KEY ENERGY GROUP INC, SC 14D9, 1998-08-18

KEY ENERGY GROUP INC
SC 14D9, 1998-08-18
DRILLING OIL & GAS WELLS

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<PAGE> 1

[Dawson Production Services LOGO]

August 17, 1998

To Shareholders of Dawson Production Services, Inc.:

On behalf of the Board of Directors of Dawson Production Services, Inc.
(the "Company"), I am pleased to inform you that the Company has entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Key Energy Group,
Inc. and Midland Acquisition Corp., its wholly-owned subsidiary, pursuant to
which Midland Acquisition Corp. today has commenced a cash tender offer (the
"Offer") to purchase all of the outstanding shares of the Company's Common
Stock, including the associated Common Stock Purchase Rights, (the "Shares") at
$17.50 per share. The Merger Agreement provides that, upon satisfaction of
certain conditions, the Offer will be followed by a merger (the "Merger") in
which any remaining Shares will be converted into the right to receive $17.50
per Share in cash, without interest.

THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY (A) DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
SHAREHOLDERS; (B) APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY; AND (C) RESOLVED TO RECOMMEND THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES AND APPROVE AND ADOPT THE
MERGER AGREEMENT AND APPROVE THE TRANSACTIONS CONTEMPLATED THEREBY.

In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
that is being filed today with the Securities and Exchange Commission. Among
other things, the Board of Directors considered the opinion of its financial
advisor, Morgan Stanley & Co. Incorporated, that the consideration to be
received by the holders of Shares in the Offer and Merger is fair to such
holders from a financial point of view.

In addition to the attached Schedule 14D-9, enclosed is the Offer to
Purchase dated August 17, 1998, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and the Merger and provide
instructions as to how to tender your Shares. We urge you to read these
documents carefully in making your decision with respect to tendering your
Shares pursuant to the Offer.

On behalf of the Board of Directors,
/s/ Michael E. Little
Michael E. Little
Chairman, President and Chief
Executive Officer

112 E. Pecan St., Suite 1000 S San Antonio, TX 78205 S (210) 476-0420 S Fax
(210) 476-0444
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------

DAWSON PRODUCTION SERVICES, INC.
(NAME OF SUBJECT COMPANY)

DAWSON PRODUCTION SERVICES, INC.
(NAME OF PERSON(S) FILING STATEMENT)

COMMON STOCK, PAR VALUE $0.01 PER SHARE
COMMON STOCK PURCHASE RIGHTS
(TITLE OF CLASS OF SECURITIES)

239423-10-6
(CUSIP NUMBER OF CLASS OF SECURITIES)

MICHAEL E. LITTLE
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
DAWSON PRODUCTION SERVICES, INC.
112 E. PECAN STREET, SUITE 1000
SAN ANTONIO, TEXAS 78205
(210) 476-0420

(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
------------------------

COPIES TO:

<TABLE>
<S> <C>
J. ROWLAND COOK, ESQ. JOSEPH CIALONE, ESQ.
JENKENS & GILCHRIST, P.C. BAKER & BOTTS, L.L.P.
600 CONGRESS AVENUE, SUITE 2200 3000 ONE SHELL PLAZA
AUSTIN, TEXAS 78701 910 LOUISIANA
(512) 499-3821 HOUSTON, TEXAS 77002
(713) 229-1261
</TABLE>

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- --------------------------------------------------------------------------------
<PAGE> 3

ITEM 1. SECURITY AND SUBJECT COMPANY

(a) The name of the subject company is Dawson Production Services, Inc., a
Texas corporation (the "Company"), and the address of the principal executive
office of the Company is 112 E. Pecan Street, Suite 1000, San Antonio, Texas
78205. The title of the class of equity security to which this statement relates
is the Common Stock, par value $0.01 per share of the Company, and the related
Common Stock Purchase Rights (together, the "Shares").

ITEM 2. TENDER OFFER OF THE PURCHASER

This statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated August 17, 1998 (the "Schedule 14D-1") of
Midland Acquisition Corp., a New Jersey corporation (the "Purchaser"), a
wholly-owned subsidiary of Key Energy Group, Inc., a Maryland corporation (the
"Parent" or "Key"), to purchase for cash all issued and outstanding shares of
common stock of the Company at $17.50 per share upon the terms and subject to
the conditions set forth in the Offer to Purchase dated August 17, 1998 (the
"Offer to Purchase") and in the related Letter of Transmittal (which, together
with the Offer to Purchase and any amendments or supplements thereto,
collectively constitute the "Offer.") The Schedule 14D-1 states that the
principal executive offices of the Purchaser and Parent are located at Two Tower
Center, Twentieth Floor, East Brunswick, New Jersey 08816.

The Offer is made pursuant to an Agreement and Plan of Merger dated August
11, 1998 between the Company, the Purchaser and the Parent, a copy of which is
filed as Exhibit 1 hereto. The Merger Agreement provides, among other things,
that following satisfaction or waiver of the conditions set forth in the Merger
Agreement, Purchaser shall be merged with and into the Company, the separate
corporate existence of Purchaser shall cease and the Company shall continue as
the surviving corporation and a direct wholly owned subsidiary of Parent. The
Merger Agreement is described in greater detail in Item 3 of this Schedule
14D-9.

ITEM 3. IDENTITY AND BACKGROUND

(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.

(b) Except as described herein or in the Information Statement attached as
Annex A hereto, to the knowledge of the Company, as of the date hereof, there
are no material contracts, agreements, arrangements or understandings, or any
potential or actual conflicts of interest between the Company or its affiliates
and

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(i) the Company, its directors, executive officers or affiliates or (ii) the
Purchaser or their directors, executive officers or affiliates.

EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS

Certain contracts, arrangements and understandings between the Company and
certain of its directors and executive officers are described in Annex A hereto,
which description is incorporated by reference.

EMPLOYMENT AGREEMENTS; AMENDMENTS TO EMPLOYMENT AGREEMENTS

Little Employment Agreement. The Company and Michael E. Little, Chairman,
President and Chief Executive Officer of the Company entered into an employment
agreement effective April 1, 1996. Mr. Little and the Company amended this
employment agreement effective April 1, 1998. The employment agreement, as
amended, provides for a four-year term that will expire on March 31, 2000. Mr.
Little's annual base salary is $300,000 for 1997, 1998 and 1999. Mr. Little is
eligible for a bonus pursuant to the benefit plan entitled "Compensation
Program, Board of Directors Summary," which was approved by the Board of
Directors on July 31, 1997. Mr. Little's bonus is capped at 100% of his annual
base salary. Prior to a change of control of the Company, (i) if Mr. Little
terminates his employment with the Company for cause, or if the Company
terminates Mr. Little's employment without cause, Mr. Little will receive two
year's base salary as severance, and (ii) if Mr. Little terminates his
employment with the Company without cause, or if the Company terminates Mr.
Little's employment for cause, Mr. Little will not receive any severance
payment. For a period of one year after a change of control of the Company, if
Mr. Little terminates his employment with the Company for cause, or if the
Company terminates Mr. Little's employment without cause, Mr. Little will
receive three year's base salary as severance. For a period of 60 days after a
change of control, Mr. Little may terminate his employment with the Company
without cause and still receive three years' base salary as severance. If Mr.
Little is terminated by the Company for cause at any time, Mr. Little will not
receive any severance. On August 10, 1998, Mr. Little and the Company entered
into a second amendment to the employment agreement, in which the Company agreed
to pay Mr. Little such additional amounts as may be necessary to cover the taxes
Mr. Little would have to pay on any "excess parachute payments" he is entitled
to receive pursuant to his employment agreement.

