found in Section 3.1(t)(xxiv)(F).
<PAGE> 7
The definition of "NEGOTIATION PERIOD" can be found in Section 6.9(a).
The definition of "PARTNERSHIP" can be found on page 1.
The definition of "PBGC" can be found in Section 3.1(t)(ii).
The definition of "PENSION PLAN" can be found in Section 3.1(t)(xxiv)(G).
The definition of "PERMITS" can be found in Section 1.1(a)(ix).
The definition of "PERMITTED LIENS" can be found in Section 3.1(i).
The definition of "PERSON" can be found in Section 9.11.
The definition of "PERSONAL PROPERTY" can be found in Section 1.1(a)(viii).
The definition of "PREVAILING PARTY" can be found in Section 9.15.
The definition of "PROPERTY TAXES" can be found in Section 1.5.
The definition of "PROPRIETARY INFORMATION" can be found in Section 7.11(a).
The definition of "PROXY STATEMENT" can be found in Section 4.1(f).
The definition of "PURCHASE PRICE" can be found in Section 1.3(a).
The definition of "PURCHASER" can be found on page 1.
The definition of "PURCHASER LOSSES" can be found in Section 6.2.
The definition of "PURCHASER'S COMMON STOCK" can be found in Section 8.4.
The definition of "REAL PROPERTIES" can be found in Section 1.1(a)(ii).
The definition of "REAL ESTATE LEASES" can be found in Section 3.1(o)(i)(A).
The definition of "RECORDS" can be found in Section 1.1(a)(vii).
The definition of "REGULATIONS" can be found in Section 3.1(j).
The definition of "SELLER" can be found on page 1.
The definition of "SELLER LOSSES" can be found in Section 6.3.
The definition of "SELLER'S DOCUMENTS" can be found in Section 3.1(b).
The definition of "STOCK" can be found in Section 1.1.
The definition of "TAX RETURNS" can be found in Section 3.1(f).
The definition of "TAXES" can be found in Section 3.1(f).
The definition of "THIRD PARTY CLAIMS" can be found in Section 6.4(b).
The definition of "TRANSITION PERIOD" can be found in Section 7.9.
The definition of "VEBA" can be found in Section 3.1(t)(iv).
The definition of "VEHICLE LEASES" can be found in Section 1.1(a)(v).
The definition of "WARN" can be found in Section 7.1(a).
The definition of "WELFARE PLAN" can be found in Section 3.1(t)(xxiv)(H).
<PAGE> 8
PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (the "AGREEMENT"), dated as of the 23rd day of
December, 1996 (the "EFFECTIVE DATE"), is entered into by and between Pride
Petroleum Services, Inc., a Louisiana corporation ("SELLER"), and Dawson
Production Services, Inc., a Texas corporation ("PURCHASER").

RECITALS:

A. Seller is engaged in the domestic, onshore well servicing
business (the "BUSINESS") as well as several other related business activities;

B. Purchaser is engaged in the business of oil well servicing;

C. The respective Boards of Directors of Purchaser and Seller
have approved this Agreement and the transactions contemplated by this
Agreement;

D. Purchaser and Seller have entered into that certain
Confidentiality Agreement dated November 13, 1996;

E. Seller proposes to restructure its ownership of the Business
as set forth on SCHEDULE 1, with the result that the Business will be held,
directly or indirectly, by a corporate subsidiary of Seller ("GP") and by a
limited partnership ("PARTNERSHIP" and, together with GP, "HOLDINGS"), with GP
as the general partner of the Partnership and a wholly owned corporate
subsidiary of Seller ("LP") as the limited partner of the Partnership; and

F. Subject to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth, Seller desires
to sell and Purchaser desires to purchase all of the issued and outstanding
equity interests in Holdings, which will at the Closing (as defined herein)
own, directly or indirectly, the Business and substantially all of the assets
now owned by Seller or acquired by Seller prior to Closing and used primarily
in the Business.

NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements contained in this
Agreement, and intending to be legally bound by this Agreement, the parties
agree as follows:

ARTICLE I - PURCHASE AND SALE

1.1 AGREEMENT TO SELL. At the Closing (as defined in Section
2.1), and except as otherwise specifically provided in this Section 1.1, Seller
and LP shall grant, sell, convey, assign, transfer and deliver to Purchaser,
upon and subject to the terms and conditions of this Agreement, all right,
title and interest of Seller and LP in and to all of the issued and outstanding
equity
<PAGE> 9
interests in Holdings (collectively, the "STOCK"), consisting of (1) all of the
issued and outstanding capital stock of GP, which shall be sold to Purchaser by
Seller, and (2) all of the limited partnership interest in the Partnership,
which shall be sold to Purchaser by LP. At the Closing, such limited
partnership interest shall constitute the entire limited partnership interest
in the Partnership, and the general partnership interest in the Partnership
held by GP shall constitute the entire general partnership interest in the
Partnership. At the Closing, Holdings, directly or indirectly, shall own: (a)
the Business as a going concern, and (b) all of the assets, properties and
rights of Seller and Holdings constituting the Business or used primarily
therein, of every kind and description, real, personal and mixed, tangible and
intangible, wherever situated (which Business, assets, properties and rights
are herein sometimes collectively referred to as the "ASSETS"), free and clear
of all mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever except Permitted Liens
(as defined in Section 3.1(i)).

(a) Included Assets. The Assets shall include, without
limitation, the following assets, properties and rights of Seller and Holdings
used in the conduct of, or generated by or constituting the Business, except as
otherwise expressly excluded pursuant to Section 1.1(b):

(i) all interests of Seller and Holdings in all
real properties that are owned by Seller or Holdings and used primarily in
connection with the Business which are identified in SCHEDULE 1.1(A)(I) (the
"FEE PROPERTIES");

(ii) all of Seller's and Holdings' interests as
lessee in all real property and offices leased or subleased to Seller or
Holdings and used primarily in connection with the Business, which are
identified in SCHEDULE 1.1(A)(II) (the "LEASED PROPERTIES" and, together with
the Fee Properties, the "REAL PROPERTIES");

(iii) those Contracts (as hereinafter defined),
including purchase orders and noncompetition agreements, but exclusive of all
leases of personal property, to which Seller or Holdings is a party described
in SCHEDULE 1.1(A)(III), together with all Contracts that are entered into by
Seller or Holdings as part of the Business in the ordinary course of business
after the Effective Date and are not prohibited by this Agreement
(collectively, the "HOLDINGS CONTRACTS");

(iv) all of Seller's and Holdings' rights in and
to operating leases of personal property used primarily in connection with the
Business other than vehicles, all of which are described in SCHEDULE
1.1(A)(IV), together with all such leases that are entered into by Seller or
Holdings as part of the Business in the ordinary course of business after the
Effective Date that are not prohibited by this Agreement (the "EQUIPMENT
LEASES"), subject to the consents of lessors, if required;

(v) all of Seller's rights in and to the vehicles
identified in and subject to the vehicle leases listed on SCHEDULE 1.1(A)(V)
(the "VEHICLE LEASES");

2
<PAGE> 10
(vi) all office furniture, fixtures and equipment
owned by Seller and Holdings and all other equipment, parts, materials,
supplies, furniture and fixtures owned by Seller or Holdings, in either case
used primarily in connection with the Business including, without limitation,
the equipment, furniture, fixtures, computers, servers, local area network
systems, intranet systems, electronic mail and financial accounting equipment,
software and systems described on SCHEDULE 1.1(A)(VI) (collectively, the
"EQUIPMENT");
(vii) except for materials relating to Excluded
Assets, litigation, Employee Benefit Plans, and other matters not constituting
part of the Assets, originals or (at Seller's election) copies of all books,
records, correspondence, files, plans and other documents and instruments of
Seller or Holdings used primarily in connection with the Business, including
software, financial and accounting systems and records, information technology
systems and management information systems, and customer files related to the
Business or to the Assets (collectively, the "RECORDS");

(viii) all other intangible and tangible personal
property, all technologies, methods, formulations, data bases, trade secrets,
customer lists, know-how, inventions and other intellectual property used
primarily in connection with the Business or under development for use
primarily in connection with the Business, and owned, leased or licensed by
Seller or Holdings (collectively, the "PERSONAL PROPERTY");

(ix) any and all permits, authorizations,
certificates, approvals, registrations, or other approvals and licenses granted
by any federal, state, local or foreign court, arbitrator or administrative or
Governmental Entity (as hereinafter defined) in connection with the Business to
the extent transferrable (collectively, the "PERMITS");

(x) all motor fuel and inventory on hand on the
Closing Date used in connection with the Business, including without
limitation, all motor fuel, oil, lubricants, drilling mud and other items of
tangible personal property of similar character (collectively, the "FUEL AND
INVENTORY"); and

(xi) all of the corporate books and records of
Holdings.

(b) Excluded Assets. The Assets shall not include the
following: (i) Seller's corporate headquarters located at 1500 City West
Blvd., Suite 400, Houston, Texas or the furniture, fixtures, equipment,
software and systems or other tangible property located therein other than as
specifically listed in the Schedules to Section 1.1(a) above; (ii) certain rigs
and related equipment identified on SCHEDULE 1.1(B); (iii) corporate seals,
certificates of incorporation, minute books, stock books, or other records
having to do with the corporate organization of Seller, or any of its
subsidiaries other than Holdings and its subsidiaries; (iv) cash, the accounts
receivable of Seller or Holdings, Seller's or Holdings' prepaid items, and the
deposits listed on SCHEDULE 1.1(B); (v) Seller's name and service marks, or any
rights therein; and (vi) the rights which accrue or will accrue to Seller under
this Agreement, the rights to any of Seller's or Holdings' claims for any
federal, state, local, or foreign tax refunds arising prior to Closing,
Seller's financial and accounting records not relating to the Business or the
other assets, properties

3
<PAGE> 11
or rights described in SCHEDULE 1.1(B) (which Schedule may be modified prior to
Closing to exclude any Real Properties which Purchaser does not wish to
acquire), all of which are referred to in this Agreement as the "EXCLUDED
ASSETS."

1.2 AGREEMENT TO PURCHASE. At the Closing, Purchaser shall
purchase the Stock from Seller and LP, upon and subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of Seller contained herein, in exchange for the Purchase Price
(as defined in Section 1.3). In addition, Purchaser shall assume at the
Closing and agree to pay, discharge or perform, as appropriate, certain
liabilities and obligations of Seller or Holdings, but only to the extent
expressly provided in Section 1.4. Except as expressly provided in Section
1.4, Purchaser shall not assume or be responsible for any liabilities or
obligations based on events occurring prior to Closing relative to the Assets,
the Business, Seller or Holdings.

1.3 THE PURCHASE PRICE.

(a) Purchase Price. In consideration of the transfer to
Purchaser of the Stock, Purchaser shall pay to Seller and LP the aggregate
amount of $135,650,000 (the "PURCHASE PRICE"), which shall be paid by wire
transfer at the Closing; provided, however, the Purchase Price shall be
adjusted (by an adjustment in the amount wire transferred to Seller) by the
amount, if any, determined in accordance with Sections 1.5, 1.6, 1.7, and 7.2
of this Agreement. One percent of the Purchase Price shall be paid to Seller
and the balance to LP.

(b) Fair Market Value. The fair market value for federal
income tax purposes of the Assets shall be agreed to by the parties hereto
prior to the Closing Date. Seller and Purchaser each hereby covenant and agree
that such amounts reflect or will reflect the fair market value of the Assets
and that neither of them, directly or indirectly, through a subsidiary or
affiliate or otherwise, will take a position on any income tax return, before
any Governmental Entity charged with the collection of any income tax, or in
any judicial proceeding that is in any way inconsistent with the tax basis and
fair market value of the Assets set forth on SCHEDULE 1.3(B). Such allocations
will be reflected in the schedules required by Treasury Regulation Section
1.755-2T(c) to be attached to the returns of Purchaser and GP to reflect their
acquisition of interests in the Partnership.

(c) Federal Income Tax Elections. Purchaser and Seller
will join in making an election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended (the "CODE") with respect to the purchase and
sale of the stock of GP. Seller will pay all federal income taxes which result
from such election under Section 338(h)(10)(A)(ii) of the Code and Treasury
Regulation Section 1.338(h)(10)-1(e)(1). The Partnership will make an election
under Section 754 of the Code.

1.4 ASSUMPTION OF LIABILITIES.

(a) Except as otherwise specifically provided in this
Section 1.4, (i) in connection with the transfer of the Assets from Seller to
Holdings, Holdings shall assume and agree to pay, discharge or perform, as
appropriate, the liabilities and obligations of Seller (1) that

4
<PAGE> 12
accrue or arise after the Closing under the leases of the Leased Properties,
the Holdings Contracts, and the Equipment Leases and (2) those that are set
forth on SCHEDULE 1.4(A) (the "ASSUMED LIABILITIES"); and (ii) at the Closing,
Purchaser shall agree to cause Holdings to pay, discharge or perform, as
appropriate, the Assumed Liabilities.

(b) Notwithstanding Section 1.4(a), it is expressly
understood that, other than obligations and liabilities expressly assumed in
Section 1.4(a), Purchaser shall not be liable for, and shall not assume, any of
Seller's or Holdings' obligations or liabilities, whether known or unknown,
matured or unmatured, fixed or contingent, including but not limited to
liabilities relating to events occurring prior to the Closing, any Taxes (as
hereinafter defined, other than those prorated as of the Closing Date), or any
liabilities under any Employee Benefit Plans (as hereinafter defined) of Seller
or Holdings, it being expressly agreed that upon Closing, Seller shall remain
liable for all obligations of Holdings incurred prior to Closing, other than
Assumed Liabilities. Seller shall remain obligated to pay and discharge any of
its liabilities and obligations not expressly assumed hereby. Seller hereby
agrees that it will indemnify Purchaser as set forth in Section 6.2 for any
liabilities of Seller not expressly assumed by Purchaser pursuant to Section
1.4(a).

1.5 PRORATIONS. All annual or periodic ad valorem fees, taxes and
assessments, licensing fees and vehicle use fees, and similar charges imposed
by taxing authorities on the Assets (collectively, "PROPERTY TAXES") shall be
borne and paid (a) by Seller for all full tax years or periods ending before
the Closing Date (as defined in Section 2.1) and for that portion of any tax
year or period ending on or after the Closing Date from the date of
commencement of such year or period to the date immediately preceding the
Closing Date and (b) by Purchaser for all full tax years or periods beginning
on or after the Closing Date and for that portion of any tax year or period
ending on or after the Closing Date from and including the Closing Date to the
final date of such year or period, regardless of when or by which party such
Property Taxes are actually paid to the applicable taxing authority. In
addition, all rents and other lease charges, power and utility charges, license
or other fees, revenues on Holdings Contracts, and similar items shall be
allocated between Purchaser and Seller effective as of 12:01 a.m. on the
Closing Date. Such allocations shall be determined and payment accordingly
made from one party to the other, as the case may be, on the Closing Date to
the extent they are known and agreed to by Purchaser and Seller; otherwise such
allocations shall be determined and payment made (effective as of 12:01 a.m. on
the Closing Date) as soon as practicable. All work for customers of Seller
shall be performed for the account of Purchaser, and invoiced under the name of
Purchaser, effective as of 12:01 a.m. on the Closing Date, unless the Closing
does not occur.

1.6 TRANSFER TAXES; RECORDING FEES.

(a) Purchaser and Seller agree that Seller's sale and
Purchaser's purchase of the Stock is not subject to sales and use taxes in all
jurisdictions, and that all parties hereto shall treat the sale of Stock
provided for herein accordingly; provided, however, that if, contrary to the
foregoing, it shall be finally determined after the Closing that the sale by
Seller and the purchase by Purchaser of the Stock or any other transaction
consummated pursuant to the Closing, is

5
<PAGE> 13
subject to any sales, use or similar tax, then all such taxes shall be borne
equally by Purchaser and Seller.

(b) Purchaser shall pay any and all recording, filing or
other fees relating to the conveyance or transfer of (i) the Stock from Seller
and LP to Purchaser, or (ii) the Assets from Seller to Holdings.

1.7 CERTAIN ENVIRONMENTAL MATTERS. If prior to the Closing Date,
Purchaser determines pursuant to its investigation conducted in accordance with
Section 4.1(d) that, as a result of an environmental condition existing at any
one or more separate parcels of the Real Properties, Purchaser elects to cause
Holdings not to acquire any such parcel(s), Purchaser may give written notice
of such election and of the reasons therefor, in which case such parcel(s)
shall not be acquired by Holdings and shall be excluded from the Assets. Each
parcel excluded pursuant to this Section 1.7 is referred to herein as an
"EXCLUDED PARCEL." If any parcel of Real Property is so excluded, the Purchase
Price shall be reduced by the value relating to such Excluded Parcel that is to
be determined by the parties, in good faith, at or prior to Closing. In
addition to identifying a parcel of Real Property as an Excluded Parcel,
Purchaser at Closing also, in its sole discretion, shall be permitted to lease
such property from Seller with an option to purchase. Any such lease shall be
for a term of one year with an option for Purchaser to purchase the Real
Property at a value to be determined by the parties, in good faith, at or prior
to Closing. Rentals under any such lease shall be $100 per month for each such
parcel, plus taxes; any such lease shall not impose any obligations on
Purchaser to indemnify Seller with respect to pre-existing environmental
matters.

1.8 ADJUSTMENT FOR CERTAIN LIABILITIES. The Purchase Price set
forth in Section 1.3(a) was determined on the basis that Seller prior to the
Closing would fully pay (i) the Vehicle Leases and (ii) indebtedness evidenced
by a note dated on or about March 22, 1995, payable by Seller to Billy B.
Cooper and Raymond H. Eaves in the approximate outstanding amount of $3.9
million, secured by certain of the Assets, and that Purchaser and Holdings
would not be subject to any liability or obligation with respect to such
indebtedness from and after the Closing.

ARTICLE II - CLOSING, ITEMS TO BE DELIVERED,
THIRD PARTY CONSENTS AND FURTHER ASSURANCES

2.1 CLOSING. Subject to the terms and conditions of this
Agreement, the closing (the "CLOSING") of the sale and purchase of the Stock
shall take place at 10:00 a.m., local time, on such date as is mutually agreed
to by Purchaser and Seller but in no event later than two business days after
the date on which the conditions specified in Sections 5.1(j), 5.1(k), 5.2(e)
and 5.2(g) have been satisfied, at the offices of Jenkens & Gilchrist, A
Professional Corporation, 1100 Louisiana, Suite 1800, Houston, Texas 77002, and
shall be effective as of 12:01 a.m. local time on such date. The effective
date of the Closing is sometimes herein referred to as the "CLOSING DATE."