Byerlotzer Employment Agreement. The Company and Jim Byerlotzer, Senior
Vice President and Chief Operating Officer of the Company, entered into an
employment agreement effective July 1, 1998. The employment agreement provides
for a two-year term that will expire on June 30, 2000. Mr. Byerlotzer's annual
base salary during the term of the agreement is $150,000. Mr. Byerlotzer is
eligible for a discretionary bonus from the Company. Prior to a change of
control of the Company, if Mr. Byerlotzer terminates his employment with the
Company for cause, or if the Company terminates Mr. Byerlotzer's employment
without cause, Mr. Byerlotzer will receive one year's base salary as severance.
For a period of one year after a change of control, if the Company terminates
Mr. Byerlotzer without cause, Mr. Byerlotzer will receive 18 months' salary as
severance. For a period of two years after a change of control, if Mr.
Byerlotzer terminates his employment with the Company for cause, he will receive
one year's salary as severance. After a change of control, if Mr. Byerlotzer
terminates his employment with the Company without cause, or if the Company
terminates Mr. Byerlotzer's employment for cause, Mr. Byerlotzer will not
receive any severance payment. On August 10, 1998, Mr. Byerlotzer and the
Company entered into an amendment to the employment agreement, in which the
Company agreed to pay Mr. Byerlotzer such additional amounts as may be necessary
to cover the taxes Mr. Byerlotzer would have to pay on any "excess parachute
payments" he is entitled to receive pursuant to his employment agreement.

cause, Mr. Stark will receive 18 months' salary as severance. For a period of
two years after a change of control, if Mr. Stark terminates his employment with
the Company for cause, he will receive one year's salary as severance. After a
change of control, if Mr. Stark terminates his employment with the Company
without cause, or if the Company terminates Mr. Stark's employment for cause,
Mr. Stark will not receive any severance payment. On August 10, 1998, Mr. Stark
and the Company entered into an amendment to the employment agreement, in which
the Company agreed to pay Mr. Stark such additional amounts as may be necessary
to cover the taxes Mr. Stark would have to pay on any "excess parachute
payments" he is entitled to receive pursuant to his employment agreement.

Eustace Employment Agreement. The Company and Joseph Eustace, Vice
President of the East Texas/Gulf Coast Region, entered into an employment
agreement effective April 1, 1996. The employment agreement provides for a
three-year term that will expire on March 31, 1999. Mr. Eustace's annual base
salary is $125,000 for the first year, increasing to $132,500 in the second year
and to $140,000 in the third year. Mr. Eustace is eligible for a discretionary
bonus from the Company. If Mr. Eustace's employment is terminated by the Company
without cause, Mr. Eustace will receive one year's salary as severance. If Mr.
Eustace's employment is terminated by the Company without cause during the
12-month period following a change of control of the Company, Mr. Eustace will
receive 18 months' salary as severance. If Mr. Eustace terminates his employment
with the Company for cause within 12 months of a change of control of the
Company, Mr. Eustace will receive 12 months' salary as severance. If the Company
terminates Mr. Eustace's employment for cause, Mr. Eustace is not entitled to
any severance. On August 10, 1998, Mr. Eustace and the Company entered into an
amendment to the employment agreement, in which the Company agreed to pay Mr.
Eustace such additional amounts as may be necessary to cover the taxes Mr.
Eustace would have to pay on any "excess parachute payments" he is entitled to
receive pursuant to his employment agreement.

EMPLOYEE SEVERANCE PAY PLAN

As of August 7, 1998, the Board of Directors adopted an Employee Severance
Pay Plan ("Severance Plan"). The Severance Plan provides severance benefits to
office employees and salaried employees, as those categories of employees are
set forth in the Company's payroll records. The Severance Plan provides
severance benefits only if the employee is a full-time employee. The Chief
Executive Officer, Chief Financial Officer, and Chief Operating Officer are
entitled to receive benefits under the Severance Plan unless they are entitled
to severance benefits from the Company through a separate agreement, in which
case the separate agreement will control.

Severance benefits are triggered if an employee is involuntarily terminated
by the Company, or its successor, within 18 months after the Company undergoes a
Change of Control (as defined in the Severance Plan), except if (a) the employee
is terminated with cause, (b) the employee is terminated but is immediately
offered a similar or equivalent position, with similar duties and with no
decrease in base pay, and which is within commuting distance from the employee's
principal residence, or (c) the employee is terminated due to the sale of the
Company where the individual is immediately offered a similar or equivalent
position, with similar duties and with no decrease in base pay, and which is
within commuting distance from the employee's principal residence. The Severance
Plan provides for severance benefits of one month's salary for each full year of
service, except that the minimum amount of severance benefits which an eligible
employee can receive is three months' salary. The Severance Plan cannot be
modified by the new management of the Company for 18 months after a Change of
Control. The Severance Plan will automatically terminate five years after the
effective date of the Severance Plan if there has not been a Change of Control.

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DIRECTORS' AND OFFICERS' INDEMNIFICATION

The Company's Amended and Restated Articles of Incorporation (the "Articles
of Incorporation") and Bylaws (the "Bylaws") provide that the Company shall
indemnify any person who was, is or is threatened to be made a named defendant
or respondent in a proceeding because the person (a) is or was a director or
officer of the Company, or (b) while a director or officer of the Company, is or
was serving at the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, to the fullest
extent that a corporation may grant indemnification under the Texas Business
Corporation Act, as the same exists or as amended. The Articles and Bylaws
further provide that this indemnification right is a contract right and as,
such, runs to the benefit of any director or officer who is elected and accepts
the position of director or officer of the Company or elects to continue to
serve as a director or officer of the Company while the applicable
indemnification provisions in the Articles and the Bylaws are in effect.

The Company has entered into indemnification agreements (the
"Indemnification Agreements") with each of its directors and officers. The
Indemnification Agreements generally provide that if the party to be indemnified
(the "Indemnitee") was, is or becomes a party to or witness or other participant
in, a claim by reason of (or arising in part out of) an Indemnifiable Event (as
defined in the Indemnification Agreements), the Company shall indemnify the
Indemnitee to the fullest extent permitted by law as soon as practicable but in
not event later than 30 days after written demand is present to the Company,
against any and all expenses, judgments, fines, penalties, and amounts paid in
settlement of with respect to the relevant claim. A form of the Indemnification
Agreements is filed as Exhibit 3 hereto.

CONSULTING AGREEMENTS

Pursuant to the Merger Agreement, the Company has agreed to use its best
efforts to cause Messrs. Little, Byerlotzer and Eustace to enter into definitive
consulting agreements with Parent and Purchaser on the terms set forth on the
term sheets executed August 11, 1998 between Parent, Purchaser and each of
Messrs. Little, Byerlotzer and Eustace, which are filed herewith as Exhibits 14,
15 and 16, respectively. The term sheets provide that, in connection with the
Merger, for a period of three years, Messrs. Little, Byerlotzer and Eustace will
provide consulting services to Parent and the Purchaser (in the case of Mr.
Little, estimated at less than 40 hours per month) for which they will receive
annual compensation of $250,000, $100,000 and $75,000, respectively. The term
sheets include covenants not to compete in certain businesses and the definitive
agreements will include usual and customary terms, including terms relating to
confidentiality of information and non-solicitation of employees.

THE MERGER AGREEMENT

As of August 11, 1998, Parent, the Purchaser and the Company entered into
the Merger Agreement, pursuant to which the Purchaser agreed to make the Offer.
The following is a summary of certain provisions of the Merger Agreement. This
summary does not purport to be complete and is qualified in its entirety by
reference to the complete text of the Merger Agreement, a copy of which is filed
as Exhibit 1 hereto and is incorporated herein by reference. Capitalized terms
not otherwise defined below shall have the meanings set forth in the Merger
Agreement.

The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the satisfaction or waiver of
the conditions of the Offer, the Purchaser will purchase all Shares validly
tendered pursuant to the Offer. The obligation of the Purchaser to accept for
payment and pay for any Shares validly tendered prior to the expiration of the
Offer is conditioned upon there being validly tendered and not withdrawn prior
to the expiration of the Offer, that number of Shares which, together with the
Shares owned by Parent or the Purchaser, represents at least a majority of the
Shares outstanding on a fully diluted basis and to the satisfaction or waiver of
the other conditions described in Annex A to the Merger Agreement. The Merger
Agreement provides that the Purchaser may not amend or waive the Minimum
Condition, or decrease the Offer Price or the number of Shares sought, or amend
any other condition of the Offer in any manner adverse to the holders of Shares
without the written consent of the Company. Notwithstanding the foregoing
provisions, if on the initial scheduled expiration of the Offer (as it may be
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extended), all conditions to the Offer shall not have been satisfied or waived,
the Offer may be extended from time to time until December 31, 1998. In
addition, the Offer Price may be increased and the Offer may be extended to the
extent required by law in connection with such increase, in each case without
the consent of the Company.