6
<PAGE> 14
2.2 ITEMS TO BE DELIVERED AT CLOSING. In connection with the
Closing and subject to the terms and conditions contained in this Agreement:

(a) Seller shall deliver to Purchaser the following:

(i) at the Closing, stock certificates
representing all of the Stock of Holdings, together with properly executed
stock transfer powers in a form consistent with the provisions of this
Agreement and reasonably satisfactory to the parties hereto; copies of fully
executed instruments of conveyance evidencing that all of the Assets have been
transferred and conveyed to Holdings, including but not limited to bills of
sale with covenants of warranty of title in a form consistent with the
provisions of this Agreement and reasonably satisfactory to the parties hereto;
assignments in a form consistent with the provisions of this Agreement and
reasonably satisfactory to the parties hereto; warranty deeds (or special
warranty deeds if Seller acquired such property pursuant to a special warranty
deed) in a form consistent with the provisions of this Agreement and reasonably
satisfactory to the parties hereto; and other good and sufficient instruments
and documents of conveyance and transfer, in forms reasonably satisfactory to
Purchaser and its counsel, as shall be necessary and effective to evidence the
transfer and assignment to Holdings of all of Seller's right, title and
interest in and to the Assets; and

(ii) at the Closing or concurrently therewith at a
mutually agreed upon location, all of the certificates, certificates of title,
Contracts, customer lists, supplier lists, Equipment Leases, Real Estate
Leases, all correspondence, files, plans and other documents and instruments,
books, Records, and data belonging to Seller or Holdings which are part of the
Assets;

and simultaneously with such delivery, Seller shall take all steps as may be
reasonably required to put Purchaser in control of Holdings and to put Holdings
in actual possession and operating control of the Assets.

(b) Purchaser shall deliver to Seller, and in the case of
(i) to LP, the following:

(i) the wire transfer of the Purchase Price
(adjusted in accordance with Sections 1.5, 1.6, 1.7, and 7.2); and

(ii) a fully executed assignment of Contracts,
assignment of leases of Leased Properties, and assignment of Equipment Leases
in a form consistent with the provisions of this Agreement and reasonably
satisfactory to the parties hereto.

(c) At or prior to the Closing, the parties hereto also
shall deliver to each other the agreements, opinions, certificates and other
documents and instruments referred to in Article V.

2.3 THIRD PARTY CONSENTS. To the extent that Seller's or
Holdings' rights under any Contracts, Authorizations (as defined in Section
3.1(j)), Permits, Equipment Leases, Real Estate Leases, or other Assets may not
be transferred in accordance with the terms of this Agreement

7
<PAGE> 15
without the consent of another person, which consent has not been obtained
prior to the Closing, this Agreement shall not constitute an agreement to
assign or transfer the same if an attempted assignment or transfer would
constitute a breach thereof or be unlawful, and Purchaser and Seller, each at
its own expense, shall use commercially reasonable efforts to obtain any such
required consent(s) as promptly as possible. If any such consent shall not be
obtained or if any attempted assignment or transfer would be ineffective or
would impair Holdings' rights under the Asset in question so that Holdings
would not in effect acquire the benefit of all such rights, Seller, to the
maximum extent permitted by law and by the terms of any documents affecting the
Asset, shall act for one year after the Closing as Holdings' agent in order to
obtain for Holdings the benefits thereunder and shall cooperate, to the maximum
extent permitted by law and by the terms of any document affecting the Asset,
with Purchaser in any other reasonable arrangement designed to provide such
benefits to Holdings. Seller agrees to pay any termination or assignment fees
provided in such agreements.

2.4 FURTHER ASSURANCES. Seller from time to time after the
Closing, at Purchaser's request, will execute, acknowledge and deliver to
Purchaser such other instruments of conveyance and transfer and will take such
other actions and execute and deliver such other documents, certifications and
further assurances as Purchaser reasonably may request in order to vest more
effectively in Holdings, or to put Holdings more fully in possession of, any of
the Assets, or to better enable Holdings to complete, perform or discharge any
of the liabilities or obligations assumed by Holdings at the Closing pursuant
to Section 1.4. Each of the parties will cooperate with the other and execute
and deliver to the other parties hereto such other instruments and documents
and take such other actions as reasonably may be requested from time to time by
the other party hereto as necessary to carry out, evidence and confirm the
intended purposes of this Agreement. If Seller dissolves or is merged out of
existence within one year following the Closing Date, effective as of the
dissolution of Seller, Seller hereby irrevocably appoints Purchaser or
Purchaser's substitute as its attorney-in-fact coupled with an interest and
with full power of substitution to carry out the provisions of this Section

2.5 CONDITIONS OF ASSETS. The Assets acquired by Purchaser as a
result of Purchaser's acquisition of the Stock, shall be acquired on an "AS IS,
WHERE IS" basis. Title, possession and risk of loss with respect to the Assets
shall be deemed to pass on the Closing Date.

ARTICLE III - REPRESENTATIONS AND WARRANTIES

3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents and warrants to Purchaser that the following statements are true and
correct, except as set forth on the Schedules. Unless the context clearly
indicates otherwise, references in this Agreement to Seller shall include
Seller, Holdings and LP prior to Closing.

(a) Corporate Existence. Seller is and, prior to
Closing, GP will be a corporation duly organized, validly existing and in good
standing under the laws of Louisiana and Delaware, respectively, and the
Partnership will be a limited partnership duly organized and validly existing;
Seller is and, prior to Closing, Holdings will be duly qualified to do business
and

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<PAGE> 16
in good standing as a foreign corporation, and the Partnership will be duly
qualified to do business in Texas and in each other jurisdiction where the
conduct of the Business by it requires it or them to be so qualified, all of
which jurisdictions are listed on SCHEDULE 3.1(A).

(b) Corporate Power; Authorization; Enforceable
Obligations. Seller has the corporate power and authority to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by Seller have been duly authorized by all necessary corporate action
as of the Closing Date. This Agreement has been, and the other agreements,
documents and instruments required to be delivered by Seller in accordance with
the provisions hereof (collectively, the "SELLER'S DOCUMENTS") will be, duly
executed and delivered on behalf of Seller by duly authorized officers or
directors of Seller, and this Agreement constitutes, and the Seller's Documents
when executed and delivered will constitute, the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with their
respective terms except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, or other laws affecting the enforcement of
creditors' rights generally and the application of general principles of
equity. Seller's Board of Directors has approved this Agreement and the
transactions contemplated hereby.

(c) Validity of Contemplated Transactions, Etc. The
execution, delivery and performance of this Agreement by Seller does not and
will not violate, conflict with or result in the breach of any material term,
condition or provision of, or require the consent of any other person under:

(i) any Regulation (as hereinafter defined) to
which Seller is subject other than filings required under the HSR Act and the
Securities Exchange Act of 1934, as amended,

(ii) any judgment, order, writ, injunction, decree
or award of any court, arbitrator or Governmental Entity which is applicable to
Seller,

(iii) the charter documents of Seller or any
securities issued by Seller, or

(iv) any material mortgage, indenture,
undertaking, note, bond, debenture, letter of credit, commitment, agreement,
contract, lease, Authorization, Holdings' Contract (including but not limited
to the Equipment Leases) or other instrument, or understanding, whether or not
assigned hereby (collectively, the "CONTRACTS"), by which Seller may have
rights or by which any of the Assets may be bound or affected.

No fact or condition exists which would give any party to a Contract the right
to terminate, modify, accelerate or otherwise change the existing rights or
obligations of Seller or Holdings in or to any material Asset. Except as
aforesaid, no Authorization, approval or consent of, and no registration or
filing with, any Governmental Entity is required in connection with the
execution, delivery or performance of this Agreement by Seller.

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<PAGE> 17
(d) No Third Party Options. No person has any existing
agreements, options, commitments or rights to acquire any of the Assets or any
interest therein.

(e) Financial Statements.

(i) Seller has delivered to Purchaser copies of
balance sheets relating to the Business at December 31, 1994 and December 31,
1995 and related statements of income, cash flows, and owner's equity for the
fiscal years then ended and for the fiscal year ended December 31, 1993,
audited and reported upon by Coopers & Lybrand. Seller also has delivered to
Purchaser certain unaudited financial information of the Business as of and for
the nine months ended September 30, 1995, and September 30, 1996. Upon the
Effective Date or promptly thereafter as soon as they are available, Seller
will deliver to Purchaser the unaudited monthly statements of income for the
month ended October 31, 1996 and for each month thereafter until the Closing
relating to the Business. Such unaudited financial statements will contain all
adjustments, which shall be solely of a normal recurring nature, necessary to
present fairly, in all material respects, the results of operations for the
period then ended. The monthly unaudited financial statements described above
shall also set forth for each such period the amount of maintenance capital
expenditures, and maintenance and repairs, recorded for such period with
respect to the Business. All of the above mentioned financial statements shall
be referred to herein as the "FINANCIAL STATEMENTS."

(ii) The balance sheet as of September 30, 1996
(the "BALANCE SHEET") includes the Assets which, if the Closing had been held
on September 30, 1996 (the "BALANCE SHEET DATE"), would have been held directly
or indirectly by Holdings in accordance herewith.

(iii) The Financial Statements fairly present, in
all material respects, as of their respective dates, the financial position,
assets and liabilities (whether accrued, absolute, contingent or otherwise) of
the Business. The monthly, unaudited financial information referred to above
fairly presents, and shall fairly present, in all material respects, the
operating income of the Business for such periods. The property, plant and
equipment shown as belonging to the Business in the Balance Sheet fairly
reflects and at the Closing will fairly reflect in all material respects the
Assets being acquired hereunder and necessary to conduct the Business, subject
to acquisitions and dispositions thereof subsequent to the Balance Sheet Date
not prohibited by this Agreement.

(f) Taxes; Tax and Other Returns and Reports. All
federal, state, local and foreign tax returns, reports, statements and other
similar filings required to be filed by Seller or to be filed by Holdings or LP
and affecting the Assets or the Business (the "TAX RETURNS") with respect to
any federal, state, local or foreign taxes, assessments, interest, penalties,
deficiencies, fees, duties and other governmental charges or impositions
(including without limitation all income tax, unemployment compensation, social
security, payroll, sales and use, excise, gross receipts, value-added,
privilege, property, ad valorem, franchise, license, school transfer, mortgage
recording, customs, withholding, estimated and other tax or similar
governmental charge or imposition under laws of the United States or any state,
county, or municipal entity, agency or instrumentality or political subdivision
thereof or any foreign country or political

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<PAGE> 18
subdivision thereof) insofar as same may affect the Assets or the Business (the
"TAXES") have been timely filed with the appropriate governmental agencies in
all jurisdictions in which such Tax Returns are required to be filed, and all
such Tax Returns properly reflect the liabilities of Seller or Holdings for
Taxes for the periods, property and events covered thereby. All Taxes,
including, without limitation, those which are called for by the Tax Returns,
have been properly accrued or timely paid. Purchaser will have no liability to
any person or taxing authority for Taxes relating to actions or events
occurring prior to the Closing Date, except as otherwise provided by Section
1.5. Seller's warranties and representations under this Section 3.1(f) shall
be construed consistently with Section 1.5.

(g) Books of Account. The books, records and accounts of
Seller and Holdings maintained with respect to the Business and the Assets
fairly reflect, in all material respects and in reasonable detail, the
transactions and the assets and liabilities of Seller and Holdings with respect
to the Business.

(h) Existing Condition. Since the Balance Sheet Date,
neither Seller nor Holdings has entered into any transaction affecting the
Business or the Assets except in the ordinary course of business, consistent
with past practice; encumbered or transferred any material assets which would
have been included in the Assets if the Closing had been held on the Balance
Sheet Date or on any date since then except in the ordinary course of business,
consistent with past practice; subjected any of its Assets to any lien or other
encumbrance of any nature whatsoever, except in the ordinary course of
business, consistent with past practice, and except for Permitted Liens
(defined in Section 3.1(i)); made any amendment or termination of any material
agreement affecting the Business or the Assets, or canceled, modified or waived
any rights of substantial value affecting the Business or the Assets, whether
or not in the ordinary course of business; changed any of the accounting
principles followed by it or the methods of applying such principles; increased
the compensation of any Affected Employee (as hereinafter defined) other than
in the ordinary course of business; or suffered any loss, whether or not
covered by insurance, materially and adversely affecting the Business or
Assets.

(i) Title to Properties. Notwithstanding anything herein
to the contrary, Seller has at the Effective Date and Holdings will have on the
Closing Date, good, valid and marketable title (or in the case of real
property, indefeasible title) to all of its assets, real, personal and mixed,
which would be included in the Assets if the Closing took place on the date
hereof, which it purports to own, including without limitation all assets
reflected in the Balance Sheet, free and clear of all liens (including but not
limited to Tax liens), claims, restrictions and other encumbrances and defects
of title of any nature whatsoever, except for (i) liens for current real or
personal Property Taxes not yet due and payable; (ii) Real Properties as to
which Seller or Holdings is the lessee; (iii) liens and other exceptions to
title as disclosed in SCHEDULE 3.1(I); (iv) inchoate mechanics' and
materialmen's liens for construction in progress; (v) inchoate workmen's,
repairmen's, warehousemen's, customers', employees' and carriers' liens arising
in the ordinary course of business; (vi) liens and imperfections of title
(including liens created by operation of law) that, singularly or in the
aggregate, would not materially affect the value or operations of the Assets
subject to such lien in the hands of a purchaser thereof; and (vii) liens
securing obligations included in the Assumed Liabilities (collectively,
"PERMITTED LIENS").

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<PAGE> 19
(j) Compliance with Laws; Authorizations. Seller and
Holdings have complied in all material respects with each, and are not in
material violation of any, law, ordinance or governmental or regulatory rule or
regulation, whether federal, state, local or foreign, to which the Business or
Assets is subject ("REGULATIONS"). Seller on the Effective Date and Holdings
on the Closing Date owns, holds, possesses or lawfully uses or will own, hold,
possess or lawfully use in the operation of the Business, all permits,
franchises, licenses, easements, rights, applications, filings, registrations
and other authorizations ("AUTHORIZATIONS") which are in any material respect
necessary for it to conduct its Business as now conducted or for the ownership
and use of the Assets in the conduct of the Business. Seller is and at the
Closing Date, Holdings will be in compliance in all material respects with all
Regulations related to the Authorizations. Seller is not in material default,
and on the Closing Date Holdings will not be in material default, nor has
Seller received any notice of any claim of material default, with respect to
any such Authorization. Seller has not received any notice that any of the
material Authorizations used by Seller or to be used by Holdings in the
operation of the Business would not or cannot be renewed or continued in the
ordinary course of business, and to Seller's knowledge, all such material
Authorizations are renewable by their terms or in the ordinary course of
business. No person other than Seller owns or has any proprietary, financial
or other interest (direct or indirect) in any Authorization.

(k) Transactions With Affiliates. Any material
transactions between Seller and its affiliates affecting the Business or the
Assets and occurring since January 1, 1995 have been upon terms substantially
comparable to those that would have been available to Seller from third parties
in arms length transactions.

(l) Litigation. As of the date hereof, except as set
forth on SCHEDULE 3.1(L), and except for insured claims subject to customary
deductibles, no litigation or administrative proceeding, including any
arbitration, investigation or other proceeding of or before any court,
arbitrator or Governmental Entity is pending or, to the best knowledge of
Seller, threatened against Seller, which relates to the Business or Assets or
the transactions contemplated by this Agreement, nor does Seller know of any
reasonably likely basis for any such litigation, arbitration, investigation or
proceeding. As of the date hereof, Seller is not a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or Governmental Entity which may materially adversely affect
the Assets or Business, or the transactions contemplated hereby.

(m) Contracts and Commitments. Except as set forth on
SCHEDULE 3.1(M), Seller is not a party to, and at Closing, Holdings will not be
a party to any written or oral:

(i) lease under which Seller or Holdings is
either lessor or lessee relating to the Assets or any property at which the
Assets are located other than those set forth on the Schedules to this
Agreement;

(ii) Contract or agreement for any capital
expenditure or leasehold improvement in excess of $100,000 relating to the
Assets or the Business; or

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<PAGE> 20
(iii) Contract or agreement limiting or restraining
Seller or Holdings, or their respective successors or assigns, from engaging or
competing in any manner in the Business.

Each of the Contracts and agreements listed in SCHEDULE 3.1(M), and each other
Holdings Contract, including but not limited to Equipment Leases under which
Purchaser is to acquire rights or obligations hereunder, is valid and
enforceable in accordance with its terms; Seller is, and to Seller's knowledge
all other parties thereto are, in material compliance with the provisions
thereof; Seller is not, and to Seller's knowledge no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein; and to Seller's knowledge
no event has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder. Furthermore, Seller is
not aware of any reason that Seller or any other party will be unable to comply
with any of the requirements contained in any such Contract or agreement.

(n) Environmental Matters. Except as set forth in
SCHEDULE 3.1(N), Seller with respect to the Assets (a) is, and has continuously
been, in compliance in all material respects with all laws, regulations and
ordinances relating to environmental, health and safety matters (including
those relating to toxic and hazardous waste and the discharge of matter into
the air or water) and (b) have not had any Contaminant (as hereinafter defined)
placed, held, located, released, generated, treated, stored or disposed of
thereon except for Contaminants properly and legally stored or disposed of in
compliance with applicable environmental laws or as would not have a material
adverse effect. Except as set forth in SCHEDULE 3.1(N), Seller has not
received any notice or claim, and Seller is not aware of any facts suggesting,
that it has been or may be liable to any person as a result of any Contaminant
having been generated, treated, stored, discharged, emitted, released or
transported by it with respect to the Business or the Assets that would have a
material adverse effect on the Assets or the Business. Except as set forth in
SCHEDULE 3.1(N), no conditions or circumstances are known to Seller to exist or
to have existed, and no activities are known to Seller to be occurring or to
have occurred, that are resulting or have resulted in the exposure of any
person or property to a Contaminant such that Seller, or after Closing,
Holdings or Purchaser may in the future be liable to such persons or to the
owners of such property for personal or other injuries or damages resulting
from such exposure. For purposes of this Agreement, a "CONTAMINANT" is any
waste, pollutant, hazardous substance, toxic substance, hazardous waste,
special waste, petroleum-based substance or waste, product or by-product or any
constituent of any said substance, waste or product, whether solid, liquid or
gaseous in form.

(o) Real Properties.

(i) Real Estate Leases.

A. Seller has delivered to Purchaser a
true and complete copy of every real estate lease and sublease that is in
writing to which Seller is a tenant or subtenant as to each of the Leased
Properties described on SCHEDULE 1.1(A)(II) (the "REAL ESTATE LEASES").