Designation of Directors. The Merger Agreement provides that, promptly
upon the purchase of and payment for Shares by Parent or any of its subsidiaries
which represents at least a majority of the outstanding Shares (on a fully
diluted basis), Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board so that the percentage
of Parent's nominees on the Company Board equals the percentage of outstanding
Shares beneficially owned by Parent, the Purchaser and their affiliates. The
Company shall, upon request by the Purchaser, use its best efforts promptly
either to increase the size of the Company Board or, at the Company's election,
secure the resignations of incumbent directors, and shall cause Parent's
designees to be so elected. Notwithstanding the foregoing, until the effective
time of the Merger ("the Effective Time"), the Company will use its reasonable
efforts to retain as members of the Company Board at least two directors who
were directors of the Company on the date of the Merger Agreement; provided,
that, subsequent to the purchase of and payment for Shares pursuant to the
Offer, Parent will always have its designees represent at least a majority of
the entire Company Board. The Company's obligation to appoint Parent's designees
to the Company Board is subject to compliance with Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. Following the election of Parent's
designees to the Company Board, any amendment of the Merger Agreement, any
termination of the Merger Agreement by the Company, any extension of time for
performance of any of the obligations of Parent or the Purchaser, or any waiver
of any condition or any of the Company's rights thereunder may be effected only
by the action of a majority of the directors of the Company then in office who
were directors on the date of the Merger Agreement, which action shall be deemed
to constitute the action of the full Company Board; provided, that, if there are
no such directors, such actions may be effected by the majority vote of the
entire Company Board.

The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, the Purchaser will be merged with and into the Company, with
the Company continuing as the surviving corporation (the "Surviving
Corporation") and a wholly owned subsidiary of Parent. At Parent's election, the
Merger may be restructured so that the Company is merged with or into Parent or
any other direct or indirect subsidiary of Parent or so that any direct or
indirect subsidiary of Parent other than the Purchaser is merged with and into
the Company. At the Effective Time, each issued and outstanding Share (other
than Shares owned by Parent, the Purchaser or any other wholly owned Subsidiary
of Parent, Shares owned by the Company as treasury stock and Shares held by
holders who perfect any available appraisal rights under the Texas Business
Corporation Act (the "TBCA")) shall be converted into the right to receive the
Offer Price, without interest thereon, and each issued and outstanding share of
common stock of the Purchaser shall be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.

Treatment of Options. The Merger Agreement provides that Parent and the
Company will take all actions necessary so that, immediately prior to the
Effective Time, the Company shall pay to the holder of each option to purchase
Shares, whether or not then vested or exercisable, which has been granted under
the Company's stock option plans an amount equal to the product of (A) the
excess, if any, of the Offer Price over the per share exercise price thereof and
(B) the number of Shares subject to such option. Each outstanding option will be
canceled as of the Effective Time and all plans, programs or arrangements of the
Company providing for the issuance or grant of options or other interests in the
capital stock of the Company will be terminated.

Conditions. The respective obligations of each party to effect the Merger
are subject to the satisfaction, on or prior to the closing of the Merger, of
each of the following conditions: (a) the Merger Agreement and the Merger shall
have been approved and adopted by the requisite vote of the holders of Common
Stock if required by applicable law and the Company's Articles, in order to
consummate the Merger; (b) no statute, rule, order, decree or regulation shall
have been enacted or promulgated by any foreign or domestic government or any
governmental agency or authority of competent jurisdiction which prohibits the
consum-

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mation of the Merger and all foreign or domestic governmental consents, orders
and approvals required for the consummation of the Merger and the transactions
contemplated by the Merger Agreement shall have been obtained and shall be in
effect at the Effective Time; (c) there shall be no order or injunction of a
foreign or United States federal or state court or other governmental authority
of competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and (d) Parent, the Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer.

Shareholders' Meeting. Pursuant to the Merger Agreement, the Company
shall, if required by applicable law in order to consummate the Merger, (i) duly
call, give notice of, convene and hold a special meeting of its shareholders as
soon as practicable following the acceptance for payment and purchase of Shares
by the Purchaser pursuant to the Offer for the purpose of considering and taking
action upon the Merger Agreement; (ii) prepare and file with the Commission a
preliminary proxy or information statement relating to the Merger and the Merger
Agreement and shall use its reasonable efforts to (A) cause a definitive Proxy
Statement to be mailed to its shareholders and (B) obtain the necessary
approvals of the Merger and the Merger Agreement by its shareholders; and (iii)
subject to the fiduciary obligations of the Company Board, the Company shall
include in the Proxy Statement the recommendation of the Company Board that
shareholders of the Company vote in favor of the approval of the Merger and the
adoption of the Merger Agreement. In the event that Parent, the Purchaser or any
other subsidiary of Parent shall acquire at least 90% of the outstanding Shares,
pursuant to the Offer or otherwise, the parties shall take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of the Company's
shareholders, in accordance with the TBCA and the New Jersey Business
Corporation Act.

Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to, among other things (i) organization and good standing,
(ii) capitalization, (iii) authorization, validity of the Merger Agreement and
all required Company action taken with respect to the Offer and the Merger, (iv)
required consents or approvals, (v) no material misstatements in filings made
with the Commission or financial statements, (vi) absence of material adverse
changes, (vii) no undisclosed liabilities, (viii) no misstatements or omissions
of a material fact in the Proxy Statement or other filings with the Commission
with respect to the Offer and the Merger, (ix) employee benefit plans and ERISA,
(x) litigation, (xi) interim conduct of businesses, (xii) compliance with
environmental laws and regulations, (xiii) tax returns and tax liabilities,
(xiv) labor relations, (xv) compliance with all laws, (xvi) insurance, (xvii)
material contracts, (xviii) valid title to, or leasehold interests in, all
property, (xix) valid title to, or leasehold interests in, all equipment, (xx)
all necessary permits and licenses, (xxi) intellectual property, (xxii) receipt
of fairness opinion from financial advisor and (xxiii) vote required to approve
the Merger. In addition, the Merger Agreement contains representation by Parent
and the Purchaser as to, among other things, (i) organization and good standing,
(ii) authorization, validity of the Merger Agreement and all required action
taken with respect to the Offer and the Merger, (iii) required consents or
approvals, (iv) information in the Proxy Statement, (v) financing the Offer and
the Merger and (vi) operations of the Purchaser.

Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that after the date of the Merger Agreement and prior to the time
Parent's designees have been elected to, and constitute a majority of, the
Company Board, unless Parent otherwise agrees in writing and except as otherwise
contemplated by the Merger Agreement the business of the Company and each of its
Subsidiaries shall be conducted only in the ordinary and usual course and, to
the extent consistent therewith, each of the Company and its Subsidiaries shall
use its best efforts to preserve its business organization intact and maintain
its existing relations with customers, suppliers, employees, creditors and
business partners. Without limiting the generality of the foregoing, during such
period, the Company shall not, and shall not permit any of its Subsidiaries to:

(a) sell, transfer or pledge any Common Stock, preferred stock of the
Company or capital stock of any of its Subsidiaries beneficially owned by
it, or split, combine or reclassify the outstanding Common Stock or any
outstanding capital stock of any of its Subsidiaries;

(b) except for those actions contemplated by the Merger Agreement, (i)
amend its articles of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend

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or other distribution payable in cash, stock or property with respect to
its capital stock, (iii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company or any of its
Subsidiaries, other than Shares reserved for issuance on the date of the
Merger Agreement upon exercise of outstanding Rights pursuant to the Rights
Agreement or issuances pursuant to the exercise of stock options
outstanding on the date of the Merger Agreement; (iv) transfer, lease,
license, sell, mortgage, pledge, dispose of, or encumber any material
assets other than in the ordinary and usual course of business and
consistent with past practice, or incur or modify any material indebtedness
or other liability, other than in the ordinary and usual course of business
and consistent with past practice; or (v) redeem, purchase or otherwise
acquire directly or indirectly more than 5,000 shares of its capital stock,