B. Each Real Estate Lease is, and at
Closing shall be, in full force and effect and has not been assigned, modified,
supplemented or amended except as listed

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<PAGE> 21
in SCHEDULE 1.1(A)(II) or SCHEDULE 3.1(O), and no party to any Real Estate
Lease is in material default under any of the Real Estate Leases, and, other
than provisions in the Real Estate Leases permitting termination without cause,
no circumstances or state of facts presently exists which, with the giving of
notice or passage of time, or both, would permit the landlord, lessee or
sublessee under any Real Estate Lease to terminate any Real Estate Lease.

C. Prior to Closing, Seller shall
assign to Holdings all right, title and interest of Seller in and to all Real
Estate Leases and shall deliver to Purchaser originals or copies of all
consents required for such assignments. All security deposits made by Seller
or Holdings pursuant to any of the Real Estate Leases, including but not
limited to the security deposits pertaining to the Real Estate Leases listed in
SCHEDULE 3.1(O), together with all interest earned on such deposits shall be
retained by Holdings at and following the Closing.

(ii) Zoning. To the best of Seller's knowledge,
the Real Properties, as used at the date of execution of this Agreement, until
and including the Closing Date, are in material compliance with all applicable
zoning and other land use requirements.

(iii) Access. Seller has obtained all material
Authorizations and rights-of-way, including proof-of-dedication, which are
necessary to ensure vehicular and pedestrian ingress and egress to and from the
Real Properties. To the best of Seller's knowledge, there are no material
restrictions on entrances to or exits from the Real Properties to adjacent
public streets and no conditions exist which will result in the termination of
the present access from the Real Properties to existing highways and roads.

(iv) Assessments. Neither Seller nor Holdings has
received any written notice from any Governmental Entity that the assessed
value of any of the Real Properties has been determined to be materially
greater than that upon which county, township or school tax was paid for the
1995 tax year. If, at the time of Closing, the Real Properties or any portion
thereof are affected by any assessment which is or may become payable in annual
installments, of which one or more is then payable or has been paid, then for
the purpose of this Agreement, all the unpaid installments of any such
assessment including without limitation those which are to become due and
payable after Closing, shall be prorated in accordance with Section 1.5.

(v) Eminent Domain. Neither Seller nor Holdings
has received any written notice and neither of them has any reason to believe
that any Governmental Entity having the power of eminent domain over the Real
Properties has commenced or intends to exercise the power of eminent domain or
a similar power with respect to any part of the Real Properties that in the
aggregate is material to the Business.

(vi) No Violations. The Real Properties and the
present uses thereof comply in all material respects with all regulations of
the Governmental Entities having jurisdiction over the Real Properties, and
neither Seller nor Holdings has received any written notices from any
Governmental Entity, and neither of them has any reasonable basis upon which to
believe that the Real Properties or any improvements erected or situated
thereon, or the uses

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<PAGE> 22
conducted thereon, violate any regulations of any such Governmental Entity that
would have a material adverse effect on Purchaser.

(vii) Executory Contracts. Other than the Real
Estate Leases, Seller is not a party to or bound by, and at the Closing Date,
Holdings will not be a party to or bound by, any material executory contracts
for the operation, management or maintenance of the Real Properties.

(p) Availability of Documents. Seller has made available
to Purchaser copies of all of the Contracts, Permits, and licenses listed in
the Schedules. Seller will use its best efforts to obtain any such documents
not in its possession and promptly deliver same to Purchaser. Such copies are
true and complete and include all amendments, supplements and modifications
thereto or waivers currently in effect thereunder.

(q) Assets. Except as set forth in SCHEDULE 3.1(Q), and
except for working capital of Holdings and the other assets of Holdings
expressly excluded from the Assets pursuant to Section 1.1(b), the Assets on
the Closing Date will include all rights and properties reasonably necessary
for Purchaser or Holdings to continue to conduct the Business in the manner in
which it is conducted by Seller on the Effective Date, and no property excluded
or omitted from the Assets constitutes property or rights material to the
Business.

(r) Restrictions. Neither Seller nor Holdings is a party
to any material agreement, license, Permit, Authorization or other instrument
or, to the best of either of their knowledge, any understanding or oral
agreement, and neither Seller nor Holdings is subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree or
award, which materially adversely affects or materially restricts the Business
or Assets.

(s) Conditions Affecting the Business. Other than the
transactions contemplated by this Agreement and such conditions as may affect
as a whole the well servicing industry generally, there is no fact known to
Seller or Holdings which would materially adversely affect the Business
considered as a whole.

(t) Employee Benefit Plans.

(i) SCHEDULE 3.1(T) lists all Employee Benefit
Plans of Seller. Except for the plan maintained by Seller pursuant to Section
401(k) of the Code (the "401(K) PLAN"), Seller is not now a party to any
Pension Plan, and for the preceding five years has not been a party to any
Pension Plan subject to Title IV of ERISA. Seller is under no legal obligation
to create a new Employee Benefit Plan or, except as provided herein, amend an
existing Employee Benefit Plan in a manner that would have a material effect on
any Affected Employee, except as required by applicable law.

(ii) All material documents, including all
amendments thereto, with respect to each Employee Benefit Plan under which one
or more Affected Employees are, or are reasonably likely to be, participants
have been given to Purchaser or will be made available to

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<PAGE> 23
Purchaser prior to the Closing Date. Such documents include, but are not
limited to, the following documents to the extent material and applicable: plan
documents, trust agreements, insurance contracts, annuity contracts, fidelity
bonds and fiduciary liability policies and applications therefor, summary plan
descriptions, pending filings with, pending applications to and correspondence
with any Governmental Entity, unresolved disputed claims made by or against any
Employee Benefit Plan, investment manager and investment advisory contracts,
administration contracts, actuarial reports, audit reports, financial
statements, union contracts, agreements concerning plan mergers or transfers,
determination letters and private letter rulings from the Internal Revenue
Service ("IRS"), advisory opinion letters from the Department of Labor ("DOL")
or the Pension Benefit Guaranty Corporation ("PBGC"), prohibited transaction
exemptions, resolutions of the Board of Directors of Seller, minutes or other
records of the meetings of any plan committee, and current reports of trustees.

(iii) To the extent required under the terms of any
Employee Benefit Plan and applicable law, and otherwise only to the extent
Holdings shall determine in its sole discretion, Holdings shall adopt each
Employee Benefit Plan(s) for the benefit of Affected Employees prior to the
Closing Date, and Seller and Holdings shall not (except by operation of law)
terminate any adopted Employee Benefit Plan solely with respect to Affected
Employees prior to the Closing Date without providing prior written notice to
Purchaser; however, at the written request of Purchaser delivered within a
reasonable time prior to the Closing Date, Seller shall, or shall cause
Holdings to, terminate any one or more of such Employee Benefit Plans prior to
the Closing Date with respect to the participation of Holdings and, to the
extent possible under the terms of the Employee Benefit Plan, and applicable
law, the Affected Employees. All benefits earned or accrued by Affected
Employees under the 401(k) Plan, or the 401(k) Restoration Plan, if terminated
prior to the Closing Date, shall be fully vested. Seller shall cooperate with
Purchaser to the full extent reasonably possible to insure that Affected
Employees receive all of the benefits they have accrued under each Employee
Benefit Plan through the Closing Date. Without limitation, to the extent
Seller maintains an Employee Benefit Plan which provides coverage or benefits
to any Employee or such Employee's dependents with respect to medical expenses
incurred after the Employee terminates employment with Seller, other than
coverage or benefits provided solely as a result of compliance with Section
4980B of the Code, at any time through the Closing Date if such Employee
Benefit Plan is adopted by Holdings, Seller is legally entitled to cause
Holdings to terminate such post-termination of employment medical coverage or
benefits, with respect to all Affected Employees.

(iv) At the written request of Purchaser within a
reasonable time prior to the Closing Date, and upon agreement between Seller
and Purchaser with respect to Purchaser's reimbursement of Seller for the cost
hereof, and subject to the consents, if any, required of third parties, Seller
will allow Affected Employees to remain under Seller's medical plans and
related cafeteria plan for a period requested by Purchaser, not to exceed 30
days, after the Closing Date. Seller shall cause Holdings to withdraw as an
adopting employer in all Employee Benefit Plans as of the Closing Date (or, if
later, the applicable date under the preceding sentence). Seller, Holdings and
Purchaser shall cooperate in causing the separation of the portion of each
Employee Benefit Plan adopted by Holdings and continued after the Closing Date
attributable to Affected Employees from the corresponding Employee Benefit Plan
sponsored by Seller. Without limiting

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<PAGE> 24
the generality of the foregoing, Seller, Holdings, and Purchaser agree to
separate Seller's voluntary employee beneficiary association ("VEBA") trust
under which vacation benefits are paid, by transferring to a separate VEBA
trust maintained by Holdings as soon as practicable following the Closing Date,
$400,000 in cash.

(v) Except to the extent the following would not
have a material adverse effect on Purchaser, each person who has participated
in the operations of any Employee Benefit Plan has acted in accordance with the
material terms and conditions of such Employee Benefit Plan; and each Employee
Benefit Plan is now, and has always been established, maintained and operated
materially in accordance with all applicable laws (including but not limited to
ERISA and the Code), as well as materially in accordance with its plan
documents.

(vi) Except to the extent the following would not
have a material adverse effect on Purchaser, all communications to Affected
Employees with respect to each Employee Benefit Plan by any authorized person
have reflected accurately the documents and operations of such Employee Benefit
Plan, and no person has any material liability by reason of any communication
or failure to communicate with respect to or in connection with any Employee
Benefit Plan.

(vii) The 401(k) Plan is and always has been
qualified under Section 401 of the Code, and each trust maintained in
connection with such 401(k) Plan is and always has been tax exempt under
Section 501 of the Code. The IRS has issued a determination letter with
respect to the current version of the 401(k) Plan stating that such 401(k) Plan
is qualified.

(viii) The assets of all funded Employee Benefit
Plans that are not Pension Plans are held by entities that are and always have
been tax exempt under all applicable federal and state laws and, without
limitation, each VEBA which is intended to fund or implement any Welfare Plan
has received a favorable ruling or determination letter as to its tax-exempt
status.

(ix) Except as described in SCHEDULE 3.1(T), and
except with respect to taxes on benefits paid or provided, no material income,
excise or other tax or penalty (federal or state) has been waived or excused,
has been paid or is owed by any person (including but not limited to any
Employee Benefit Plan, any plan fiduciary and Seller) with respect to the
operations of, or any transactions with respect to, any Employee Benefit Plan.
No action has been taken, nor has there been any failure to take action, that
would subject Holdings to any material liability for any tax or penalty in
connection with any Employee Benefit Plan. No reserve for any taxes or
penalties has been established with respect to any Employee Benefit Plan, nor
has any advice been given to any person with respect to the need to establish
such a reserve.

(x) There are no agreements by Seller which
might, under any circumstances, result in payments to any Affected Employee who
is an officer, shareholder, or highly compensated individual within a period of
two years following the Closing Date of amounts which would constitute
"parachute payments" under Section 280G of the Code that are nondeductible to
Seller or subject to tax under Section 4999 of the Code.

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<PAGE> 25
(xi) All reports, forms, summaries, and other
documents required to be filed, or advisable to be filed, with any Governmental
Entity, or with any participant or beneficiary with respect to any Employee
Benefit Plan have been timely filed and are materially accurate.

(xii) Except as described in SCHEDULE 3.1(T) or
with respect to the filing of a Summary Plan Description, a Summary of Material
Modifications, an Annual Report, tax report, or a request for a determination
letter with respect to the qualified status of a Pension Plan, there have been
no written or oral communications with respect to any Employee Benefit Plan
with the IRS, DOL, or the PBGC.

(xiii) All contributions required to be made to or
with respect to each Employee Benefit Plan that are due have been completely
and timely made. All such contributions, and any further such contributions
paid prior to the Closing Date, have been, or will be, fully deducted by
Seller for federal and state income tax purposes; such deductions have not been
challenged or disallowed by any Governmental Entity; and Seller has no reason
to believe that such deductions are not allowable.

(xiv) All material benefits and other payments due
and payable under or by any Employee Benefit Plan have been completely and
timely paid.

(xv) Except as described in SCHEDULE 3.1(T), to
the best of Seller's knowledge, there has been no actual, anticipated,
threatened, or expected material actions, suits, or claims (other than routine
claims for benefits in the ordinary course), or arbitration, or any material
complaints to or by any Governmental Entity filed, threatened, or expected,
concerning or involving any Employee Benefit Plan, and, without limitation,
Seller has no knowledge of any facts which could give rise to any such actions,
suits, claims or complaints.

(xvi) No material claims have been made or are
expected to be made with respect to any bond or any fiduciary liability or
other similar insurance with regard to the actions of any person in connection
with any Employee Benefit Plan, nor has there been nor is there expected to be
any notice to any insurer under any such bond or policy with regard to any
Employee Benefit Plan. No application for any bond or fiduciary liability or
similar insurance policy with respect to any Employee Benefit Plan has been
rejected nor is any such bond or policy now subject to any qualification,
condition or exclusion.

(xvii) Holdings will be in material compliance with
all requirements of the continuation health care coverage requirements of
Section 4980B of the Code with respect to any Employee Benefit Plan adopted by
Holdings on or prior to the Closing Date.

(xviii) With respect to the 401(k) Plan and the
401(k) Restoration Plan, Seller's and/or Holdings' matching contribution shall
be made with respect to Affected Employee contributions through the Closing
Date. All financial reports and statements with respect to each Employee
Benefit Plan contain materially accurate statements of the financial condition
of such Employee Benefit Plan.

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<PAGE> 26
(xix) No events have occurred or are expected to
occur with respect to any Employee Benefit Plan that would cause a material
adverse effect on Holdings.

(xx) The cost of providing benefits under, and
paying liabilities of, each material Employee Benefit Plan with respect to
Affected Employees for 1996 will be provided prior to the Closing Date upon
written request. All additional direct or indirect costs with respect to
establishing or maintaining each Employee Benefit Plan (including but not
limited to legal fees, accounting fees, and administrative costs), to the
extent they can be allocated to Affected Employees, for 1996 will be made
available to Purchaser prior to the Closing Date upon written request. All of
the information in this subsection shall be based on the best reasonable
estimate of Seller.

(xxi) There have been no contributions to any
Employee Benefit Plan in any form other than cash, and there has been no
prohibited transaction (within the meanings of Section 406 of ERISA and Section
4975 of the Code) with respect to any Employee Benefit Plan which would
materially affect Holdings.

(xxii) With respect to any Employee Benefit Plan, no
insurance contract, annuity contract or other agreement or arrangement with any
financial or other organization would impose a penalty, discount or other
reduction on account of the withdrawal of assets from such organization or the
change in investment of such assets.

(xxiii) The name, address and telephone number of
each person who gives or has given material advice of any kind to or in
connection with each Employee Benefit Plan will be made available to Purchaser
prior to the Closing Date upon written request.

(xxiv) The following are definitions used primarily,
or exclusively, in this Section 3.1(t):

A. "AFFECTED EMPLOYEE" means every Employee
employed by Holdings on the Closing Date, and each former Employee, if any,
with respect to whom Holdings has assumed a direct or indirect liability,
responsibility, or employment relationship with under any contract, law or
Employee Benefit Plan.

B. "EMPLOYEE BENEFIT PLAN" means all present
plans, programs, agreements, arrangements, and methods of contribution or
compensation providing any remuneration or benefits, other than current cash
compensation, to any current or former Employee or to any other person who
provides services to Seller, whether or not such plan or plans, programs,
agreements, arrangements, and methods of contribution or compensation are
subject to ERISA, as hereinafter defined, and whether or not such plan or
plans, programs, agreements, arrangements and methods of contribution or
compensation are qualified under the Code; and such term includes, but is not
limited to plans which are, or are in the nature of pension, retirement, profit
sharing, stock bonus, 401(k), nonqualified deferred compensation, medical,
dental, workers' compensation, health insurance, life insurance, incentive,
compensation

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<PAGE> 27
for forgoing vacation benefits, and fringe benefits, but such term does not
include normal policies concerning holidays, vacations and salary continuations
during short absences for illness or other reasons, nor any Multiemployer Plan,
as hereinafter defined.

C. "EMPLOYEE" shall mean all current or former
officers, employees, consultants or others who are or were employed or
otherwise compensated by Seller, or any such person employed by an ERISA
Affiliate who is or becomes an Affected Employee.

D. "ERISA" means the Employee Retirement Income
and Security Act of 1974, as amended, and the regulations and rulings
thereunder.

E. "ERISA AFFILIATE" shall mean any person (as
defined in Section 3(9) of ERISA) (including each trade or business (whether or
not incorporated)) which is a member of a "controlled group" including, or
under common control with Seller or a Subsidiary of Seller within the meaning
of Sections 414(b) and (c) of the Code or Section 4001(a)(14) of ERISA, or an
affiliated service group under Section 414 of the Code.

F. "MULTIEMPLOYER PLAN" means a plan which is
described in Section 3(37) of ERISA.

G. "PENSION PLAN" means an Employee Benefit Plan
described in Section 3(2) of ERISA, and a Multiemployer Plan.

H. "WELFARE PLAN" means an Employee Benefit Plan
described in Section 3(1) of ERISA.

(u) Personnel. SCHEDULE 3.1(U) lists the names, years of
service, and current annual base rates of compensation for salaried, non-hourly
Affected Employees, and current hourly rates for hourly Affected Employees;
Seller will make available to Purchaser information concerning the bonus,
profit sharing, percentage compensation, automobile, club membership and other
like benefits, if any, paid or payable to Affected Employees during Seller's
1996 fiscal year and to the date hereof. SCHEDULE 3.1(U) also contains a list
of all written, and a brief description of all material terms of all oral,
employment agreements, severance agreements, confidentiality agreements,
noncompete agreements or similar agreements with Seller to which any Employee
is or may be subject. Seller has delivered to Purchaser accurate and complete
copies of all such agreements, and all other agreements, plans and other
instruments to which Seller is a party and under which Affected Employees
and/or sales representatives involved in the Business are entitled to receive
benefits of any nature. To Seller's knowledge, and except as set forth on
SCHEDULE 3.1(U), the employee relations of Seller are good and there is no
pending or threatened controversy, labor dispute or union organization campaign
between Seller and any Affected Employees. None of the Affected Employees or
sales representatives of Seller are represented by any labor union or
organization nor is Seller a party to any collective bargaining agreement.
Except as set forth on SCHEDULE 3.1(U) OR 3.1(L), Seller is in compliance in
all material respects with all federal and state laws respecting employment and
employment practices, terms and conditions of employment and wages and hours
and is not engaged in any unfair labor practices.

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<PAGE> 28
Except as set forth on SCHEDULE 3.1(U), there is no unfair labor practices
complaint or charge of employment discrimination pending, or threatened against
Seller with respect to an Affected Employee before the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any other state, federal
or local court or government board, agency or commission or any strike, labor
dispute, work slowdown or work stoppage pending or, to Seller's
knowledge,threatened against or involving Seller, and Seller has not
experienced any material labor dispute during the last three years. Seller
agrees that to the extent it has entered into confidentiality agreements,
noncompete agreements or similar agreements affecting the Business with
Employees who are not Affected Employees, it shall cooperate with Purchaser in
enforcing such agreements to the maximum extent permitted by law, subject only
to Purchaser reimbursing Seller for the cost, if any, incurred by Seller with
respect to such enforcement; provided, however, Seller shall not be obligated
to bring legal action to enforce any such agreements or to take action
materially detrimental to Seller and its other businesses.

(v) Condition of Rigs. Of the total of approximately 407
workover rigs to be owned by Holdings on the Closing Date, approximately 318
rigs have been operated within the 12 months preceding the Effective Date.

3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to Seller as follows:

(a) Corporation. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas.

(b) Corporate Power and Authorization. Purchaser has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by
Purchaser have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by Purchaser and constitutes the
legal, valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, or other laws affecting the enforcement
of creditors' rights generally and the application of general principles of
equity.

(c) Validity of Contemplated Transactions, Etc. The
execution, delivery and performance of this Agreement by Purchaser does not and
will not violate, conflict with or result in the breach of any material term,
condition or provision of, or require the consent of any other party under, (i)
any existing law, ordinance, or governmental rule or regulation to which
Purchaser is subject, (ii) any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory official, body or
authority which is applicable to Purchaser, (iii) the Articles of Incorporation
or Bylaws of, or any securities issued by, Purchaser, or (iv) any contract to
which Purchaser is a party or by which Purchaser is otherwise bound. Except as
otherwise contemplated by this Agreement, no Authorization, approval or consent
of, and no registration or filing with, any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement by
Purchaser.

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<PAGE> 29
(d) Financing. Purchaser intends to finance the
transactions contemplated hereby as set forth in Section 5.1(k), and reasonably
expects to be able to consummate such financing on terms acceptable to it.

3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. The
representations and warranties of the parties to this Agreement shall expire as
of the Closing except for the representations and warranties set forth in
Sections 3.1(a) (Corporate Existence), 3.1(b) (Corporate Power; Authorization;
Enforceable Obligations), 3.1(f) (Taxes; Tax and Other Returns and Reports),
3.2(b) (Corporate Power and Authorization), and 9.1 (Finders' Fees) which shall
survive the Closing Date. All covenants and agreements contained herein shall
survive without limitation. All representations, warranties, covenants and
agreements made by the parties shall not be affected by any investigation
heretofore or hereafter made by and on behalf of any of them and shall not be
deemed merged into any instruments or agreements delivered in connection with
this Agreement or otherwise in connection with the transactions contemplated
hereby.

3.4 REPRESENTATIONS BY SELLER REFER TO THE BUSINESS. Whether or
not so expressed, all representations and warranties of Seller herein relate
only to Holdings or to the Business or the Assets and not to any other
businesses or assets of Seller.

ARTICLE IV - AGREEMENTS PENDING CLOSING

4.1 AGREEMENTS OF SELLER PENDING THE CLOSING. Seller covenants
and agrees that, pending the Closing and except as otherwise agreed to in
writing by Purchaser:

(a) Business in the Ordinary Course. Except as otherwise
specifically provided herein, the Business shall be conducted solely in the
ordinary course consistent with past practice. Seller shall maintain its
capital expenditures and shall continue to maintain and service the physical
Assets used in the conduct of the Business consistent with Seller's past
practices. Seller shall not cause, or permit to occur to the extent Seller may
reasonably prevent, any of the events or occurrences described in Section
3.1(h) (Existing Condition). Seller shall use commercially reasonable efforts
to maintain in full force and effect all Authorizations currently in effect and
used in the conduct of the Business, and shall comply with all Regulations
applicable to the Business, the noncompliance with which might materially and
adversely affect the Business or the Assets. Seller shall not (i) sell any of
the Assets, (ii) enter into any Contract outside of the ordinary course of
business, (iii) amend, modify, terminate, waive any material provision of, or
breach any material Contract, or (iv) cancel, terminate or cause or allow to
lapse any insurance coverage affecting the Business or the Assets.

(b) Conduct of Business. Seller shall use commercially
reasonable efforts to conduct the Business in such a manner that on the Closing
Date the representations and warranties contained in this Agreement shall be
true, except as specifically contemplated by this Article IV, as though such
representations and warranties were made on and as of such date.

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<PAGE> 30
(c) Litigation. Between the Effective Date and the
Closing Date, Seller shall notify Purchaser of any and all pending or
threatened litigation and administrative proceedings, including any
arbitration, investigation or other proceeding of or before any court,
arbitrator or Governmental Entity which relates to the Business or Assets or
the transactions contemplated by this Agreement arising since the Effective
Date; Seller also will notify Purchaser if it becomes aware after the
Effective Date of any reasonably likely basis for any such litigation,
arbitration, investigation or proceeding, the result of which could adversely
affect the Assets or Business, or the transactions contemplated hereby.

(d) Access. Seller shall give to Purchaser's officers,
employees, counsel, accountants and other representatives reasonable access to
and the right to inspect, during normal business hours, all of the premises,
properties, Assets, Records, Contracts and other documents relating to
Holdings, the Business and the Assets and shall permit them to consult with the
officers, employees, accountants, counsel and agents of Seller for the purpose
of making such investigation of Holdings, the Business and the Assets as
Purchaser shall desire to make, provided that such investigation shall be at
Purchaser's sole cost and expense and shall not unreasonably interfere with
Seller's business operations. Without limitation, Seller shall permit Purchaser
to perform Phase I environmental testing (but not Phase II tests or any other
testing of the soil or any testing of groundwater without Seller's consent).
Furthermore, Seller shall furnish to Purchaser copies of all such documents,
Records and information with respect to Holdings, the Business and the Assets,
and copies of any internal financial records relating thereto as Purchaser
shall from time to time reasonably request and shall permit Purchaser and its
agents to make such physical inventories and inspections of the Assets as
Purchaser may reasonably request from time to time.

(e) Press Release. Upon the execution of this Agreement,
Seller shall cooperate with Purchaser in the drafting and issuance of a press
release concerning this Agreement. Except for such press release and
discussions with employees and customers as mutually agreed to by Seller and
Purchaser and except as required by applicable law, Seller shall not give
notice to third parties or otherwise make any public statement or releases
concerning this Agreement or the transactions contemplated hereby except for
such written information as shall have been approved in writing as to form and
content by Purchaser, which approval shall not be unreasonably withheld.

(f) Actions of Directors and Shareholders. If required
by law or by the rules of any stock exchange, Seller shall promptly and
diligently take all action necessary in accordance with law and its Articles of
Incorporation, Bylaws and other organizational documents to convene a meeting
of its shareholders promptly to consider and vote upon the approval of this
Agreement. The proxy statement (such proxy statement and the form of proxy,
including all amendments, supplements, or modifications thereto, being herein
referred to as the "PROXY STATEMENT") disseminated to its shareholders shall
contain the recommendation of the Board of Directors of Seller in favor of the
transaction contemplated hereby, and the Board of Directors of Seller shall
recommend that the shareholders vote to approve this Agreement. Seller shall
use reasonable efforts to solicit from its shareholders proxies in favor of
such adoption and approval and shall take all other action customary in
transactions of this nature in accordance with its organizational

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<PAGE> 31
documents and applicable law which is necessary to secure a vote of its
shareholders in favor of and to consummate this transaction.

(g) Hart-Scott-Rodino. Seller shall promptly make any
and all filings required to be made by Seller under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR ACT") with respect to the
transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain any consent, Authorization, order or approval of,
or any exemption from or termination of any applicable waiting periods required
by, any Governmental Entity or other public or private third party in
connection with the transactions contemplated by this Agreement.

(h) Employee Matters. Seller shall give Affected
Employees all notices required by law, including but not limited to notices of
their rights under the Comprehensive Omnibus Budget Reconciliation Act of 1986.

(i) Actions of Seller. Seller will not take any action
which would result in a material breach of any of its representations and
warranties hereunder. Furthermore, Seller shall cooperate with Purchaser and
use its best efforts to cause all of the conditions to the obligations of
Purchaser under this Agreement to be satisfied on or prior to and at the
Closing Date.

4.2 AGREEMENTS OF PURCHASER PENDING THE CLOSING. Purchaser
covenants and agrees that, pending the Closing and except as otherwise agreed
to in writing by Seller:

(a) Confidentiality. Until the Closing, Purchaser will
hold, and shall cause its counsel, independent certified public accountants,
appraisers and investment bankers and other representatives to hold, in
confidence any confidential data or information made available to Purchaser in
connection with this Agreement with respect to the Assets or Business in
accordance with the Confidentiality Agreement between Seller and Purchaser
dated November 13, 1996.

(b) Press Release. Upon the execution of this Agreement,
Purchaser shall cooperate with Seller in the drafting and issuance of a press
release concerning this Agreement. Except for such press release and
discussions with Affected Employees and customers as mutually agreed to by
Seller and Purchaser and except as required by applicable law, Purchaser will
not give notice to third parties or otherwise make any public statement or
releases concerning this Agreement or the transactions contemplated hereby
except for such written information as shall have been approved in writing as
to form and content by Seller, which approval shall not be unreasonably
withheld.

(c) Hart-Scott-Rodino. Purchaser shall promptly make any
and all filings required to be made by Purchaser under the HSR Act with respect
to the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain any consent, Authorization, order or approval of,
or any exemption from or termination of any applicable waiting periods required
by, any Governmental Entity or other public or private third party in
connection with the transactions contemplated by this Agreement.

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<PAGE> 32
(d) Actions of Purchaser. Purchaser will not take any
action which would result in a breach of any of its representations and
warranties hereunder. Furthermore, Purchaser shall cooperate with Seller and
use its best efforts to cause all of the conditions to the obligations of
Seller under this Agreement to be satisfied on or prior to the Closing Date.

ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING

5.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. The
obligations of Purchaser under this Agreement to purchase the Stock are subject
to the fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:

(a) Representations and Warranties True as of the Closing
Date. The representations and warranties of Seller contained in this Agreement
or in any Schedule, certificate or document delivered by Seller to Purchaser
pursuant to the provisions hereof shall have been true on the Effective Date
and shall be true on the Closing Date as though such representations and
warranties were made as of such date (except to the extent such representations
and warranties expressly speak only as of an earlier date), except where the
failure to be true (without giving effect to the individual materiality
qualifications and thresholds otherwise contained in Section 3.1) would not
have a material adverse effect on Holdings, the Stock, the Business or the
Assets.

(b) Compliance with this Agreement. Seller shall have
performed and complied in all material respects with all of its obligations
under this Agreement to be performed or complied with by it prior to or at the
Closing.

(c) Closing Certificate. Purchaser shall have received
certificates from Seller, dated the Closing Date, certifying in such detail as
Purchaser may reasonably request that the conditions specified in Sections
5.1(a), 5.1(b) and 5.1(h) have been fulfilled and certifying that Seller has
obtained all consents and approvals required by Section 5.1(g) with respect to
it or the Business.

(d) Opinion of Counsel for Seller. Baker & Botts,
L.L.P., outside counsel for Seller, shall have delivered to Purchaser a written
opinion, dated the Closing Date, in the form of EXHIBIT A with only such
changes as shall be in form and substance reasonably satisfactory to Purchaser
and its counsel. In rendering such opinion, Baker & Botts, L.L.P. may rely on
special Louisiana counsel as to all matters of Louisiana law relevant to such
opinion.

(e) Good Standing. Seller shall have delivered to
Purchaser a certificate issued by the appropriate Secretary of State evidencing
the good standing of Seller and Holdings, as of a date not more than five
calendar days prior to the Closing Date. Seller also shall have delivered to
Purchaser a certificate issued by the appropriate taxing authority evidencing
that all applicable corporate income and state franchise taxes have been paid.

(f) No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or injunction or final judgment
relating thereto, shall be threatened or be

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<PAGE> 33
pending before any Governmental Entity in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.

(g) Consents and Approvals. Consistent with Section 2.3,
Purchaser or Seller shall have obtained the consents of third parties relative
to Contracts, Authorizations, Permits, Equipment Leases, or Real Estate Leases
reasonably sufficient to permit Purchaser after the Closing to operate the
Business as previously operated by Seller, except as would not have a material
adverse effect.

(h) Material Adverse Changes. Neither Holdings, the
Assets nor the Business in the aggregate shall have been or shall be threatened
to be materially adversely affected in any way as a result of any event or
occurrence other than such conditions as may affect as a whole the well
servicing industry generally.

(i) Approval of Counsel; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved with respect to sufficiency and legal compliance on the Closing
Date by Jenkens & Gilchrist, A Professional Corporation, counsel for Purchaser,
in the exercise of its reasonable judgment. Seller also shall have delivered
to Purchaser such other documents, instruments, certifications and further
assurances as such counsel may reasonably require to enable such counsel to
pass on such matters.

(j) Hart-Scott-Rodino Approval. The waiting period
(including any extension thereof) applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have
expired or terminated.

(k) Financing. Purchaser shall have completed the offer
and sale, including the closing and funding thereof, of (i) newly issued senior
notes in the original principal amount of approximately $110,000,000, and (ii)
authorized but unissued shares of Purchaser's common stock in an amount
sufficient to raise gross proceeds to Purchaser of at least $50,000,000.

(l) Securities Filings. Purchaser shall have received
from Seller consolidated audited and unaudited financial statements for the
Business in compliance with the requirements for filing a Form 8-K with the
Securities and Exchange Commission and reasonable assurances from the
independent accountants performing such audits that they will, consistent with
their professional obligations, provide to Purchaser manually signed reports
and consents in the future as required under the rules of the Securities and
Exchange Commission.

5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The
obligations of Seller under this Agreement to sell the Stock are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:

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<PAGE> 34
(a) Representations and Warranties True as of the Closing
Date. The representations and warranties of Purchaser contained in this
Agreement or in any Schedule, certificate or document delivered to Seller by
Purchaser pursuant to the provisions hereof shall have been true on the
Effective Date and shall be true on the Closing Date as though such
representations and warranties were made as of such date (except to the extent
such representations and warranties expressly speak only as of an earlier
date).

(b) Compliance with this Agreement. Purchaser shall have
performed and complied with all obligations required by this Agreement to be
performed or complied with by it prior to or at the Closing.

(c) Closing Certificates. Seller shall have received a
certificate from Purchaser, dated the Closing Date, certifying in such detail
as Seller may reasonably request that the conditions specified in Sections
5.2(a) and 5.2(b) have been fulfilled.

(d) No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or injunction or final judgment
relating thereto, shall be threatened or be pending before any Governmental
Entity in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no investigations that might result in
any such suit, action or proceeding shall be pending or threatened.

(e) Consent of Shareholders. If required, the requisite
percentage of Seller's shareholders shall have approved the consummation of the
transactions contemplated by this Agreement in accordance with the requirements
of applicable law.

(f) Opinion of Counsel for Purchaser. Jenkens &
Gilchrist, A Professional Corporation, counsel for Purchaser, shall have
delivered to Seller a written opinion, dated the Closing Date, in the form of
EXHIBIT B with only such changes as shall be in form and substance reasonably
satisfactory to Seller and its counsel.

(g) Hart-Scott-Rodino Approval. The waiting period
(including any extension thereof) applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have
expired or terminated.

ARTICLE VI - INDEMNIFICATION

THE FOLLOWING SECTIONS ARE IMPORTANT AND
SHOULD BE READ CAREFULLY.

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<PAGE> 35
6.1 DEFINITIONS.

(a) "GOVERNMENTAL ENTITY" shall mean any arbitrator,
court, administrative or regulatory agency, commission, department, board or
bureau or body or other government or authority or instrumentality or any
entity or person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

(b) "INDEMNITEE" shall mean the person or persons
indemnified, or entitled or claiming to be entitled to be indemnified, pursuant
to the provisions of Article VI.

(c) "INDEMNITOR" shall mean the person or persons having
the obligation to indemnify pursuant to the provisions of Article VI.

6.2 INDEMNIFICATION BY SELLER. Except as otherwise limited by
this Article VI or by Section 3.3 (Survival of Representations and Warranties
and Covenants), Seller agrees to indemnify, defend and hold harmless Purchaser
and Holdings and each of its respective officers, directors, employees, agents,
shareholders and controlling persons, and their respective successors and
assigns, separate consideration for which is hereby acknowledged, of, from and
against and in respect of any and all liabilities, actions, lawsuits, conduct,
losses, damages, demands, assessments, claims, costs and expenses (including
interest, awards, judgments, penalties, settlements, fines, diminutions in
value, costs and expenses incurred in connection with investigating and
defending any claims or causes of action including reasonable attorneys' fees
and expenses and all reasonable fees and expenses of consultants and other
professionals) ("DAMAGES") actually suffered, incurred or realized by such
party (collectively, "PURCHASER LOSSES") arising out of or resulting from or
relating to any of the following:

(a) any misrepresentation, breach of warranty or breach
of any covenant or agreement made or undertaken by Seller in this Agreement or
any misrepresentation in or omission from any other agreement, certificate,
exhibit or writing delivered to Purchaser pursuant to this Agreement, including
the Schedules; provided that this clause shall apply with respect to any
misrepresentation, breach of warranty or omission if, but only if, the
representation, warranty or omission is set forth in a provision that survives
the Closing pursuant to Section 3.3;

(b) any Damages or Purchaser Losses (other than the
Assumed Liabilities) relating to Seller, Holdings, the Assets or the Business,
whether known or unknown, now existing or hereafter arising, contingent or
liquidated, (including without limitation, any Tax liabilities) accruing or
arising prior to the Closing Date; and

(c) any services provided by or on behalf of Seller or
Holdings on or prior to the Closing Date or with respect to any claims made
pursuant to warranties to third persons in connection with services provided by
or on behalf of Seller or Holdings on or prior to the Closing Date.

Notwithstanding the foregoing, Seller shall not be liable under clause (a) of
this Section 6.2 based upon a misrepresentation or breach of warranty or
omission unless and until the aggregate amount of any Purchaser Losses exceeds
$2.0 million at which time all Purchaser Losses in excess of such amount shall
be subject to indemnification by Seller; provided, however, (i) Seller's
liability under

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<PAGE> 36
Sections 6.2(b) and (c) shall not be so limited, and (ii) liability under
Section 6.2(a) shall not be so limited if such Purchaser Losses arise from
Seller's breach of any of the provisions set forth in Sections 3.1(b), 3.1(f),
or 9.1 of this Agreement.