(c) (i) grant any increase in the compensation payable or to become
payable by the Company or any of its Subsidiaries to any of its executive
officers or key employees or (A) adopt any new, or (B) amend or otherwise
increase, or accelerate the payment or vesting of the amounts payable or to
become payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement; or (ii) enter into any employment or severance agreement with
or, except in accordance with the existing written policies of the Company,
grant any severance or termination pay to any officer, director or employee
of the Company or any of its Subsidiaries;

(d) modify, amend or terminate any of its material contracts or waive,
release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice;

(e) permit any material insurance policy naming it as a beneficiary or
a loss payable payee to be canceled or terminated without notice to Parent,
except in the ordinary course of business and consistent with past
practice;

(f) (i) incur or assume any long-term debt, or except in the ordinary
course of business, incur or assume any short-term indebtedness in amounts
not consistent with past practice; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; (iii) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to wholly owned Subsidiaries of the Company or customary loans
or advances to employees in accordance with past practice); or (iv) except
for commitments or transactions not in excess of $500,000, enter into any
material commitment or transaction (including, but not limited to, any
borrowing, capital expenditure or purchase, sale or lease of assets);

(g) change any of the accounting principles used by it unless required
by GAAP;

(h) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of any such claims, liabilities
or obligations, (x) in the ordinary course of business and consistent with
past practice, properly reflected or reserved against in, the consolidated
financial statements (or the notes thereto) as of and for the fiscal year
ended March 31, 1998 of the Company and its consolidated Subsidiaries, (y)
incurred since March 31, 1998 in the ordinary course of business and
consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (z) are legally required to be paid
and are also not otherwise payable in accordance with clauses (x) or (y)
above, the Company will notify Parent in writing if such claims,
liabilities or obligations exceed, individually or in the aggregate,
$500,000 in value, reasonably in advance of their payment) (except for
reasonable, documented fees and expenses related to the Merger Agreement
and the transactions contemplated thereby);

(i) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the
Merger);

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<PAGE> 10

(j) take, or agree to commit to take, any action that would make any
representation or warranty of the Company contained herein inaccurate in
any material respect at, or as of any time prior to, the Effective Time;
and

(k) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.

Rights Agreement. Pursuant to the Merger Agreement, the Company has agreed
that except for the Rights Amendment or amendments approved in writing by Parent
or the Purchaser, the Company will not amend the Rights Agreement in any manner
and that the Company will not redeem the rights unless such redemption is
consented to in writing by Parent prior to such redemption.

No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that neither it nor any of its Subsidiaries or affiliates shall (and the Company
shall use its best efforts to cause its and each of its Subsidiaries' officers,
directors, employees, representatives and agents, including, but not limited to,
investment bankers, attorneys and accountants, not to), directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
provide any information to, or enter into any agreement with, any corporation,
partnership, person or other entity or group (other than Parent, any of its
affiliates or representatives) concerning any merger, tender offer, exchange
offer, sale of assets, sale of shares of capital stock or debt securities or
similar transactions involving the Company or any Subsidiary, division or
operating or principal business unit of the Company (an "Acquisition Proposal").
The Company has further agreed that it will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Notwithstanding the foregoing, the Company
may, directly or indirectly, provide access and furnish information concerning
its business, properties or assets to any corporation, partnership, person or
other entity or group pursuant to appropriate confidentiality agreements, and
may negotiate and participate in discussions and negotiations with such entity
or group if (w) such entity or group has submitted an unsolicited bona fide
written proposal to the Company Board relating to any such transaction, (x) such
proposal provides for the acquisition for cash and/or publicly traded securities
of all of the outstanding Shares, (y) the Company Board determines in good
faith, after consultation with its independent financial advisor, that such
proposal is financially superior to the Offer and the Merger and fully financed
or reasonably capable of being financed, and (z) the Company Board determines in
good faith, after consultation with independent legal counsel, that the failure
to provide such information or access or to engage in such discussions or
negotiations would violate their fiduciary duties to the Company's shareholders
under applicable law. A proposal meeting all of the criteria in the preceding
sentence is referred to in the Merger Agreement as a "Superior Proposal."
Nothing contained in this section of the Merger Agreement shall prohibit the
Company or the Company Board from taking and disclosing to the Company's
shareholders a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act. The Company has
agreed to immediately notify Parent of any Acquisition Proposal, or if an
inquiry is made, will keep Parent fully apprised of all developments with
respect to any Acquisition Proposal, will immediately provide to Parent copies
of any written materials received by the Company in connection with any
Acquisition Proposal, discussion, negotiation or inquiry and the identify of the
party making any Acquisition Proposal or inquiry or engaging in such discussion
or negotiation. The Company has also agreed to promptly provide to Parent any
non-public information concerning the Company provided to any other party which
was not previously provided to Parent. The Company has agreed not to release any
third party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company is a party. Notwithstanding anything to the
contrary contained in the Merger Agreement, except in connection with the valid
termination of the Merger Agreement in connection with a Superior Proposal, the
Company has agreed that neither the Company Board nor any committee thereof
shall (i) withdraw, or modify or change in a manner adverse to Parent or the
Purchaser, or propose to withdraw, or propose to modify or change in a manner
adverse to Parent or the Purchaser, the approval or recommendation by the
Company Board or any such committee thereof of the Offer, the Merger Agreement
or the Merger, (ii) approve or recommend or propose to approve or recommend, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal.

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<PAGE> 11

Directors' and Officers' Indemnification. The Merger Agreement provides
that for six years after the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
Subsidiaries (each an "Indemnified Party") against all losses, claims, damages,
liabilities, fees and expenses (including reasonable fees and disbursements of
counsel and judgments, fines, losses, claims, liabilities and amounts paid in
settlement (provided that any such settlement is effected with the written
consent of the Parent or the Surviving Corporation)) in connection with any
claim, suit, action, proceeding or investigation that is, in whole or in part,
based on or arising out of the fact that such person is or was a director,
officer, employee or agent of the Company or its Subsidiaries and arising out of
actions or omissions occurring at or prior to the Effective Time, to the fullest
extent permitted under Texas law.

Disposition of Litigation. Under the terms of the Merger Agreement, each
party to the Merger Agreement has agreed to a dismissal with prejudice of the
Complaint (as defined below) and any and all counterclaims asserted in
connection with the Complaint, with each party bearing its own costs and
expenses in connection therewith. The Company has also agreed that it will not
settle any litigation currently pending, or commenced after the date hereof,
against the Company or any of its directors by any shareholder of the Company
relating to the Offer or the Merger Agreement, without the prior written consent
of Parent.

Consulting Agreements. Pursuant to the Merger Agreement, the Company has
agreed to use its best efforts to cause Mr. Little, Mr. James J. Byerlotzer,
Chief Operating Officer of the Company and Mr. Joseph B. Eustace, Vice President
of East Texas/Gulf Coast Region of the Company, to enter into definitive
consulting agreements with Parent and the Purchaser on the terms set forth in
the term sheets executed by Messrs. Little, Byerlotzer and Eustace. The term
sheets provide that, in connection with the Merger, for a period of three years,
Messrs. Little, Byerlotzer and Eustace will provide consulting services to
Parent and the Purchaser (in the case of Mr. Little, estimated at less than 40
hours per month) for which they will receive annual compensation of $250,000,
$100,000 and $75,000, respectively. The term sheets include covenants not to
compete in certain businesses and the definitive agreements will include usual
and customary terms, including terms relating to confidentiality of information
and non-solicitation of employees.

Termination. The Merger Agreement provides that it may be terminated or
abandoned at any time prior to the Effective Time, whether before or after
shareholder approval thereof:

(a) by the mutual consent of the Parent Board and the Company Board.

(b) by either of the Company Board or the Parent Board:

(i) if Shares shall not have been purchased pursuant to the Offer
on or prior to December 31, 1998; provided, however, that the right to
terminate the Merger Agreement pursuant to this paragraph shall not be
available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the failure of
the Purchaser to purchase Shares pursuant to the Offer on or prior to
such date; or

(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or
other action the parties shall use their reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by the Merger Agreement and such order,
decree, ruling or other action shall have become final and
non-appealable.

(i) if, prior to the purchase of Shares pursuant to the Offer, the
Company Board shall have withdrawn, or modified or changed in a manner
adverse to Parent or the Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger in order to approve and permit
the Company to execute a definitive agreement providing for a Superior
Proposal; provided that (A) at least five (5) business days prior to
terminating the Merger Agreement pursuant to this paragraph the Company
has provided Parent with written notice advising Parent that the Company
Board has received a Superior Proposal that it intends to accept,
specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal, and (B) the
Company shall have caused its financial and legal advisors to negotiate
in good faith with
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<PAGE> 12

Parent to make such adjustments in the terms and conditions of the
Merger Agreement as would enable the Company to proceed with the
transactions contemplated therein on such adjusted terms; and further
provided that simultaneously with any termination of the Merger
Agreement pursuant to this paragraph, the Company shall pay to Parent
the Termination Fee (as defined below); and further provided that the
Company may not terminate the Merger Agreement pursuant to this
paragraph if the Company is in material breach of the Merger Agreement;
or

(ii) if, prior to the purchase of Shares pursuant to the Offer,
Parent or the Purchaser breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained in the Merger Agreement or breaches its representations and
warranties in any material respect; or

(iii) if Parent or the Purchaser shall have terminated the Offer,
or the Offer shall have expired, without Parent or the Purchaser, as the
case may be, purchasing any Shares pursuant thereto; provided that the
Company may not terminate the Merger Agreement pursuant to this
paragraph if the Company is in material breach of the Merger Agreement;
or

(iv) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A to the Merger Agreement, Parent, the
Purchaser or any of their affiliates shall have failed to commence the
Offer on or prior to five business days following the date of the
initial public announcement of the Offer; provided, that the Company may
not terminate the Merger Agreement pursuant to this paragraph if the
Company is in material breach of the Merger Agreement.

(d) by the Parent Board:

(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A to the Merger Agreement, Parent, the
Purchaser, or any of their affiliates shall have failed to commence the
Offer on or prior to five business days following the date of the
initial public announcement of the Offer, provided that Parent may not
terminate this Agreement pursuant to this paragraph if Parent or the
Purchaser is in material breach of the Merger Agreement; or

(ii) if prior to the purchase of Shares pursuant to the Offer, the
Company Board shall have withdrawn, or modified or changed in a manner
adverse to Parent or the Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger or shall have recommended an
Acquisition Proposal or offer, or shall have executed an agreement in
principle (or similar agreement) or definitive agreement providing for a
tender offer or exchange offer for any shares of capital stock of the
Company, or a merger, consolidation or other business combination with a
person or entity other than Parent, the Purchaser or their affiliates
(or the Company Board resolves to do any of the foregoing); provided
that Parent may not terminate the Merger Agreement pursuant to this
paragraph if Parent or the Purchaser is in material breach of the Merger
Agreement; or

(iii) if Parent or the Purchaser, as the case may be, shall have
terminated the Offer, or the Offer shall have expired without Parent or
the Purchaser, as the case may be, purchasing any Shares thereunder,
provided that Parent may not terminate the Merger Agreement pursuant to
this paragraph if it or the Purchaser has failed to purchase Shares in
the Offer in violation of the material terms thereof or hereof.

Effect of Termination; Termination Fee. The Merger Agreement provides that
in the event of the termination of the Merger Agreement written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and the Merger Agreement
shall forthwith become null and void, and there shall be no liability on the
part of the Parent, the Purchaser or the Company except (A) for fraud or for
intentional material breach of the Merger Agreement and (B) as set forth in this
paragraph.

Set forth below are the circumstances under which a Termination Fee (as
defined below) is payable under the terms of the Merger Agreement. All
references to paragraph numbers refer to the section entitled "Termination"
above.
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<PAGE> 13

If (w) the Company Board shall terminate the Merger Agreement pursuant to
paragraph (c) (i), (x) the Parent Board shall terminate the Merger Agreement
pursuant to paragraph (d) (ii), (y) the Company Board shall terminate the Merger
Agreement pursuant to paragraph (b) (i) or paragraph (c) (iii) or the Parent
Board shall terminate the Merger Agreement pursuant to paragraph (b) (i) or (d)
(iii) and prior thereto there shall have been publicly announced another
Acquisition Proposal or (z) the Parent Board shall terminate the Merger
Agreement pursuant to paragraph (d) (i) or (d) (iii) in each case due to a
material breach of the Merger Agreement by the Company, then in any such case as
described in clause (w), (x), (y) or (z) (each such case of termination being
referred to as a "Trigger Event"), the Company shall pay to Parent (not later
than one business day after such termination of the Merger Agreement or, in the
case of any termination by the Company pursuant to paragraph (c) (i),
simultaneously with such termination) an amount equal to $10 million (the
"Termination Fee").

The Merger Agreement provides that upon the termination of the Merger
Agreement due to the occurrence of a Trigger Event, the Company agrees that, in
addition to the payment of the Termination Fee referred to above, the Company
shall promptly reimburse Parent for all actual, documented and reasonable
out-of-pocket expenses incurred, or to be incurred by Parent, the Purchaser and
their affiliates (including the fees and expenses of legal counsel, accountants,
financial advisors, other consultants, financial printers and financing sources)
("Expenses") in connection with the Offer, the Merger and the consummation of
the transactions contemplated by the Merger Agreement, in an amount not to
exceed $5 million in the aggregate.

The Merger Agreement also provides that if the Company shall terminate the
Merger Agreement pursuant to paragraph (c) (ii), and the Company is not in
material breach of the Merger Agreement at the time of such termination, or if
the Purchaser fails to fund the purchase of Shares pursuant to the Offer as a
result of its failure to secure financing for the Offer and the Merger pursuant
to the Financing Commitment and/or the Proposed Bridge Arrangements or otherwise
secure financing, Parent shall pay to the Company (not later than one business
day after such termination) an amount equal to the Termination Fee, together
with an amount not to exceed $5 million as reimbursement to the Company for its
actual, documented and reasonable out-of-pocket Expenses.

Fees and Expenses. Except as set forth above, whether or not the Merger is
consummated, the Merger Agreement provides that all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby shall be paid by the party incurring such expenses.

THE CONFIDENTIALITY AGREEMENT

The following is a summary of certain provisions of the Confidentiality
Agreement, dated August 8, 1998 between the Company, Parent and the Purchaser
(the "Confidentiality Agreement"). The following summary of the Confidentiality
Agreement does not purport to be complete and is qualified in its entirety by
reference to the text of the Confidentiality Agreement, which is filed as
Exhibit 2 hereto and incorporated herein by reference.

The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, the parties have agreed to keep confidential all
nonpublic, confidential or proprietary information furnished to each party
relating to the Company or Parent, as the case may be, subject to certain
exceptions (the "Confidential Information"), and to use the Confidential
Information solely in connection with the evaluation of a possible negotiated
transaction between the parties.

ITEM 4. THE SOLICITATION OR RECOMMENDATION

(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.

At a meeting commenced on the evening of August 10, 1998 and reconvened on
the morning of August 11, 1998, the Company's Board of Directors (the "Company
Board" or the "Board") unanimously (i) determined that the terms of Merger
Agreement and the transactions contemplated thereby are fair and in the best
interest of the Company's shareholders, (ii) approved and adopted the Merger
Agreement and the transactions contemplated thereby, and (iii) resolved to
recommend that the Company's

11
<PAGE> 14

shareholders accept the Offer, tender their Shares and approve and adopt the
Merger Agreement and the transactions contemplated thereby.

(B)(1) BACKGROUND OF THE OFFER.

Since 1993, representatives of the Company and representatives of Parent
have periodically engaged in discussions concerning a possible business
combination between the Company and Parent.

In January 1998, W. Philip Marcum, a director of Parent, and Stephen E.
McGregor, the Executive Vice President and Chief Financial Officer of Parent met
with Michael E. Little, Chairman, President and Chief Executive Officer of the
Company in San Antonio, Texas, to discuss possible ways in which Parent and the
Company could take advantage of the complementary strengths of their respective
businesses, including a merger of the Company and Parent. In late January 1998,
Francis D. John, Chairman, President and Chief Executive Officer of Parent and
Mr. McGregor met with Mr. Little in Houston to further discuss the possibility
of a merger between the two companies. At this meeting, Mr. John explained why
he believed that a combination of Parent and the Company would result in
significant benefits for both companies. The conversations were general in
nature and did not involve price.