6.3 INDEMNIFICATION BY PURCHASER. Except as otherwise limited by
this Article VI and Section 3.3 (Survival of Representations and Warranties and
Covenants), Purchaser agrees to indemnify, defend and hold Seller and each of
its officers, directors, employees, agents, shareholders and controlling
persons and its successors and assigns harmless from and against and in respect
of any and all Damages actually suffered, incurred or realized by such party
(collectively, "SELLER LOSSES") arising out of or resulting from any of the
following:

(a) any misrepresentation, breach of warranty or breach
of any covenant or agreement made or undertaken by Purchaser in this Agreement
or any misrepresentation in or omission from any other agreement, certificate,
exhibit or writing delivered to Seller pursuant to this Agreement; provided
that this clause shall apply with respect to any misrepresentation, breach of
warranty or omission if, but only if, the representation, warranty or omission
is set forth in a provision that survives the Closing pursuant to Section 3.3;

(b) any Assumed Liability;

(c) conduct of the Business or the ownership or operation
of the Assets or Holdings on or after the Closing Date, or any other action by
Purchaser or any affiliate of Purchaser (including Holdings after the Closing)
related to the Business or the Assets; or

(d) the application of WARN (as hereinafter defined) to
Seller as a result of the impact on the Affected Employees of the transactions
contemplated by this Agreement.

6.4 PROCEDURE. All claims for indemnification shall be asserted
and resolved as follows:

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

(b) The obligations and liabilities of an Indemnitor with
respect to Damages arising from claims of any third party that are subject to
the indemnification provided for in this Article VI ("THIRD PARTY CLAIMS")
shall be governed by and contingent upon the following additional terms and
conditions: if an Indemnitee receives notice of any Third Party Claim, the
Indemnitee shall give the Indemnitor prompt notice of such Third Party Claim
and the Indemnitor may, at its option, assume and control the defense of such
Third Party Claim at the Indemnitor's expense and through counsel of the
Indemnitor's choice reasonably acceptable to the Indemnitee.

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If the Indemnitor assumes the defense against any such Third Party Claim as
provided above, the Indemnitee shall have the right to participate at its own
expense in the defense of such asserted liability, shall cooperate with the
Indemnitor in such defense and will use commercially reasonable efforts to make
available on a reasonable basis to the Indemnitor all witnesses, pertinent
records, materials and information in its possession or under its control
relating thereto as reasonably required by the Indemnitor. If the Indemnitor
does not elect to conduct the defense against any such Third Party Claim, the
Indemnitor shall pay all reasonable costs and expenses of such defense as
incurred and shall cooperate with the Indemnitee (and be entitled to
participate) in such defense and will use commercially reasonable efforts to
make available to it on a reasonable basis all such witnesses, records,
materials and information in its possession or under its control relating
thereto as reasonably required by the Indemnitee. Except for the settlement of
a Third Party Claim that involves the payment of money only and for which the
Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may
be settled without the written consent of the Indemnitee.

6.5 FAILURE TO PAY INDEMNIFICATION. If and to the extent an
Indemnitee makes written demand upon an Indemnitor for indemnification pursuant
to this Article VI and the Indemnitor refuses or fails to pay in full within 10
business days after final determination with respect thereto, then the
Indemnitee may use any legal or equitable remedy to collect from the Indemnitor
the amount of its Damages. Nothing contained herein is intended to limit or
constrain an Indemnitee's rights against an Indemnitor for indemnity, the
remedies herein being cumulative and in addition to all other rights and
remedies of the Indemnitee.

6.6 ADJUSTMENT OF LIABILITY. The amount which an Indemnitee shall
be entitled to receive from an Indemnitor with respect to any Damages under
this Article VI shall be net of any insurance recovery by an Indemnitee on
account of such Damages from an unaffiliated party.

6.7 EXPRESS NEGLIGENCE. THE FOREGOING INDEMNITIES ARE INTENDED TO
BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND
SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY SIMILAR
DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE
NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR
STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.

6.8 DISCLAIMER. SELLER MAKES NO GUARANTEE, WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE, AS TO THE
QUALITY, SERVICEABILITY, MERCHANTABILITY OR CONDITION OF THOSE ASSETS
CONSISTING OF TANGIBLE PERSONAL PROPERTY, BUILDINGS, FIXTURES OR OTHER
IMPROVEMENTS TO REAL ESTATE, ANY MACHINERY, EQUIPMENT, SPARE PARTS, DRILLING
RIGS AND RELATED APPURTENANCE, OR THEIR FITNESS FOR ANY USE OR PURPOSE, AND
SELLER SHALL NOT BE LIABLE TO PURCHASER FOR ANY SPECIAL OR CONSEQUENTIAL
DAMAGES ARISING FROM ANY USE OF SUCH ASSETS AFTER THE CLOSING BY HOLDINGS OR
PURCHASER OR ARISING IN CONNECTION WITH THIS SALE. SELLER DOES NOT WARRANT
THAT

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THE SUBJECT ASSETS ARE FIT FOR A PARTICULAR PURPOSE, OR ARE FREE FROM
REDHIBITORY OR LATENT DEFECTS OR VICES AND SELLER IS RELIEVED OF ANY LIABILITY
FOR REDHIBITORY OR LATENT DEFECTS OR VICES UNDER LOUISIANA CIVIL CODE, ARTICLE
2476 (INSOFAR ONLY THAT ARTICLE 2476 RELATES TO HIDDEN DEFECTS OF THE THING
SOLD OR ITS REDHIBITORY VICES AND NOT AS ARTICLE 2476 RELATES TO PURCHASER'S
PEACEABLE POSSESSION OF THE THING SOLD), AND LOUISIANA CIVIL CODE, ARTICLE 2520
THROUGH ARTICLE 2548.

6.9 ARBITRATION.

(a) Negotiation Period. After the Closing, all disputes
arising under this Agreement (other than a suit for injunctive relief) or
arising with respect to any transaction contemplated hereby will be subject to
binding arbitration in accordance with this Section 6.9. If such a dispute
exists, the parties shall attempt for a 30-day period (the "NEGOTIATION
PERIOD") from the date any party gives any one or more of the other parties
notice (a "DISPUTE NOTICE") pursuant to this Section, to negotiate in good
faith, a resolution of the dispute. The Dispute Notice shall set forth with
specificity the basis of the dispute and shall be delivered to each party to
this Agreement to whom the dispute relates. During the Negotiation Period,
representatives of each party involved in the dispute who have authority to
settle the dispute shall meet at mutually convenient times and places and use
their best efforts to resolve the dispute.

(b) Commencement of Arbitration. If a resolution is not
reached by the parties prior to the end of the Negotiation Period, each party
shall have 10 days from the end of such period to give each other party who
received a Dispute Notice written notice of the selection of an independent
arbitrator. If only one party gives such written notice, the arbitrator
selected by that party (the "FINAL ARBITRATOR") shall make a final and binding
determination as to the parties' respective rights and obligations with respect
to the matters set forth in the Dispute Notice. If more than one party selects
an arbitrator, the persons so selected shall, within 10 days of the last timely
notice of such selection, select a different independent arbitrator (also
referred to herein as the "FINAL ARBITRATOR") who shall make a final and
binding determination of the parties' respective rights and obligations with
respect to the matters set forth in the Dispute Notice. Following the
selection of the Final Arbitrator, the other arbitrators selected shall have no
further responsibilities hereunder. Each arbitrator selected hereunder shall
be experienced in the arbitration of complex commercial disputes.

(c) Consolidation of Hearings. If more than one party
delivers a Dispute Notice to one or more other parties pursuant to this Section
6.9, the Final Arbitrators selected with respect to each such Dispute Notice
may elect, in their sole discretion, to combine the matters set forth in one or
more, but not necessarily all, of the Dispute Notices into one or more
hearings, in which case, the Final Arbitrators shall adjust the time deadlines
set forth herein as they determine appropriate, and shall decide which one of
them will hear the evidence and render a final determination with respect to
each hearing.

(d) Discovery. Unless the Final Arbitrator otherwise
directs, each party to an arbitration shall be entitled to one deposition,
lasting no more than one day, of a designated

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representative of each other party to the arbitration prior to the arbitration
hearing; and each party shall be entitled, within 30 days of the appointment of
the Final Arbitrator, to serve upon each other party one set of Interrogatories
(seeking no more than 30 responses), one set of Requests for Production
(limited to 30 requests) and one set of Requests for Admission (limited to 30
requests), each of which shall be answered by the recipient thereof within two
weeks of its receipt. Otherwise, the arbitration shall be conducted in
accordance with the rules of the American Arbitration Association.

(e) Conclusion of Arbitration. Unless the Final
Arbitrator otherwise directs, the decision of the Final Arbitrator as to the
parties' respective rights and obligations shall be made within 60 days of the
end of the Negotiation Period and shall be binding on the parties. The Final
Arbitrator may determine that a party is entitled to Damages hereunder from one
or more other parties, and the manner in which such Damages shall be assessed
against the other parties. However, the Final Arbitrator may not award
emotional distress or punitive Damages.

(f) Expenses of Arbitrators. The expenses of the Final
Arbitrator shall be shared equally by the parties to the arbitration. The
expenses of each other arbitrator selected hereunder shall be borne by the
party selecting such arbitrator.

6.10 OTHER RIGHTS AND REMEDIES NOT AFFECTED. Except as set forth
herein, the indemnification rights of the parties under this Agreement are
independent of and in addition to such rights and remedies as the parties may
have at law or in equity or otherwise for any misrepresentation, breach of
warranty or failure to fulfill any agreement or covenant hereunder on the part
of any party hereto, including without limitation the right to seek specific
performance, rescission or restitution, none of which rights or remedies shall
be affected or diminished hereby. The indemnification rights of the parties
under this Article VI shall be the sole remedy available to Purchaser and
Seller after the Closing with respect to the representations and warranties set
forth herein or made or deemed to be made in connection with this Agreement.

ARTICLE VII - POST CLOSING MATTERS

7.1 SELLER'S AFFECTED EMPLOYEES.

(a) Purchaser will cause Holdings to continue the
employment of, or reemploy, all of the Affected Employees listed on SCHEDULE
3.1(U) who have been actively working on the job for the period beginning 30
days prior to the Closing Date and ending on the Closing Date initially at the
same salaries and wages of such Affected Employees on the Closing Date.
Nothing in this Agreement shall be considered a Contract between Holdings or
Purchaser and any Affected Employee or consideration for, or inducement with
respect to, any Affected Employee's continued employment, or reemployment, and,
without limitation, all such Affected Employees are and will continue to be
considered to be employees at will pursuant to the applicable state employment
at will laws or doctrines. Purchaser warrants to Seller that it will take no
action not contemplated in this Agreement which would have the effect of
causing a "plant closing" or "mass layoff" within the meaning of the Workers
Adjustment and Retraining Notification Act ("WARN").

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(b) Without limiting the generality of any other
provision of this Agreement, Seller agrees that it is required to, and shall
comply with the provisions of Section 4980B of the Code by notifying each
Affected Employee who is not employed by Holdings on or after the Closing Date,
and does not continue in the employ of Seller after the Closing Date, of their
right, if any, to "continuation coverage" (as defined in Section 4980B(f)(2) of
the Code) under the group health plan of Seller or ERISA Affiliate, and Seller
agrees that Seller or an ERISA Affiliate will maintain a group health plan in
which such Affected Employees who do not become employees of Holdings will have
continuation coverage rights until that continuation coverage terminates with
respect to all such Affected Employees.

(c) Notwithstanding anything to the contrary in this
Section 7.1, if a salaried, non-hourly Affected Employee remains a salaried,
non-hourly employee of Holdings or Purchaser on the Closing Date, and Holdings
or Purchaser terminates such salaried, non-hourly Affected Employee without
cause prior to the date that is 18 months from the Closing Date, Holdings or
Purchaser will pay any such terminated salaried, non-hourly Affected Employee
(other than tool pushers) an amount (in regular bi-weekly payments) which is
equal to the product of (i) one month's current salary, as determined at the
time of the termination, times (ii) such Affected Employee's number of full
years of service for Seller shown on SCHEDULE 3.1(U). Any such salaried, non-
hourly Affected Employee may be required by Purchaser or Holdings to change his
or her primary work location, provided any such change does not require a
change of principal residence or an unreasonable commute; if the salaried, non-
hourly Affected Employee refuses or declines any such relocation, he/she shall
not be entitled to the termination payments described in this Section. "CAUSE"
for this purpose shall mean conduct such as fraud, embezzlement, theft,
commission of a felony, or any other criminal act against Purchaser, Holdings,
or employees of Purchaser or Holdings, dishonesty in the course of employment
with Purchaser or Holdings, excessive absenteeism under Purchaser's or
Holdings' applicable policies, or deliberate disregard of assigned duties and
responsibilities, or of Purchaser's or Holdings' written employment policies of
general application.

(d) With respect to each Affected Employee employed by
Purchaser, Purchaser shall deem the period of employment with Seller (as
reflected on SCHEDULE 3.1(U)) to have been employment and service with
Purchaser for purposes of determining the Affected Employee's eligibility to
join, and vesting (if any) under, but, without limitation, not with respect to
the Affected Employee's accrual of benefits under, all of Purchaser's employee
benefit plans, programs, policies or similar employment related arrangements to
the extent service with Purchaser is recognized thereunder. Purchaser shall
waive, and to the extent necessary to effect the terms hereof, if any, shall
cause the relevant insurance carriers and other third parties to waive, such
restrictions and limitations for any medical condition existing as of the
Closing Date of those Affected Employees, and such of their dependents, who are
covered on the Closing Date under the Employee Benefit Plan which is a group
health plan, but only to the extent that such medical condition would be
covered by Purchaser's or Holdings' group health plan if it were not a pre-
existing condition and only to the extent of comparable coverage in effect
under such Employee Benefit Plan which is a group health plan immediately prior
to the Closing Date. Further, Purchaser shall offer to each Affected Employee
coverage under a group health plan (as defined in Section 5000(b)(1) of the
Code) which (i) provides medical and dental benefits to such

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Affected Employee and his eligible dependents (within the meaning of
Purchaser's group health plan) effective as of the later of the Closing Date
and the date Affected Employees' coverage under Purchaser's or Holdings' group
health plan terminates, (ii) credits such Affected Employee towards the
deductibles imposed under Purchaser's group health plan, for the year during
which the Closing Date occurs, with any deductibles already incurred during
such year under Seller's group health plan, and (iii) waives any pre-existing
condition restrictions to the extent provided in the preceding sentence.

7.2 DISCHARGE OF BUSINESS OBLIGATIONS. Following the Closing
Date, Seller shall pay and discharge, in accordance with past practice but not
less than on a timely basis, all obligations and liabilities incurred by Seller
or Holdings prior to the Closing Date relating to the Business and the Assets,
its operations or the assets and properties used therein (except for the
Assumed Liabilities and except to the extent prorated pursuant to Section 1.5),
including without limitation any liabilities or obligations to employees, trade
creditors and customers of the Business. Seller and Purchaser shall each use
their best efforts following the Closing to ensure a smooth transition of the
Business to Holdings as controlled by Purchaser. Following the Closing Date,
Purchaser shall pay and discharge, or cause Holdings to pay and discharge, not
less than on a timely basis, all obligations and liabilities incurred on or
after the Closing Date with respect to the Business or the Assets, and
operations or the assets and properties used therein, including without
limitation any such liabilities or obligations to trade creditors and
customers. Notwithstanding the foregoing, with respect to accrued vacation and
other similar employee expenses relating to Affected Employees, all such
amounts up to but not to exceed $650,000, will be assumed by Purchaser at the
Closing. Any such amounts ultimately not paid by Purchaser or Holdings within
one year following Closing, up to $250,000, shall be accounted for and refunded
to Seller.

7.3 MAINTENANCE OF BOOKS AND RECORDS. Seller and Purchaser shall
(and Purchaser will cause Holdings to) each preserve all Records possessed by
such party relating to the Business or Assets prior to the Closing Date for a
period of at least six years following the fiscal year to which the Records
relate. After the Closing Date, where there is a legitimate purpose, such party
shall provide the other parties and their representatives with access, upon
prior reasonable written request specifying the need therefor, during regular
business hours, to (a) the officers and employees of such party and (b) the
books of account and Records of such party, but, in each case, only to the
extent relating to the Assets or Business prior to the Closing Date, and the
other parties and their representatives shall have the right to make copies of
such books and Records; provided, however, that the foregoing right of access
shall not be exercisable in such a manner as to interfere unreasonably with the
normal operations and business of such party; and further, provided that, as to
so much of such information as constitutes trade secrets or confidential
business information of such party, the requesting party and its officers,
directors and representatives will use due care to not disclose such information
except (x) as required by law, (y) with the prior written consent of such party,
which consent shall not be unreasonably withheld, or (z) where such information
becomes available to the public generally, or becomes generally known to
competitors of such party through sources other than the requesting party, its
affiliates or its officers, directors or representatives. Such Records may
nevertheless be destroyed by a party if such party sends to the other parties
written notice of its intent to destroy the Records, specifying with
particularity the contents of the Records to be destroyed. Such Records may
then

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be destroyed after the 30th day after such notice is given unless another party
objects to the destruction in which case the party seeking to destroy the
Records shall deliver such Records to the objecting party.

7.4 PAYMENTS RECEIVED. Seller and Purchaser each agree that after
the Closing they will (and Purchaser will cause Holdings to) hold and will
promptly transfer and deliver to the other, from time to time as and when
received by them, any cash, checks with appropriate endorsements (using their
best efforts not to convert such checks into cash), or other property that they
may receive on or after the Closing which properly belongs to the other party,
including without limitation any insurance proceeds, and will account to the
other for all such receipts. Following the Closing, Purchaser and Holdings
shall have the right and authority to endorse without recourse the name of
Seller on any check or any other evidences of indebtedness received by
Purchaser or Holdings on account of the Business and the Assets, for the sole
purpose of depositing such items into accounts over which Seller has signatory
authority.

7.5 USE OF NAME. Promptly following the Closing Date, and in any
event within 60 days following the Closing Date, Purchaser shall cause Holdings
to replace, repaint or remark all signs, signage and other items containing
Seller's name, logo or otherwise containing the word "Pride" so as not to make
any reference to Seller's name or logo.

7.6 INQUIRIES. Following the Closing Date, Seller will promptly
refer all inquiries with respect to Holdings or with respect to ownership of
the Assets or the Business to Purchaser. In addition, Seller will execute
such documents and financing statements as Purchaser may reasonably request
from time to time to evidence the transactions contemplated by this Agreement.