On February 10, 1998, Mr. Little sent a memo to the Company's Board of
Directors attaching the information he received in January 1998 from Mr. John
and Mr. McGregor and reporting the substance of their conversations. The Company
Board met on February 16, 1998 to discuss issues relating to a business
combination with Parent.

On February 24, 1998, Mr. Little sent a letter to Mr. John advising him
that the Company Board had decided that a possible business combination with
Parent was not in the best interests of the Company's shareholders at that time.
Mr. John responded by letter dated March 10, 1998, in which he expressed
disappointment with the decision of the Company Board.

Parent publicly disclosed in a Schedule 13D filed with the Securities and
Exchange Commission (the "Commission") on June 15, 1998 its ownership of an
aggregate of 820,500 Shares, representing 7.3% of the Shares outstanding based
on publicly available information.

On June 29, 1998, Parent delivered the following letter (the "June 29th
Letter") to Mr. Little and the other members of the Company Board:

June 29, 1998

The Board of Directors
of Dawson Production Services, Inc.
112 E. Pecan Street
Suite 1000
San Antonio, Texas 78205

Mr. Michael E. Little and other Board Members:

Mike, over the past three years you and I with our respective Board members
have discussed the significant value that would be created by a combination of
Key Energy Group, Inc. ("Key") and Dawson Production Services, Inc. ("Dawson").
Since May of last year we have made three specific proposals to Dawson that we
believe would have benefitted both companies' shareholders. Subsequent to our
most recent discussions, in January and February of this year, Key has continued
to analyze the possible benefits of such a combination. This analysis reconfirms
our belief that the companies would be a superb fit. Key/Dawson would be the
largest well servicing company in the world, positively staged for future
growth, with leading positions in nearly all major domestic producing regions
and with great expansion prospects throughout the world. The combination would
provide substantial benefits to shareholders, employees and customers of both
companies.

Key and Dawson have each shown significant operating improvements as we
have successfully consolidated the well servicing industry. We believe more than
ever that a Key/Dawson combination creates real shareholder value; therefore,
Key is pleased to submit to you its proposal to acquire, at a cash price of
12
<PAGE> 15

$16.00 per share, all issued and outstanding shares of common stock of Dawson.
This price represents a premium of 62% over the closing price of Dawson's shares
on June 12, 1998, the last trading day prior to the date on which Key disclosed
its present investment in Dawson.

While this is an all-cash proposal, we believe that the combined company's
equity would be highly attractive, and accordingly we would be willing to
consider a stock-for-stock transaction or a mixed stock-and-cash transaction.

The combination of Key and Dawson would create a stronger, more competitive
entity. In addition, a Key/Dawson combination would provide significant
operational and financial consolidation benefits and, based on our current
analyses and projections, should be accretive within the first year of combined
operations.

Based on extensive conversations with a major commercial bank and a leading
investment bank, Key is highly confident that financing would be available to
pay for all transaction-related financing requirements, including Dawson's
shares and for any necessary refinancing of existing debt.

This proposal obviously is subject to the negotiation and execution of
definitive documentation on mutually satisfactory terms; however, we believe
that this could be accomplished quite expeditiously.

Our interest in Dawson is strong, and, as stated above, we have made a
substantial investment in Dawson. As disclosed in our Schedule 13D filed with
the SEC on June 15, 1998, Key now owns 820,500 shares of Dawson common stock,
representing approximately 7.3% of the shares outstanding based on current
publicly available information. Simultaneously with the transmission of this
letter, we have issued a public announcement setting forth the text of this
letter.

We believe that Dawson's shareholders will find our proposal extremely
attractive and trust that you will give careful consideration to it. Our strong
preference is to proceed harmoniously and cooperatively within the framework of
a negotiated transaction. To this end, we would welcome the opportunity to meet
with you to discuss our proposal at the earliest possible date. We look forward
to hearing from you in the near future.

Very truly yours,

/s/ Francis D. John

Francis D. John

In addition, on June 29, 1998, Parent issued a press release publicly
disclosing the June 29th Letter. On July 1, 1998, the Company's management
informed the Company Board of its interviews with investment banking firms and
its comparison of several firms. Based on management's recommendation, the
Company Board approved the hiring of Morgan Stanley & Co. Incorporated ("Morgan
Stanley"). On July 7, 1998, the Company issued a press release announcing that
it had retained Morgan Stanley to review Parent's proposal to acquire the
Company set forth in the June 29th Letter.

On July 14, 1998, Company Board held an informal briefing in Houston to
discuss financial and legal aspects of the Parent's proposal.

On July 17, 1998, Paul McCollam, a director of the Company, and Kevin
Collins, a director of Parent, engaged in a brief conversation in which Mr.
McCollam indicated to Mr. Collins that the Company was working diligently with
Morgan Stanley.

On July 20, 1998, Parent sent the following letter to each member of the
Company Board (and issued a press release publicly disclosing the same):

July 20, 1998

The Board of Directors
Dawson Production Services, Inc.
112 E. Pecan Street
Suite 1000
San Antonio, TX 78205
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<PAGE> 16

Dear Board Members:

On June 29, 1998 Key Energy Group, Inc. made an all cash proposal to you
for the acquisition of Dawson Production Services, Inc. To date, no one from
your company has contacted us with respect to the proposal even though three
weeks have passed since it was delivered to you. Over the past several weeks,
many of your shareholders have contacted Key expressing concern and frustration
about Dawson's unresponsiveness. It is our understanding that you too have heard
by phone and in writing from many of these Dawson shareholders. Their unanimous
view as expressed to Key is that the combination of our companies makes
tremendous sense and would be beneficial to all relevant parties, including our
respective shareholders, employees and customers.

In our June 29 letter we noted that our $16 per share proposal represented
a premium of more than 60% to Dawson's market value the day prior to the
disclosure of Key's investment in your company. Subsequent to our proposal,
oilfield service stocks have continued to decline as the outlook for oil and
natural gas prices remains uncertain. As a result, and based on a review of
comparable service companies, it is reasonable to conclude that Dawson in all
likelihood would be trading in the $8 range today if it were not for Key's
attractive proposal. Accordingly, Key's proposal now represents a premium of
approximately 100% to Dawson's unaffected stock price.

We are certain that Dawson's Management and Directors want to act in the
best interest of the company's shareholders. As I previously mentioned, many of
Dawson's shareholders have expressed their desire to see this transaction
completed expeditiously. Hopefully, we will hear from you in the very near
future with a commitment to proceed forward in good faith. Such constructive
action would mitigate the possibility of our proposal being reduced which would
have a negative impact on your shareholders' value.

As you know, we have been and continue to be prepared to meet immediately
with representatives of Dawson to discuss our proposal. Given the financing
commitment we have in hand from PNC Bank, we believe a definitive agreement
between our companies could be achieved in no more than thirty days from the
date we initially meet and with no material disruption to our companies'
operations. No doubt, a large majority of your shareholders would applaud such
an outcome.

Sincerely,

/s/ Francis D. John

Francis D. John
President, Chairman & CEO

On July 21, 1998, Mr. Little sent the following letter to Mr. John (and the
Company issued a press release disclosing the same):

July 21, 1998

Mr. Francis D. John
Chairman, President and Chief Executive Officer
Key Energy Group, Inc.
Two Tower Center, 20th Floor
East Brunswick, NJ 08816

Dear Fran:

We received this morning your letter dated July 20, 1998. As we said in our
press release dated July 7, 1998, we have engaged Morgan Stanley & Co.
Incorporated, are reviewing the situation with them, and will respond in due
course.