7.7 COVENANT NOT TO COMPETE. Seller agrees that for a period of
five years after the Closing Date, neither Seller nor any of its subsidiaries
will, directly or indirectly, own, manage, operate, join or control, or
participate in ownership, management, operation or control of, any business
whether in corporate, proprietorship or partnership form or otherwise as more
than a ten percent owner in such business where such business is competitive
with the Business in providing onshore oil field rig workover services and is
within a 75-mile radius of any of Purchaser's facilities now existing or
Seller's or Holdings' facilities used in the Business or in the operation of
the Assets as of the Closing Date. The foregoing does not restrict Seller or
its subsidiaries from owning or operating drilling rigs. The parties hereto
specifically acknowledge and agree that the remedy at law for any breach of the
foregoing will be inadequate and that Purchaser, in addition to any other
relief available to it, shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damage. Seller acknowledges
that this covenant not to compete is being provided as an inducement to
Purchaser to acquire the Stock and that this Section 7.7 contains reasonable
limitations as to time, geographical area and scope of activity to be
restrained that do not impose a greater restraint than is necessary to protect
the goodwill or other business interest of Purchaser in the Business. Whenever
possible, each provision of this Section 7.7 shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of this Section 7.7 is prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Section 7.7. If any
provision of this Section 7.7 is, for any

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reason, judged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Section 7.7 but shall be confined in its operation to the
provision of this Section 7.7 directly involved in the controversy in which
such judgment has been rendered. If the provisions of this Section 7.7 are
ever deemed to exceed the time or geographic limitations permitted by
applicable laws, then such provisions shall be reformed to the maximum time or
geographic limitations permitted by applicable law.

7.8 SUBSEQUENT ACQUISITIONS BY SELLER. The parties agree that
during the five-year period specified in Section 7.7 above, Seller may acquire
entities which, as an immaterial part of their business, provide domestic,
onshore well servicing. If, as a result of any such acquisition, Seller is in
violation of the provisions of Section 7.7, Seller shall have one year from the
date of such acquisition, to cease all operations that violate Section 7.7, and
shall be deemed not to be in violation of Section 7.7 during such one-year
period as a result of such activities.

7.9 TRANSITION PERIOD. During the six-month period following the
Closing (the "TRANSITION PERIOD"), the parties shall operate the Business in
the following manner. As used in this Section 7.9, references to Purchaser
shall include Holdings.

(a) Collections. Purchaser's employees shall issue
invoices for work in process as of the Closing Date for both the portion of the
work completed by Seller prior to the effective date of the Closing and the
portion of the work completed by Purchaser thereafter. Purchaser's employees
shall use commercially reasonable best efforts to collect the invoices issued
on Seller's behalf and Purchaser shall promptly pay to Seller all such amounts
collected representing work completed by Seller prior to the effective date of
the Closing.

(b) Accounting. Purchaser's employees will assist Seller
as reasonably necessary to close out Seller's books and Records related to the
Business.

(c) Licenses and Permits. Seller will continue to
cooperate with Purchaser in connection with Purchaser's applications for the
transfer, renewal or issuance of any Permits, licenses, approvals or other
Authorizations and as required to satisfy any regulatory requirements arising
as a result of the sale of the Business pursuant to this Agreement, provided
that all out-of-pocket expenses incurred in connection therewith shall be paid
by Purchaser.

(d) Access to Corporate Headquarters. Seller shall
provide Purchaser's employees with reasonable access during normal business
hours to Seller's ordinary work environment at Seller's corporate headquarters
in Houston, Texas, including but not limited to reasonable access during normal
business hours to Seller's computer systems used in the Business and MIS
systems used in the Business, and shall allow Purchaser's employees to
communicate with Seller's employees at that location in order for Purchaser's
employees to obtain certain information required for the operation of the
Business.

7.10 ACCOUNTING RECORDS. For a five-year period following the
Closing, Seller will use commercially reasonable efforts to allow Purchaser to
obtain access to audit work papers of

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Seller's accountants for the immediately preceding five years, if Purchaser
requests such access in connection with the audit by Purchaser of Seller for
periods preceding the Closing.

7.11 NONDISCLOSURE OF PROPRIETARY INFORMATION.

(a) Seller agrees that, from and after the Closing Date,
Seller and its subsidiaries shall hold in confidence and will not directly or
indirectly at any time reveal, report, publish, disclose or transfer to any
person other than Purchaser any proprietary information relating primarily to
the Business or the Assets (the "PROPRIETARY INFORMATION") that is not
generally known to the public or use any Proprietary Information for any
purpose.

(b) Seller acknowledges that all documents and objects
containing or reflecting any Proprietary Information whether developed by
Seller or by a third party for Seller, will after the Closing Date become the
exclusive property of Purchaser and be delivered to Purchaser.

7.12 CONTACT WITH FORMER EMPLOYEES. Purchaser and Seller agree for
a period of two years following the Closing Date, not to solicit, directly or
indirectly, any of the other's respective employees, or employees of their
respective subsidiaries.

7.13 ASSUMED OBLIGATIONS. Purchaser shall, and shall cause
Holdings to, fulfill in all material respects the obligations it assumes in
connection with the Assumed Liabilities, and shall indemnify Seller for any
loss or expense incurred by Seller for events occurring after the effective
time of the Closing relative to the Assumed Liabilities or relating to the
conduct of the Business after the Closing.

ARTICLE VIII - TERMINATION

8.1 EVENTS OF TERMINATION. The obligation to close the
transactions contemplated by this Agreement may be terminated as follows:

(a) by mutual agreement of Purchaser and Seller;

(b) by Purchaser, if a material default is made by Seller
in the observance or in the due and timely performance by Seller of any
agreements and covenants of Seller herein contained, or if there has been a
breach by Seller of any of the warranties and representations of Seller herein
contained that results in a material adverse effect (without giving effect to
the individual materiality qualifications and thresholds otherwise contained in
Section 3.1 hereof), and such default or breach has not been cured or waived
within 20 days of written notice thereof;

(c) by Seller, if a material default is made by Purchaser
in the observance or in the due and timely performance by Purchaser of any
agreements and covenants of Purchaser herein contained, or if there has been a
breach by Purchaser of any of the warranties and representations of Purchaser
herein contained that results in a material adverse effect (without giving
effect to the individual materiality qualifications and thresholds otherwise
contained in

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Section 3.2 hereof), and such default or breach has not been cured or has not
been waived within 20 days of written notice thereof;

(d) by Purchaser or Seller, upon written notice provided
not less than four business days prior to the effective date of such
termination (provided the terminating party has not materially breached any of
its agreements, covenants or representations and warranties), if the Closing
shall not have occurred on or before March 17, 1997.

8.2 LIABILITY UPON TERMINATION. If the obligation to consummate
the transactions contemplated by this Agreement is terminated pursuant to any
provision of this Article VIII, then, other than the provisions of Section 8.4
which shall survive such termination, this Agreement shall forthwith become
void and there shall not be any liability or obligation with respect to this
Agreement on the part of Seller or Purchaser except and to the extent such
termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder.

8.3 NOTICE OF TERMINATION. The parties hereto may exercise their
respective rights of termination under this Article VIII only by delivering
written notice to that effect to the other party on or before the Closing Date
(or, in the event of a termination pursuant to Section 8.1(d), at the time
therein provided), specifically describing the factual basis and provisions of
this Agreement relied upon for such termination.

8.4 BREAK-UP FEE. Seller acknowledges that Purchaser is required
to secure financing to fund the Closing, and intends to seek funding by
offering securities in public or, if required, in private transactions as set
forth in Section 5.1(k). In the event Purchaser is not able to obtain such
funding and this Agreement is terminated pursuant to Section 8.1(d), Purchaser
agrees to pay Seller within fifteen days following the date of such termination
(i) $1.0 million in cash and (ii) $4.0 million in cash or, at Purchaser's
option, through the issuance to Seller of Purchaser's common stock, par value
$0.01 per share ("PURCHASER'S COMMON STOCK"). Purchaser's Common Stock shall
be valued at the average closing price reported on the Nasdaq National Market
for the 10 trading days immediately prior to the date of termination of this
Agreement. In the event Purchaser's Common Stock is issued as described above,
Purchaser shall grant registration rights to Seller with respect to such
shares, consistent with the Registration Rights Agreement dated November 1,
1995, by and among Purchaser and the Holders, as therein defined. The fee
described above is referred to herein as the "BREAK-UP FEE." The parties agree
that the Break-Up Fee is a substitute for Damages and not an incentive to
performance and that the amount is a reasonable estimate of the harm that would
result from any such breach or termination in light of the anticipated harm,
difficulties of proof of loss, and inconvenience or non-feasibility of any
other remedy and that the Break-Up Fee is not imposed as a penalty; provided,
however, that if any court or other authority determines that the Break-Up Fee
is unreasonable or otherwise unenforceable, Purchaser shall pay to Seller the
maximum reasonable amount payable as a Break-Up Fee allowable by law, but not
to exceed $5.0 million. If the Break-Up Fee is judicially determined not to be
enforceable, Seller shall be entitled to all other rights and remedies provided
by law or in equity.

38
<PAGE> 46

ARTICLE IX - MISCELLANEOUS

9.1 FINDERS' FEES. Other than the fees payable by Purchaser to
Jefferies & Company, Inc., Seller represents to Purchaser and Purchaser
represents to Seller that all negotiations relative to this Agreement have been
carried on by them directly without the intervention of any person who may be
entitled to any brokerage or finder's fee or other commission in respect of
this Agreement or the consummation of the transactions contemplated hereby, and
each agrees to indemnify and hold harmless the other against any and all
claims, losses, liabilities and expenses which may be asserted against or
incurred by it as a result of its dealings, arrangements or agreements with any
such person.

9.2 EXPENSES. Except as otherwise provided in this Agreement,
each party hereto shall pay its own expenses incidental to the preparation of
this Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.

9.3 ASSIGNMENT AND BINDING EFFECT. This Agreement may not be
assigned prior to the Closing by any party hereto without the prior written
consent of the other party; provided, however, Purchaser may assign its rights
and obligations hereunder to any other entity that is controlling, controlled
by or under common control with Purchaser but any such assignment shall not
relieve Purchaser of its obligations hereunder. Purchaser shall give Seller
prompt written notice of any such assignment. Subject to the foregoing, all of
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of Seller and
Purchaser.

9.4 NOTICES. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally or sent by
facsimile (in either case, with a copy also sent by first class mail, postage
prepaid) as follows:

If to Purchaser, to: With a copy to:

Dawson Production Services, Inc. Jenkens & Gilchrist,
901 N.E. Loop 410, Suite 700 A Professional Corporation
San Antonio, Texas 78209-1306 600 Congress Avenue, Suite 2200

ATTN: Michael E. Little Austin, Texas 78701
Facsimile Number: (210) 930-3345 ATTN: J. Rowland Cook
Facsimile Number: (512) 404-3520

39
<PAGE> 47
If to Seller, to: With a copy to:

Pride Petroleum Services, Inc. Baker & Botts, L.L.P.
1500 City West Blvd., Suite 400 One Shell Plaza
Houston, Texas 77042 910 Louisiana Street
ATTN: Robert W. Randall Houston, Texas 77002
Facsimile Number: (713) 789-1430 ATTN: L. Proctor Thomas and
J. David Kirkland, Jr.
Facsimile Number: (713) 229-1522

or to such other address or facsimile number as the addressee may have
specified in a notice duly given to the sender as provided herein. Such
notice, request, demand, waiver, consent, approval or other communication will
be deemed to have been given as of the date so delivered or faxed.

9.5 GOVERNING LAW. This Agreement shall be governed by,
interpreted and enforced in accordance with the laws of the State of Texas
(without regard to the choice or conflicts of law provisions of Texas law).

9.6 NO BENEFIT TO OTHERS. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit
of the parties hereto and their heirs, executors, administrators, legal
representatives, successors and assigns and they shall not be construed as
conferring any rights on any other persons, except for (a) in the case of
Article VI hereof, certain other indemnified parties, and (b) in the case of
Section 7.1(d) hereof, the Affected Employees.

9.7 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, to the extent they related in any way to the
subject matter hereof except that the Confidentiality Agreement dated November
13, 1996, between Purchaser and Seller shall remain in full force and effect.
All Exhibits and Schedules referred to herein are incorporated herein in full
and are specifically made a part of this Agreement.

9.8 HEADINGS. All Section headings contained in this Agreement
are for convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.

9.9 SEVERABILITY. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
enforceability in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction; provided if any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the effective period of this Agreement, such
provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement; and the remaining provisions of this
Agreement shall remain in full force and effect

40
<PAGE> 48
and shall not be affected by the illegal, invalid, or unenforceable provision
or by its severance from this Agreement. Furthermore, in lieu of each illegal,
invalid, or unenforceable provision there shall be added automatically as part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and
enforceable.

9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when all counterparts taken
together shall have been executed and delivered by the parties. It shall not
be necessary in making proof of this Agreement as to a party to produce or
account for any of the other counterparts signed by another party not joined in
the action.

9.11 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context requires. Any reference
to a "PERSON" herein shall include an individual, firm, corporation,
partnership, trust, Governmental Entity, association, unincorporated
organization and any other entity. Any references to a Section, Article,
Schedule or Exhibit are to sections, articles, schedule and exhibits to this
Agreement, unless otherwise specifically stated.

9.12 WAIVER. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
occurrence.

9.13 SPECIFIC PERFORMANCE. The parties acknowledge and agree that
a party would be damaged irreparably if any of the provisions of this Agreement
are not performed in accordance with their specific terms or otherwise are
breached. Accordingly, a party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions of this
Agreement in any action instituted in any court of the United States or any
state thereof having jurisdiction over the parties and the matter (subject to
the provisions set forth in Section 6.9), in addition to any other remedy to
which they may be entitled, at law or in equity.

9.14 GOOD FAITH. The parties agree to act in good faith in the
performance and enforcement of the Agreement.

41
<PAGE> 49
9.15 ATTORNEYS' FEES. Except as otherwise provided in Section 6.9,
if any arbitration or action at law or in equity, including an action for
declaratory relief, is brought to enforce or interpret the provisions of this
Agreement, the Prevailing Party shall be entitled to recover reasonable
attorneys' fees and costs from the other party. No party to any such
proceeding shall be considered a "PREVAILING PARTY" unless it recovers more (or
pays less) as a result of arbitration or a lawsuit than it has been offered as
a settlement of the dispute.

42
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.

DAWSON PRODUCTION SERVICES, INC.

By: /s/ Michael E. Little
-----------------------------------
Michael E. Little
President

PRIDE PETROLEUM SERVICES, INC.

By: /s/ Ray Tolson
-----------------------------------
Ray Tolson
Chairman of the Board, President and
Chief Executive Officer

43
<PAGE> 51
<TABLE>
<CAPTION>
LIST OF SCHEDULES
-----------------
<S> <C>
Schedule 1 Restructure of Seller's U.S. Land Operations
Schedule 1.1(a)(i) Fee Properties
Schedule 1.1(a)(ii) Leased Properties
Schedule 1.1(a)(iii) Holdings Contracts
Schedule 1.1(a)(iv) Equipment Leases
Schedule 1.1(a)(v) Vehicle Leases
Schedule 1.1(a)(vi) Equipment
Schedule 1.1(b) Excluded Assets
Schedule 1.3(b) Fair Market Value
Schedule 1.4(a) Assumed Liabilities
Schedule 3.1(a) Corporate Jurisdiction
Schedule 3.1(i) Permitted Liens
Schedule 3.1(l) Litigation
Schedule 3.1(m) Contracts and Commitments
Schedule 3.1(n) Environmental Matters
Schedule 3.1(o) Real Properties
Schedule 3.1(q) Assets
Schedule 3.1(t) Employee Benefit Plans
Schedule 3.1(u) Personnel
</TABLE>

<TABLE>
<CAPTION>
LIST OF EXHIBITS
----------------
<S> <C>
Exhibit A Form of Opinion of Counsel for Seller
Exhibit B Form of Opinion of Counsel for Purchaser
</TABLE>

44
<PAGE> 52
SCHEDULE 1

RESTRUCTURE OF SELLER'S U.S. LAND OPERATIONS

1. Seller transfers 1% of its U.S. land assets, subject to
certain liabilities, to a new corporation ("GP") in exchange for all of the
stock of GP.

2. Seller transfers 99% of its U.S. land assets, subject to
certain liabilities, to a new limited partnership (the "Partnership") in
exchange for a 99% limited partnership interest. At the same time, GP
transfers 1% of the U.S. land assets, subject to certain liabilities, to the
Partnership for a 1% general partner interest.

3. Seller contributes the limited partner interest to a newly
organized corporation ("LP") for all of the stock of LP.

4. LP sells the limited partner interest and Seller sells all of
the stock of GP to Purchaser. Seller and Purchaser make a section 338(h)(10)
election for federal income tax purposes as to the sale of the stock of GP.
The Partnership makes an election under section 754 of the Code.

<PAGE> 1

EXHIBIT 10.19

SECOND AMENDMENT TO LOAN AGREEMENT

THIS SECOND AMENDMENT TO LOAN AGREEMENT (hereinafter referred to as the
"Second Amendment"), dated as of December 4, 1996, is made by and between
DAWSON PRODUCTION SERVICES, INC. ("Dawson"), a Texas corporation, whose
principal business address is at 901 N.E. Loop 410, Suite 700, San Antonio,
Texas 78209-1306, and THE FROST NATIONAL BANK, a national banking association
with its principal place of business at 100 W. Houston Street, San Antonio,
Texas 78205 (the "Bank").

RECITALS

A. On or about November 30, 1994, Dawson Well Servicing, Inc., a
Texas corporation and Dawson WellTech, L.C., a Texas limited
liability company and Bank entered into that certain Loan
Agreement (the "Agreement") concerning the terms, conditions
and covenants of that certain $13,000,000.00 Term Loan from
Bank to WellTech and that certain $4,000,000.00 Revolving
Credit Facility in favor of Dawson Well Servicing.

B. The Loan Agreement was amended by First Amendment to Loan
Agreement dated November 28, 1995.

C. Since the date of the First Amendment, Dawson Well Servicing,
Inc. and Dawson WellTech, L.C. have been merged and a new
company formed, Dawson Production Services, Inc.

D. This Second Amendment is necessary to amend the Loan Agreement
to reflect the change in name described above and to evidence
the renewal of the $4,000,000.00 Revolving Credit Facility.

E. All capitalized terms not otherwise defined in this Second
Amendment shall have the same meanings as are set forth in the
Agreement.

NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, Bank and Dawson agree as follows:

AGREEMENTS

1. The definition of "Borrowers" or "Borrower" as set forth in the
Loan Agreement and in Appendix A to the Loan Agreement shall
hereinafter mean Dawson Production Services, Inc.

<PAGE> 2
2. The $4,000,000.00 Revolving Credit Facility is renewed and
shall be evidenced by a Promissory Note in the original
principal amount of $4,000,000.00 dated November 28, 1996
executed by Dawson Production Services, Inc. and payable to
the order of Bank.

3. Except as specifically modified or amended herein, all terms,
provisions and requirements of the Agreement shall remain as
written, and as amended from time to time. Borrowers hereby
reaffirm all covenants, conditions, representations and
warranties contained in the Agreement, as amended.

NOTICE TO COMPLY WITH STATE LAW

For the purpose of this Notice, the term "WRITTEN AGREEMENT" shall
include the document set forth above, together with each and every other
document relating to and/or securing the same loan transaction, regardless of
the date of execution.

THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

EXECUTED as of the day and year first above written.

BORROWER:

DAWSON PRODUCTION SERVICES, INC.,
a Texas corporation

By:
-------------------------------
Michael E. Little, President

LENDER:

FROST NATIONAL BANK

By: /s/ JAMES B. CROSBY
--------------------------------------
James B. Crosby, Senior Vice President
<PAGE> 3
COMMERCIAL SECURITY AGREEMENT

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,000,000.00 11-28-1996 01-28-1997 0599 500 6073 2211480 035
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: DAWSON PRODUCTION SERVICES, INC. LENDER: THE FROST NATIONAL BANK
(TIN:74-2231546) P.O. BOX 1600
901 NE LOOP 410, SUITE 700 SAN ANTONIO, TX 78296
SAN ANTONIO, TX 78209

================================================================================

THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN DAWSON PRODUCTION
SERVICES, INC. (REFERRED TO BELOW AS "GRANTOR"); AND THE FROST NATIONAL BANK
(REFERRED TO BELOW AS "LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS
TO LENDER A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS
AND AGREES THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH
RESPECT TO THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY
HAVE BY LAW.

DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.

AGREEMENT. The word "Agreement"- means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.

COLLATERAL. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:

ALL ACCOUNTS

In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising,
and wherever located:

(a) All accessions, accessories, increases, and additions to and
all replacements of and substitutions for any property described above.

(b) All products and produce of any of the property described in
this Collateral section.

(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.

(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.

(e) All records and data relating to any of the property described
in this Collateral section, whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together with
all of Grantor's right, title, and interest in and to all computer
software required to utilize, create, maintain, and process any such
records or data on electronic media.

EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."

GRANTOR. The word "Grantor" means DAWSON PRODUCTION SERVICES, INC., its
successors and assigns

GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.

INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and earned interest, together with all
other indebtedness and costs and expenses for which Grantor is responsible
under this Agreement or under any of the Related Documents. In addition,
the word "Indebtedness" includes all other obligations, debts and
liabilities, plus interest thereon, of Grantor, or any one or more of
them, to Lender, as well as all claims by Lender against Grantor, or any
one or more of them, whether existing now or later; whether they are
voluntary or involuntary, due or not due, direct or indirect, absolute or
contingent, liquidated or unliquidated; whether Grantor may be liable
individually or jointly with others; whether Grantor may be obligated as
guarantor, surety, accommodation party or otherwise.

LENDER. THE word "Lender" means THE FROST NATIONAL BANK, its successors
and assigns.

NOTE. The word "Note" means the note or credit agreement dated November
28, 1996, in the principal amount of $4,000,000.00 from DAWSON PRODUCTION
SERVICES, INC. to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions for
the note or credit agreement.

RELATED DOCUMENTS. The words "RELATED Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.

RIGHT OF SETOFF. Grantor hereby grants Lender A contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts Grantor
may open in the future, excluding, however, all IRA and Keogh accounts, and
all trust accounts for which the grant of a security interest would be
prohibited by law. Grantor authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all Indebtedness against any and all such
accounts.

OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as FOLLOWS:

PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to
Lender for possession by Lender. Grantor hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue the security interest granted in this
Agreement. Lender may at any time, and without further authorization from
Grantor, file A carbon, photographic or other reproduction of any
financing statement or of this Agreement for use as a financing statement.
Grantor will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security
<PAGE> 4

11-28-1996 COMMERCIAL SECURITY AGREEMENT PAGE 2
Loan No 0599 (Continued)
================================================================================

interest in the Collateral. Grantor promptly will notify Lender before any
change in Grantor's name including any change to the assumed business names of
Grantor. THIS IS A CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN AFFECT
EVEN THOUGH ALL OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH
FOR A PERIOD OF TIME GRANTOR MAY NOT BE INDEBTED TO LENDER.

NO VIOLATION. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.

ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is enforceable
in accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral.
At the time any account becomes subject to a security interest in favor of
Lender, the account shall be a good and valid account representing an
undisputed, bona fide indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or theretofore shipped or
delivered pursuant to a contract of sale, or for services theretofore performed
by Grantor with or for the account debtor; there shall be no setoffs or
counterclaims against any such account; and no agreement under which any
deductions or discounts may be claimed shall have been made with the account
debtor except those disclosed to Lender in writing.

REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the
State of Texas, without the prior written consent of Lender.

TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. Grantor
shall not pledge, mortgage, encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in right to
the security interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to
any sale or other disposition. Upon receipt, Grantor shall immediately deliver
any such proceeds to Lender.

TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or to which
Lender has specifically consented. Grantor shall defend Lender's rights in the
Collateral against the claims and demands of all other persons.

COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and
insofar as the Collateral consists of accounts, Grantor shall deliver to Lender
schedules of such Collateral, including such information as Lender may require,
including without limitation names and addresses of account debtors and agings
of accounts. Such information shall be submitted for Grantor and each of its
subsidiaries or related companies.

MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral.
Lender and its designated representatives and agents shall have the right at
all reasonable times to examine, inspect, and audit the Collateral wherever
located. Grantor shall immediately notify Lender of all cases involving the
return, rejection, repossession, loss or damage of or to any Collateral; of any
request for credit or adjustment or of any other dispute arising with respect
to the Collateral; and generally of all happenings and events affecting the
Collateral or the value or the amount of the Collateral.

TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral
is subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other
charges that could accrue as a result of foreclosure or sale of the Collateral.
In any contest Grantor shall defend itself and Lender and shall satisfy any
final adverse judgment before enforcement against the Collateral. Grantor
shall name Lender as an additional obligee under any surety bond furnished in
the contest proceedings.

COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities,
now or hereafter in effect, applicable to the ownership, production,
disposition, or use of the Collateral. Grantor may contest in good faith any
such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's interest in the
Collateral, in Lender's opinion, is not jeopardized.

HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien on
the Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or
Federal laws, rules, or regulations adopted pursuant to any of the foregoing.
The terms "hazardous waste" and "hazardous substance" shall also include,
without limitation, petroleum and petroleum by-products or any fraction thereof
and asbestos. The representations and warranties contained herein are based on
Grantor's due diligence in investigating the Collateral for hazardous wastes
and substances. Grantor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This obligation
to indemnity shall survive the payment of the Indebtedness and the satisfaction
of this Agreement.

MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with respect
to the Collateral, in form, amounts, coverages and basis reasonably acceptable
to Lender. GRANTOR MAY FURNISH THE REQUIRED INSURANCE WHETHER THROUGH EXISTING
POLICIES OWNED OR CONTROLLED BY GRANTOR OR THROUGH EQUIVALENT INSURANCE FROM
ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN THE STATE OF TEXAS.
If Grantor fails to provide any required insurance or fails to continue such
insurance in force, Lender may, but shall not be required to do so at Grantor's
expense, and the cost of the insurance will be added to the Indebtedness. If
any such insurance is procured by Lender at a rate or charge not fixed or
approved by the State Board of Insurance, Grantor will be so notified, and
Grantor will have the option for five (5) days of furnishing equivalent
insurance through any insurer authorized to transact business in Texas.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,

<PAGE> 5

11-28-1996 COMMERCIAL SECURITY AGREEMENT PAGE 3
LOAN NO 0599 (CONTINUED)
================================================================================

including stipulations that coverages will not be cancelled or diminished
without at least ten (10) days' prior written notice to Lender and not
including any disclaimer of the insurer's liability for failure to give
such a notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any way
by any act, omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at any
time fails to obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest in the
Collateral.

APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender
of any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their
receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness.

INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to
be sufficient to produce, at least fifteen (15) days before the premium
due date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.

INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the property insured; (e) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (f) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more often than annually) have
an independent appraiser satisfactory to Lender determine, as applicable,
the cash value or replacement cost of the Collateral.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest
in such Collateral. Until otherwise notified by Lender, Grantor may collect
any of the Collateral consisting of accounts. At any time and even though no
Event of Default exists, Lender may exercise its rights to collect the accounts
and to notify account debtors to make payments directly to Lender for
application to the Indebtedness. If Lender at any time has possession of any
Collateral, whether before or after an Event of Default, Lender shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral if Lender takes such action for that purpose as Grantor shall
request or as Lender, in Lender's sole discretion, shall deem appropriate under
the circumstances, but failure to honor any request by Grantor shall not of
itself be deemed to be a failure to exercise reasonable care. Lender shall not
be required to take any steps necessary to preserve any rights in the
Collateral against prior parties, nor to protect, preserve or maintain any
security interest given to secure the Indebtedness.

EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, lions, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the Note rate from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will
be due and payable at the Note's maturity. This Agreement also will secure
payment of these amounts. Such right shall be in addition to all other rights
and remedies to which Lender may be entitled upon the occurrence of an Event of
Default.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:

DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the Indebtedness.

OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.

DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's property or Borrower's
or any Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.

FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.

DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.

INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.

CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender.

EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies
or becomes incompetent.

ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.

INSECURITY. Lender, in good faith, deems itself insecure.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of

<PAGE> 6

11-28-1996 COMMERCIAL SECURITY AGREEMENT PAGE 4
LOAN NO 0599 (CONTINUED)
================================================================================

a secured party under the Texas Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:

ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness
immediately due and payable, without notice.

ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter,
provided Lender does so without a breach of the peace or a trespass, upon
the property of Grantor to take possession of and remove the Collateral.
If the Collateral contains other goods not covered by this Agreement at
the time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.

SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its
own name or that of Grantor. Lender may sell the Collateral at public
auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after which any
private sale or any other intended disposition of the Collateral is to be
made. The requirements of reasonable notice shall be met if such notice
is given at least ten (10) days before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure until repaid.

APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid.

COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether
or not Indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, draft, money orders, documents
of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify
account debtors and obligors on any Collateral to make payments directly
to Lender.

OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after application
of all amounts received from the exercise of the rights provided in this
Agreement. Grantor shall be liable for a deficiency even if the
transaction described in this subsection is a sale of accounts or chattel
paper.

OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.

CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall not affect Lender's right to
declare a default and to exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.

APPLICABLE LAW. This Agreement has been delivered to Lender and accepted
by Lender in the State of Texas. If there is a lawsuit, and if the
transaction evidenced by this Agreement occurred in Bexar County, Grantor
agrees upon Lender's request to submit to the jurisdiction of the courts
of Bexar County, State of Texas. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and applicable Federal
laws.

ARBITRATION. LENDER AND GRANTOR AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
ARISING FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION
CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF
THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No
act to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement.
This includes, without limitation, obtaining injunctive relief or a
temporary restraining order; invoking a power of sale under any deed of
trust or mortgage; obtaining a writ of attachment or imposition of a
receiver; or exercising any rights relating to personal property,
including taking or disposing of such property with or without judicial
process pursuant to Article 9 of the Uniform Commercial Code. Any
disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any
Collateral, including any claim to rescind, reform, or otherwise modify
any agreement relating to the Collateral, shall also be arbitrated,
provided however that no arbitrator shall have the right or the power to
enjoin or restrain any act of any party. Judgment upon any award rendered
by any arbitrator may be entered in any court having jurisdiction.
Nothing in this Agreement shall preclude any party from seeking equitable
relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, [aches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for
these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation, and enforcement of this arbitration
provision.

ATTORNEYS' FEES AND OTHER COSTS. Lender may hire an attorney to help
collect the Note if Grantor does not pay, and Grantor will pay Lender's
reasonable attorneys' fees. Grantor also will pay Lender all other
amounts actually incurred by Lender as court costs, lawful fees for
filing, recording, or releasing to any public office any instrument
securing the Note; the reasonable cost actually expended for repossessing,
storing, preparing for sale, and selling any security; and fees for noting
a lien on or transferring a certificate of title to any motor vehicle
offered as security for the Note, or premiums or identifiable charges
received in connection with the sale of authorized insurance.

CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.

NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,

<PAGE> 7

11-28-1996 COMMERCIAL SECURITY AGREEMENT PAGE 5
LOAN NO 0599 (CONTINUED)
================================================================================

postage prepaid, addressed to the party to whom the notice is to be given at
the address shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address.
To the extent permitted by applicable law, if there is more than one
Grantor, notice to any Grantor will constitute notice to all Grantors. For
notice purposes, Grantor will keep Lender informed at all times of Grantor's
current address(es).

POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing
or payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment
for the Collateral; (c) to settle or compromise any and all claims arising
under the Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file any claim
or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or otherwise,
which in the discretion of Lender may seem to be necessary or advisable.
This power is given as security for the Indebtedness, and the authority
hereby conferred is and shall be irrevocable and shall remain in full force
and effect until renounced by Lender.

SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.

SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns.

WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED NOVEMBER
28,1996.

GRANTOR:

DAWSON PRODUCTION SERVICES, INC.

By:
--------------------------------------------------------
MICHAEL E. LITTLE, President and Chief Executive Officer

================================================================================
<PAGE> 8

PROMISSORY NOTE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,000,000.00 11-28-1996 01-28-1997 0599 500 6073 2211480 035
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability OF this
document to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: DAWSON PRODUCTION SERVICES, INC. LENDER: THE FROST NATIONAL BANK
(TIN: 74-2231546) P.O. BOX 1600
901 NE LOOP 410, SUITE 700 SAN ANTONIO, TX 78296
SAN ANTONIO, TX 78209

================================================================================

PRINCIPAL AMOUNT: $4,000,000.00 INITIAL RATE: 8.250%
DATE OF NOTE: November 28, 1996

PROMISE TO PAY. DAWSON PRODUCTION SERVICES, INC. ("BORROWER") PROMISES TO PAY
TO THE FROST NATIONAL BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED
STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FOUR MILLION & 00/100 DOLLARS
($4,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE
UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE OR
MATURITY, WHICHEVER OCCURS FIRST.

CHOICE OF USURY CEILING AND INTEREST RATE. The interest rate on this Note has
been implemented under the "Indicated Rate Ceiling" as referred to in Article
5069-1.04 (a)(1) V.T.C.S. The terms, including the rate, or index, formula, or
provision of law used to compute the rate on the Note, will be subject to
revision as to current and future balances, from time to time by notice from
Lender in compliance with Article 5069-1.04(i) V.T.C.S.

PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON JANUARY 28, 1997. In ADDITION,
BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING
DECEMBER 28, 1996, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY
OF EACH MONTH AFTER THAT. Interest on this Note is computed on a 365/360
simple interest basis; that is, by applying the ratio of the annual interest
rate over a year of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding,
unless such calculation would result in a usurious rate, in which case interest
shall be calculated on a per diem basis of a year of 365 or 366 days, as the
case may be. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed
or required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges. Notwithstanding any other provision of this Note,
Lender will not charge interest on any undisbursed loan proceeds. No scheduled
payment, whether of principal or interest or both, will be due unless
sufficient loan funds have been disbursed by the scheduled payment date to
justify the payment.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may or
may not be the lowest rate available from Lender at any given time. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. THE INDEX
CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED PRIOR TO
MATURITY TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE EQUAL
TO THE INDEX, RESULTING IN AN INITIAL RATE OF 8.250% PER ANNUM. NOTICE: Under
no circumstances will the interest rate on this Note be more than the maximum
rate allowed by applicable law. For purposes of this Note, the "maximum rate
allowed by applicable law" means the greater of (a) the maximum rate of
interest permitted under federal or other law applicable to the indebtedness
evidenced by this Note, or (b) the "Indicated Rate Ceiling" as referred to in
Article 5069-1.04 (a)(1) V.T.C.S.

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.

POST MATURITY RATE. The Post Maturity Rate on this Note is the maximum rate
allowed by applicable law. Borrower will pay interest on all sums due after
final maturity, whether by acceleration or otherwise, at that rate, with the
exception of any amounts added to the principal balance of this Note based on
Lender's payment of insurance premiums, which will continue to accrue interest
at the pre-maturity rate.

DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this Note. (h) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is
impaired. (i) Lender in good faith deems itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire indebtedness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount. Lender may hire an attorney to help collect this Note if Borrower does
not pay, and Borrower will pay Lender's reasonable attorneys' fees. Borrower
also will pay Lender all other amounts actually incurred by Lender as court
costs, lawful fees for filing, recording, or releasing to any public office any
instrument securing this loan; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor
vehicle offered as security for this loan, or premiums or identifiable charges
received in connection with the sale of authorized insurance. THIS NOTE HAS
BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER In THE STATE OF TEXAS. IF
THERE IS A LAWSUIT, AND IF THE TRANSACTION EVIDENCED BY THIS NOTE OCCURRED IN
BEXAR COUNTY, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF BEXAR COUNTY, THE STATE OF TEXAS. SUBJECT TO THE
PROVISIONS ON ARBITRATION, THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.

RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however
<PAGE> 9

11-28-1996 PROMISSORY NOTE PAGE 2
LOAN NO 0599 (CONTINUED)

================================================================================

all IRA and Keogh accounts, and all trust accounts for which the grant of a
security interest would be prohibited by law. Borrower authorizes Lender, to
the extent permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.

LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested orally by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to
any of Borrower's accounts with Lender. The unpaid principal balance owing on
this Note at any time may be evidenced by endorsements on this Note or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Note or any other loan with Lender; (d) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or
any other agreement between Lender and Borrower. THIS REVOLVING LINE OF
CREDIT SHALL NOT BE SUBJECT TO CHAPTER 15, ARTICLE 5069 V.T.C.S. (THE TEXAS
CREDIT CODE).

ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT
AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or
dispose of any collateral securing this Note shall constitute a waiver of
this arbitration agreement or be prohibited by this arbitration agreement.
This includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any collateral securing this Note,
including any claim to rescind, reform, or otherwise modify any agreement
relating to the collateral securing this Note, shall also be arbitrated,
provided however that no arbitrator shall have the right or the power to
enjoin or restrain any act of any party. Judgment upon any award rendered by
any arbitrator may be entered in any court having jurisdiction. Nothing in
this Note shall preclude any party from seeking equitable relief from a court
of competent jurisdiction. The statute of limitations, estoppel, waiver,
laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding,
and the commencement of an arbitration proceeding shall be deemed the
commencement of an action for these purposes. The Federal Arbitration Act
shall apply to the construction, interpretation, and enforcement of this
arbitration provision.

DISHONORED CHECK CHARGE. In the event a check offered in full or partial
payment on this loan is returned unpaid, Lender may charge a fee for the
purpose of defraying the expense incident to handling such returned check,
and Borrower agrees to pay such fee. The fee shall not exceed the maximum
amount permitted under applicable law.

OTHER CREDITS AFFECTING AVAILABILITY. Any other credits made available to
Borrower by Lender, such as other loans or letters of credit, may be advanced
to Borrower and/or issued under this line of credit commitment, and any such
advances or issuances shall, in addition to the outstanding advances on this
Note, reduce the outstanding availability on the line of credit.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact
will not affect the rest of the Note. In particular, this section means
(among other things) that Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take,
reserve or receive (collectively referred to herein as "charge or collect"),
any amount in the nature of interest or in the nature of a fee for this loan,
which would in any way or event (including demand, prepayment, or
acceleration) cause Lender to charge or collect more for this loan than the
maximum Lender would be permitted to charge or collect by federal law or the
law of the State of Texas (as applicable). Any such excess interest or
unauthorized fee shall, instead of anything stated to the contrary, be
applied first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. The right to
accelerate maturity of sums due under this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to charge or collect any unearned
interest in the event of acceleration. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of sums due hereunder shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the loan evidenced by this Note until
payment in full so that the rate or amount of interest on account of the loan
evidenced hereby does not exceed the applicable usury ceiling. Lender may
delay or forgo enforcing any of its rights or remedies under this Note
without losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand
for payment, protest, notice of dishonor, notice of intent to accelerate the
maturity of this Note, and notice of acceleration of the maturity of this
Note. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for
any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is
made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.

BORROWER:

DAWSON PRODUCTION SERVICES, INC.

By:
--------------------------------------------------------
MICHAEL E. LITTLE, PRESIDENT AND CHIEF EXECUTIVE OFFICER

================================================================================
Variable Rate. Line of Credit.

<PAGE> 1

EXHIBIT 10.20

[LOGO]

PROMISSORY NOTE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$7,000,000.00 11-25-1996 01-25-1997 9001 500 0010 2211480 035
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Borrower: DAWSON PRODUCTION SERVICES, INC. Lender: THE FROST NATIONAL BANK
(TIN: 74-2231546) P.O. BOX 1600
901 NE LOOP 410, SUITE 700 SAN ANTONIO, TX 78296
SAN ANTONIO, TX
==================================================================================================================
</TABLE>

<TABLE>
<S> <C> <C>
Principal Amount: $7,000,000.00 Initial Rate: 7.625% Date of Note: November 25, 1996
</TABLE>

PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PRINCIPAL PAYMENT OF $7,000,000.00
PLUS INTEREST ON JANUARY 25, 1997. THIS PAYMENT DUE JANUARY 25, 1997, WILL BE
FOR ALL PRINCIPAL AND ACCRUED INTEREST NOT YET PAID. IN ADDITION, BORROWER WILL
PAY REGULAR MONTHLY PAYMENTS OF ALL ACCRUED UNPAID INTEREST DUE AS OF EACH
PAYMENT DATE, BEGINNING DECEMBER 25, 1996, WITH ALL SUBSEQUENT INTEREST
PAYMENTS TO BE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. Interest on this
Note is computed on a 365/360 simple interest basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding, unless such calculation would result in a
usurious rate, in which case interest shall be calculated on a per diem basis
of a year of 365 or 366 days, as the case may be. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payment will
be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the London
Interbank Offered Rate (LIBOR) for one (1) month as quoted in the most recently
published issue of THE WALL STREET JOURNAL under the "Money Rates" column, and
if more than one LIBOR rate for one (1) month is quoted, the higher rate shall
apply (the "Index"). The Index is not necessarily the lowest rate charged by
Lender on its loans. If the Index becomes unavailable during the term of this
loan, Lender may designate a substitute index after notice to Borrower. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. THE INDEX
CURRENTLY IS 5.375% PER ANNUM. THE INTEREST RATE TO BE APPLIED PRIOR TO
MATURITY TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT THE RATE
OF 2.250 PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF
7.625% PER ANNUM. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law. For purposes of
this Note, the "maximum rate allowed by applicable law" means the greater of
(a) the maximum rate of interest permitted under federal or other law
applicable to the indebtedness evidenced by this Note, or (b) the "Indicated
Rate Ceiling" as referred to in Article 5069-1.04(a)(1) V.T.C.S.

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments under the payment schedule. Rather, they will reduce the
principal balance due.

DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceedings is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (i) Lender
in good faith deems itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire indebtedness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount. Lender may hire an attorney to help collect this note if Borrower does
not pay, and Borrower will pay Lender's reasonable attorneys' fees. Borrower
also will pay Lender all other amounts actually incurred by Lender as court
costs, lawful fees for filing, recording, or releasing to any public office any
instrument securing this loan; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor
vehicle offered as security for this loan, or premiums or identifiable charges
received in connection with the sale of authorized insurance. THIS NOTE HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF TEXAS. IF THERE IS A
LAWSUIT, AND IF THE TRANSACTION EVIDENCED BY THIS NOTE OCCURRED IN BEXAR
COUNTY, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF
THE COURTS OF BEXAR COUNTY, THE STATE OF TEXAS. SUBJECT TO THE PROVISIONS ON
ARBITRATION, THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.

ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND
TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose
of any collateral securing this Note shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to Article
9 of the Uniform Commercial Code. Any disputes, claims, or controversies
concerning the lawfulness or reasonableness of any act, or exercise of any
right, concerning any collateral securing this Note, including any claim to
rescind, reform, or otherwise modify any agreement relating to the collateral
<PAGE> 2
11-25-1996 PROMISSORY NOTE Page 2
Loan No 9001 (Continued)
===============================================================================
securing this Note, shall also be arbitrated, provided however that no
arbitrator shall have the right or the power to enjoin or restrain any act of
any party. Judgment upon any award rendered by any arbitrator may be entered in
any court having jurisdiction. Nothing in this Note shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for these
purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.

DISHONORED CHECK CHARGE. In the event a check offered in full or partial
payment on this loan is returned unpaid, Lender may charge a fee for the
purpose of defraying the expense incident to handling such returned check, and
Borrower agrees to pay such fee. The fee shall not exceed the maximum amount
permitted under applicable law.

RENEWAL AND EXTENSION. This Note is given in renewal and extension and not in
novation of the following described indebtedness: THE PROMISSORY NOTE FROM
DAWSON PRODUCTION SERVICES, INC. TO LENDER DATED JULY 25, 1996.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. In particular, this section means (among other
things) that Borrower does not agree or intend to pay, and Lender does not
agree or intend to contract for, charge, collect, take, reserve or receive
(collectively referred to herein as "charge or collect"), any amount in the
nature of interest or in the nature of a fee for this loan, which would in any
way or event (including demand, prepayment, or acceleration) cause Lender to
charge or collect more for this loan than the maximum Lender would be permitted
to charge or collect by federal law or the law of the State of Texas (as
applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. The right to accelerate maturity of sums due under this Note does
not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and Lender does not intend to charge
or collect any unearned interest in the event of acceleration. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the loan evidenced
by this Note until payment in full so that the rate or amount of interest on
account of the loan evidenced hereby does not exceed the applicable usury
ceiling. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest, notice of dishonor, notice of intent
to accelerate the maturity of this Note, and notice of acceleration of the
maturity of this Note. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

BORROWER:

DAWSON PRODUCTION SERVICES, INC.

By: /s/ MICHAEL E. LITTLE
---------------------------------------
MICHAEL E. LITTLE, PRESIDENT & CHIEF EXECUTIVE OFFICER

================================================================================
Variable Rate. Single Pay.
<PAGE> 3
[LOGO]

DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$7,000,000.00 11-25-1996 01-25-1997 9001 500 0010 2211480 035
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Borrower: DAWSON PRODUCTION SERVICES, INC. Lender: THE FROST NATIONAL BANK
(TIN: 74-2231546) P.O. BOX 1600
901 NE LOOP 410, SUITE 700 SAN ANTONIO, TX 78296
SAN ANTONIO, TX 78209
==================================================================================================================
</TABLE>

LOAN TYPE. This is a Chapter 1 non-precomputed Variable Rate (2.250% over
London Interbank Offered Rate (LIBOR) for one (1) month as quoted in the most
recently published issue of THE WALL STREET JOURNAL under the "Money Rates"
column, and if more than one LIBOR rate for one (1) month is quoted, the higher
rate shall apply, making an initial rate of 7.625%), Single Principal Payment
(with periodic interest payments) Loan to a Corporation for $7,000,000.00 due
on January 25, 1997. This is an unsecured renewal of the following described
indebtedness: THE PROMISSORY NOTE FROM DAWSON PRODUCTION SERVICES, INC. TO
LENDER DATED JULY 25, 1996.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

/ / Personal, Family or Household Purposes.

/ / Personal Investment.

/ / Motor Vehicle Purchase for Other Than Personal, Family or
Household Purposes.

/X/ Business, Agricultural and All Other.

SPECIFIC PURPOSE. The specific purpose of this loan is: RENEWAL OF LOAN #9001:
ORIG TO FUND ACQUISITION OF TAYLOR INTERESTS.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds to $7,000,000.00 as follows:

Amount paid on Borrower's account: $7,000,000.00
$7,000,000.00 Payment on Loan # 2211480-9001 RENEWAL
-------------
Note Principal: $7,000,000.00

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED NOVEMBER 25, 1996.

BORROWER:

DAWSON PRODUCTION SERVICES, INC.

By: /s/ MICHAEL E. LITTLE
--------------------------------------------------------
MICHAEL E. LITTLE, President and Chief Executive Officer

================================================================================
Variable Rate. Single Pay.
<PAGE> 4
[LOGO]

NOTICE OF FINAL AGREEMENT

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$7,000,000.00 11-25-1996 01-25-1997 9001 500 0010 2211480 035
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C>
Borrower: DAWSON PRODUCTION SERVICES, INC. Lender: THE FROST NATIONAL BANK
(TIN: 74-2231546) P.O. BOX 1600
901 NE LOOP 410, SUITE 700 SAN ANTONIO, TX 78296
SAN ANTONIO, TX 78209
==================================================================================================================
</TABLE>

- --------------------------------------------------------------------------------

THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

AS USED IN THIS NOTICE, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:

LOAN. The term "Loan" means the following described loan: a Chapter 1
non-precomputed Variable Rate (2.250% over London Interbank Offered Rate
(LIBOR) for one (1) month as quoted in the most recently published issue of THE
WALL STREET JOURNAL under the "Money Rates" column, and if more than one LIBOR
rate for one (1) month is quoted, the higher rate shall apply, making an
initial rate of 7.625%), Nondisclosable Single Principal Payment (with periodic
interest payments) Loan to a Corporation for $7,000,000 due on January 25,
1997. This is an unsecured renewal of the following described indebtedness:
THE PROMISSORY NOTE FROM DAWSON PRODUCTION SERVICES, INC. TO LENDER DATED JULY
25, 1996.

PARTIES: The term "Parties" means THE FROST NATIONAL BANK and any and
all entities or individuals who are obligated to repay the loan or have pledged
property as security for the Loan, including without limitation the following:

BORROWER: DAWSON PRODUCTION SERVICES, INC.

LOAN AGREEMENT: The term "Loan Agreement" means one or more promises,
promissory notes, agreements, undertakings, security agreements, deeds of trust
or other documents, or commitments, or any combination of those actions or
documents, relating to the Loan, including without limitation the following:

NECESSARY FORMS

<TABLE>
<S> <C>
Promissory Note/Change in Terms Agr. Disbursement Request and Authorization
Notice of Final Agreement

</TABLE>

- --------------------------------------------------------------------------------

This Notice of Final Agreement is given by THE FROST NATIONAL BANK pursuant to
Section 26.02 of the Texas Business and Commerce Code. Each Party who signs
below, other than THE FROST NATIONAL BANK, acknowledges, represents, and
warrants to THE FROST NATIONAL BANK that it has received, read and understood
this Notice of Final Agreement. This Notice is dated November 25, 1996.

BORROWER:

DAWSON PRODUCTION SERVICES, INC.

By:________________________________________________________
MICHAEL E. LITTLE, President and Chief Executive Officer

LENDER:

THE FROST NATIONAL BANK

By:________________________________________________________
Authorized Officer

- -------------------------------------------------------------------------------

<PAGE> 1

EXHIBIT 11.1

DAWSON PRODUCTION SERVICES, INC.

EARNINGS PER SHARE COMPUTATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------ -----------------------
1994 1995 1996 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Income before extraordinary item and cumulative effect
of change in accounting principle................... $ 796,233 $1,061,236 $1,372,998 $ 648,128 $2,175,003
Extraordinary item and cumulative effect of change in
accounting principle................................ (92,202) -- (513,819) -- --
---------- ---------- ---------- ---------- ----------
Net income............................................ 704,031 1,061,236 859,179 648,128 2,175,003
Preferred stock dividends............................. (101,007) (101,007) (88,273) (50,086) --
---------- ---------- ---------- ---------- ----------
Net income applicable to common stock................. $ 603,024 $ 960,229 $ 770,906 $ 598,042 $2,175,003
========== ========== ========== ========== ==========
Shares used in earnings per share computations........ 2,052,168 2,155,380 2,931,234 2,384,359 6,510,428
========== ========== ========== ========== ==========
Earnings per share before extraordinary item and
cumulative effect of change in accounting
principle........................................... $ 0.34 $ 0.45 $ 0.44 $ 0.25 $ 0.33
========== ========== ========== ========== ==========
Earnings per share.................................... $ 0.29 $ 0.45 $ 0.27 $ 0.25 $ 0.33
========== ========== ========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE
Income before extraordinary item and cumulative effect
of change in accounting principle................... $ 796,233 $1,061,236 $1,372,998 $ 648,128 $2,175,003
Interest on convertible debt, net of tax.............. 15,668 59,091 4,894 76,628 --
---------- ---------- ---------- ---------- ----------
Income before extraordinary item and cumulative effect
of change in accounting principle................... 811,901 1,120,327 1,377,892 724,756 2,175,003
Extraordinary item and cumulative effect of change in
accounting principle................................ (92,202) -- (513,819) -- --
---------- ---------- ---------- ---------- ----------
Net income applicable to common stock................. $ 719,699 $1,120,327 $ 864,073 $ 724,756 $2,175,003
========== ========== ========== ========== ==========
Shares used in earnings per share computations........ 2,450,791 2,648,740 3,207,622 3,095,826 6,527,796
========== ========== ========== ========== ==========
Earnings per share before cumulative effect of change
in accounting principle............................. $ 0.33 $ 0.42 $ 0.43 $ 0.23 $ 0.33
========== ========== ========== ========== ==========
Earnings per share.................................... $ 0.29 $ 0.42 $ 0.27 $ 0.23 $ 0.33
========== ========== ========== ========== ==========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS -- PRIMARY
Weighted average outstanding common shares............ 1,271,885 1,399,577 2,471,712 1,688,816 6,390,984
Dilutive effect of stock and warrants issued within
one year prior to initial public offering........... 724,829 713,098 411,184 629,494 --
Average other common equivalents shares -- dilutive
effect of warrant shares............................ 55,454 42,705 48,338 66,049 119,444
---------- ---------- ---------- ---------- ----------
Shares used in earnings per share computation......... 2,052,168 2,155,380 2,931,234 2,384,359 6,510,428
========== ========== ========== ========== ==========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS -- FULLY DILUTED
Weighted average outstanding common shares............ 1,271,885 1,399,577 2,471,712 1,688,816 6,390,984
Dilutive effect of stock and warrants issued within
one year prior to initial public offering........... 724,829 713,098 411,184 629,494 --
Average other common equivalent shares -- dilutive
effect of warrant shares............................ 55,454 42,705 48,338 66,048 136,812
Average shares attributable to preferred stock........ 347,440 347,440 262,004 347,440 --
Average shares attributable to convertible debt....... 51,183 145,920 14,384 364,028 --
---------- ---------- ---------- ---------- ----------
Shares used in earnings per share computation......... 2,450,791 2,648,740 3,207,622 3,095,826 6,527,796
========== ========== ========== ========== ==========
</TABLE>

<PAGE> 1

EXHIBIT 12.1

DAWSON PRODUCTION SERVICES, INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------- ------------------------
1996 1996
PRO PRO
1992 1993 1994 1995 1996 FORMA 1995 1996 FORMA
---- ------ ------ ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income
taxes......................... $495 $ 893 $1,321 $1,742 $2,082 $(3,910) $1,046 $3,529 $ (611)
Add back:
Interest expense................. 352 301 282 789 1,848 11,810 953 296 5,905
Amortization of debt issuance
cost.......................... -- -- -- -- -- 400 -- -- 200
Portion of rent expense
representative of interest
factor........................ 36 41 48 58 84 84 39 62 62
---- ------ ------ ------ ------ ------- ------ ------ ------
Earnings as adjusted............... $883 $1,235 $1,651 $2,589 $4,014 $ 8,384 $2,038 $3,887 $5,556
==== ====== ====== ====== ====== ======= ====== ====== ======
Fixed charges:
Interest expense................. $352 $ 301 $ 282 $ 789 $1,848 $11,810 $ 953 $ 296 $5,905
Amortization of debt issuance
cost.......................... -- -- -- -- -- 400 -- -- 200
Portion of rent expense
representative of interest
factor........................ 36 41 48 58 84 84 39 62 62
---- ------ ------ ------ ------ ------- ------ ------ ------
$388 $ 342 $ 330 $ 847 $1,932 $12,294 $ 992 $ 358 $6,167
==== ====== ====== ====== ====== ======= ====== ====== ======
Ratio of earnings to fixed
charges.......................... 2.3x 3.6x 5.0x 3.1x 2.1x 0.7x 2.1x 10.9x 0.9x
==== ====== ====== ====== ====== ======= ====== ====== ======
</TABLE>

<PAGE> 1

EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

To the Stockholders, Members, and Owners
Taylor Acquisition Group

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

/s/ CHAPMAN, WILLIAMS & CO.
CHAPMAN, WILLIAMS & CO.

Carthage, Texas
January 6, 1997

<PAGE> 1

EXHIBIT 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 26, 1996 (except for the second paragraph of Note 1 as
to which the date is December 23, 1996), and which includes an explanatory
paragraph regarding a change in the accounting for income taxes in 1993, on our
audits of the financial statements of the U.S. Land-Based Well Servicing
Operations of Pride Petroleum Services, Inc. as of December 31, 1995 and 1994
and for each of the three years in the period ended December 31, 1995. We also
consent to the reference to our firm under the caption "Experts."

/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.

Houston, Texas
January 8, 1997

<PAGE> 1

EXHIBIT 23.5

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made a part of this
Registration Statement.

/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

San Antonio, Texas
January 6, 1997