Sincerely,

/s/ Michael E. Little

Michael E. Little
14
<PAGE> 17

Chairman, President and Chief Executive Officer

cc: Dawson's Board of Directors

At a meeting of the Company Board on July 30, 1998, representatives of
Morgan Stanley made an extensive presentation regarding valuation of the Company
and its competitors, the effect of oil and gas prices on the Company's
valuation, and various valuation methods. Morgan Stanley also presented an
analysis of various strategic alternatives that might be available to maximize
shareholder value. The Company Board met again the next day, August 1, 1998 to
discuss Parent's proposal and possible alternatives. After extensive
discussions, the Board instructed Morgan Stanley to communicate to Key's
financial advisors that, although the Company did not find the offer of $16 per
Share compelling, it would be open to discussing a possible business combination
with Parent at a higher price.

On August 3, 1998, the Company issued a press release (the "August 3rd
Press Release") announcing its earnings for the quarter ended June 30, 1998 and
that the Company had signed a letter of intent to acquire Hellums Services II,
Inc., Superior Completion Services, Inc., South Texas Disposal, Inc. and Elsik,
Inc. (collectively the "HSI Group").

On August 3, 1998, after the release of the August 3rd Press Release, a
representative of Morgan Stanley telephoned a representative of Parent's
financial advisor, Bear, Stearns & Co. Inc. ("Bear Stearns"). Morgan Stanley
informed Bear Stearns that the Company Board had met on a number of occasions to
review Parent's $16 offer and had concluded, after receiving advice from Morgan
Stanley, that the Company did not find the $16 offer compelling, but would be
open to discussing a possible combination at a higher price.

On August 4, 1998, the Company held a telephone conference call with
industry analysts and other members of the investment community at which the
Company reviewed the contents of the August 3rd Press Release and announced the
letter of intent with the HSI Group. On the conference call, Mr. Little stated
that Parent's proposal was still under review and that the Company had no
comment on Parent's offer at that time.

On August 5, 1998, Parent and the Purchaser issued a press release
announcing, among other things, that the Purchaser intended to commence an offer
for all outstanding Shares at a price of $14.00 per Share.

Also on August 5, 1998, the Purchaser filed a complaint against the Company
(the "Complaint") in United States District Court for the Western District of
Texas, Midland/Odessa Division.

On August 5, 1998, the Company issued a press release responding to
Parent's August 5, 1998 press release and reconfirming the Company's willingness
to entertain discussions at a price higher than $16 per Share.

On August 6 and 7, 1998, Bear Stearns had discussions with Morgan Stanley
concerning the possibility of Parent and the Company meeting to discuss a
potential negotiated transaction.

At a meeting of the Company Board on the afternoon of August 7, 1998,
representatives of Morgan Stanley reported their discussions with Bear Stearns
regarding Purchaser's tender offer, as well as their discussions with other
companies regarding possible business combinations. Morgan Stanley reported that
Bear Stearns had only a few questions to resolve before proposing an offer price
greater than $16 per Share. One issue Bear Stearns was considering was the
Company's proposed acquisition of the HSI Group and whether the acquisition
would be accretive. The Company Board discussed the possibility of a merger
agreement with Purchaser and the terms of such an agreement, including the
whether the agreement would include (i) a so-called fiduciary duty out (i.e., a
provision allowing the Company Board to pursue an unsolicited third-party offer
to acquire the Company on terms more favorable than those contained in the
Merger Agreement); (ii) a break-up fee payable by one party to the other under
certain conditions; (iii) provisions related to the Parent's financing
arrangements and the Company's contractual remedies if such financing were not
funded; and (iv) a possible standstill agreement (i.e., a provision that would
prevent Parent from pursuing a business combination with the Company for a
specific period of time in the event the Merger Agreement was terminated under
certain conditions).

15
<PAGE> 18

On August 8, 1998, legal counsel for the Company and legal counsel for
Parent and the Purchaser negotiated, and the Company, Parent and the Purchaser
executed, a confidentiality agreement. Thereafter on August 8, 1998 and August
9, 1998, representatives of Parent, the Company, their respective legal counsel,
Bear Stearns and Morgan Stanley met in Houston, Texas to conduct financial due
diligence and to further consider and discuss a possible negotiated transaction
resulting in the acquisition of the Company by Parent. Following additional
conversations, financial due diligence and negotiations, on August 9, 1998 the
parties agreed to proceed with negotiation of a definitive agreement. Legal
counsel to Parent and the Purchaser then provided an initial draft of the Merger
Agreement to the Company and its legal counsel. On August 10, 1998, negotiations
were conducted with respect to the Merger Agreement.

On the evening of August 10, 1998, the Company Board met to consider the
Merger Agreement with Purchaser. The Company's management and financial advisors
reported their negotiations over the weekend, and the terms of the proposed
agreement. The Board concluded that it would not take action on the Merger
Agreement until certain issues were resolved satisfactorily and the Board
members had an opportunity to review the Merger Agreement. During the night,
copies of the Merger Agreement were delivered to the Company's directors for
their review and negotiations with respect to outstanding issues were completed.
The Company Board reconvened early on the morning of August 11, 1998, and
Company's legal counsel extensively reviewed the terms of the Merger Agreement
with the Board. Representatives of Morgan Stanley presented their assessment of
Purchaser's proposal of $17.50 per Share and the Company's other alternatives,
and gave the Board Morgan Stanley's verbal opinion (with a commitment that it
would be promptly confirmed in its written opinion) that the Merger Agreement
was fair from a financial point of view to the holders of the Company's Shares
(other than Parent and its affiliates). After extensive discussion of the terms
of the Merger Agreement and the Company's other alternatives, the Company Board
unanimously approved the Merger Agreement. The written opinion of Morgan Stanley
is set forth in full as Annex B. Shareholders of the Company are urged to read
that opinion in its entirety.

Following the approval of the Company Board, on August 11, 1998, Parent,
the Purchaser and the Company executed and delivered the Merger Agreement and
issued a press release announcing the execution of the Merger Agreement and the
transactions contemplated thereby.

On August 17, 1998, the Purchaser and Parent commenced the Offer.

(2) REASONS FOR RECOMMENDATION.

In making the determinations and recommendations set forth in subparagraph
(a) above, the Board considered a number of factors, including the following:

(i) the amount of consideration to be received by the Company's
shareholders in the Offer and the Merger;

(ii) the historical trading prices for the Shares;

(iii) the prospects for the Company if the Company were to remain
independent and the risks inherent in remaining independent, including the
fact that the Company is in a cyclical industry, that oil and gas prices
are at a 12-year low and that the Company is in an industry that is
consolidating;

(iv) that the Merger Agreement provides for a prompt cash tender offer
for all Shares, to be followed by a merger for the same consideration,
thereby enabling the Company's shareholders to obtain the benefits of the
transaction at the earliest possible time;

(v) the Board's view regarding the likelihood of a superior offer from
a third party;

(vi) the extensive negotiations between the Company and Parent and
their respective financial advisors, leading to the Board's belief that
$17.50 per Share represented the highest price per Share that could be
negotiated with Parent;

(vii) the Company's discussions with other companies regarding
potential business combinations;

(viii) possible alternatives to the Merger;
16
<PAGE> 19

(ix) the presentation of Morgan Stanley at the Board's meeting on July
30, 1998, and the verbal opinion of Morgan Stanley (subsequently submitted
in writing) to the Company Board that, as of August 11, 1998, the
consideration of the Company's shareholders would receive pursuant to the
Offer and the Merger is fair to the Company's shareholders (excluding
Purchaser, Parent and their affiliates) from a financial point of view;

(x) Parent's financial condition and ability to cause Purchaser to
meet its obligations under the Merger Agreement;

(xi) that the $17.50 per Share tender offer price represents an
approximately 36% premium over the closing price of $12.875 for the Shares
on the New York Stock Exchange on August 10, 1998, the last trading day
before the public announcement of the Merger Agreement; a 25% premium over
the Purchaser's previously announced offer of $14 per Share; and a 62%
premium over the closing price of the Shares on June 12, 1998, the last
trading day prior to the Parent's public disclosure of its investment in
the Company.

The information and factors described above are not intended to be
exhaustive. Furthermore, the Board did not assign relative weights to the
factors listed above or determine that any factor was of particular importance.
Rather, the Board viewed its position and recommendations as based on all
information it received and considered. Different members of the Board may have
given different weights to different factors.

ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED

The Company and Morgan Stanley entered into a letter agreement dated July
3, 1998 pursuant to which the Company engaged Morgan Stanley to act as financial
advisor to the Company in connection with the Purchaser's proposal, including
the Offer. In connection with this agreement, the Company has paid Morgan
Stanley an initial fee of $250,000. Additionally, if the Offer does not result
in an acquisition of 50% or more of the voting stock of the Company or a change
in the majority of the Company's board of directors, the Company has agreed to
pay Morgan Stanley a fee of $4,000,000, against which any prior fee payments
will be credited. If the Offer results in an acquisition of a majority of the
voting stock of the Company by the Purchaser or another third party, or in a
change in the majority of the Company's board of directors, Morgan Stanley will
receive a fee equal to 1.25% of the value of the Company, against which all
prior fees will be credited. Morgan Stanley's out-of-pocket expenses are
included in its advisory fees; however, the Company has agreed to reimburse
Morgan Stanley for the fees of any outside counsel or other professional
advisors it may engage. In addition, the Company has agreed to indemnify Morgan
Stanley against certain liabilities incurred in connection with this engagement.

The Company also has retained Corporate Investor Communications, Inc., Sard
Verbennin & Co. and Easterly Investor Relations to assist the Company with
communications with shareholders. The Company will pay Corporate Investors
Communications, Inc., Sard Verbennin & Co. and Easterly Investor Relations
reasonable and customary compensation for their services, reimburse them for
their reasonable out-of-pocket expenses and provide customary indemnities.

ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES

(a) To the Company's knowledge, the only transactions in the Shares
effected during the past 60 days by the Company or its executive officers,
directors, affiliates or subsidiaries were as follows:

During the past 60 days, the Compensation Committee of the Board of
Directors approved Director Ward Greenwood's pledge of options to acquire
17,200 shares of the Company's Common Stock to secure a loan with Guaranty
Federal Bank FSB in Austin, Texas.

During the past 60 days, the Company completed a listing on the New
York Stock Exchange of 11,202,965 shares of its common stock, $0.01 par
value per share (the "Common Stock") issued and outstanding, and 2,357,286
shares of its Common Stock reserved for issuance.

17
<PAGE> 20

On July 17, 1998, Michael E. Little, Chief Executive Officer of the
Company, purchased 1,000 shares of the Company's common stock, representing
the first trade in the Company's shares on the New York Stock Exchange.

(b) To the Company's knowledge, all of the Company's executive officers,
directors, affiliates and subsidiaries currently intend to tender, pursuant to
the Offer, all shares of Common Stock which are held of record or beneficially
owned by such persons (other than shares, if any, which if tendered would cause
such persons to incur liability under the provisions of Section 16 of the
Securities Exchange Act of 1934), subject to and consistent with any fiduciary
obligations of such persons. To address the Section 16 issues that would be
presented with respect to any shares tendered pursuant to the Offer by persons
subject to Section 16, the Merger Agreement permits the Company to repurchase up
to 5,000 Shares.

ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY

(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiations in response to the Offer which relate to or would result in
(i) an extraordinary transaction such as a merger or reorganization involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.

(b) Except as set forth herein, there are no transactions, Company Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.

ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED

INFORMATION STATEMENT

The Information Statement attached hereto as Annex A is being furnished in
connection with the contemplated designation by Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed by the Board of Directors
of the Company other than at a meeting of the Company's shareholders.

SENIOR NOTES

In accordance with the terms of the Indenture dated February 20, 1997
between the Company and U. S. Trust Company of Texas, N. A., as trustee (the
"Trustee"), with respect to the Company's 9 3/8% Senior Notes due 2007 (the
"Senior Notes"), within 30 days following a Change of Control (as defined in the
Indenture), the Company must send written notice to each holder of the Senior
Notes (i) describing the Change of Control transaction and (ii) offering to
repurchase the Senior Notes at a purchase price in cash equal to 101% of the
principal amount of such Senior Notes, plus accrued and unpaid interest thereon
to the date of purchase. The closing of the Offer in accordance with the terms
set forth in the Merger Agreement would constitute a Change in Control under the
Indenture.

FROST BANK LOAN AGREEMENT

A Credit Agreement is in effect between the Company and The Frost National
Bank ("Frost Bank") dated February 20, 1997, relating to a $50.0 million working
capital revolving facility (the "Frost Facility"). As of the date hereof, the
Company has not drawn any amounts under the Frost Facility, other than $1.8
million used to secure letters of credit issued by Frost Bank and provided by
the Company to certain of its workers' compensation insurance carriers. Certain
provisions of the Credit Agreement would require the consent of Frost Bank in
connection with the change of control and merger contemplated by the Merger
Agreement. The Company proposes to negotiate with Frost Bank with a view of
obtaining their consent or of terminating the Frost Facility.

18
<PAGE> 21

AMENDMENT TO RIGHTS AGREEMENT

On August 11, 1998, the Company's Board of Directors amended the Rights
Agreement (the "Rights Amendment") (i) to prevent the Merger Agreement or the
consummation of any of the transactions contemplated thereby, including but not
limited to the announcement of the Offer and the consummation of the Offer and
the Merger, from resulting in the distribution of separate rights certificates
or the occurrence of a Distribution Date, Shares Acquisition Date, Flip-In Event
or Triggering Event (each as defined in the Rights Agreement) and (ii) to
provide that neither Parent nor Purchaser nor their affiliates shall be deemed
an Acquiring Person (as defined in the Rights Agreement) by reason of the
transactions provided for in the Merger Agreement. Thus, the Rights Amendment
renders the Rights inoperative with respect to the acquisition of any Shares by
Parent, Purchaser or any of their affiliates pursuant to the Merger Agreement.
As a result of the Rights Amendment, the Rights will not be exercisable upon or
at any time after the acceptance for payment of Shares pursuant to the Offer.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS

<TABLE>
<S> <C>
Exhibit 1 Agreement and Plan of Merger dated August 11, 1998 between
the Company, Purchaser and Parent.
Exhibit 2 Confidentiality Agreement dated August 8, 1998 between the
Company, Purchaser and Parent.
Exhibit 3 Form of Indemnification Agreement and provisions regarding
indemnification of directors and officers from the Company's
Articles of Incorporation and Bylaws.
Exhibit 4 Employment Agreement effective as of April 1, 1998 between
the Company and Michael E. Little.
Exhibit 5 Amendment No. 1 to Employment Agreement between the Company
and Michael E. Little.
Exhibit 6 Amendment No. 2 to Employment Agreement between the Company
and Michael E. Little.
Exhibit 7 Employment Agreement effective as of April 1, 1996 between
the Company and Joseph Eustace.
Exhibit 8 Amendment No. 1 to Employment Agreement between the Company
and Joseph Eustace.
Exhibit 9 Employment Agreement effective as of April 1, 1998 between
the Company and Jim Byerlotzer.
Exhibit 10 Amendment No. 1 to Employment Agreement between the Company
and Jim Byerlotzer.
Exhibit 11 Employment Agreement effective April 1, 1996 between the
Company and P. Mark Stark.
Exhibit 12 Amendment No. 1 to Employment Agreement between the Company
and P. Mark Stark.
Exhibit 13 Employee Severance Pay Plan.
Exhibit 14 Consulting Agreement Term Sheet dated August 11, 1998
between Parent, Purchaser and Michael E. Little.
Exhibit 15 Consulting Agreement Term Sheet dated August 11, 1998
between Parent, Purchaser and James J. Byerlotzer.
Exhibit 16 Consulting Agreement Term Sheet dated August 11, 1998
between Parent, Purchaser and Joseph E. Eustace.
Exhibit 17 Opinion of Morgan Stanley dated August 11, 1998.*
Exhibit 18 Letter to Shareholders of the Company dated August 17,
1998.*
</TABLE>

* Included in copies of the Schedule 14D-9 mailed to the Company's Shareholders.

19
<PAGE> 22

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

DAWSON PRODUCTION SERVICES, INC.

/s/ MICHAEL E. LITTLE

By: Michael E. Little
Chairman, President and Chief
Executive Officer

Dated: August 17, 1998

20
<PAGE> 23

ANNEX A

DAWSON PRODUCTION SERVICES, INC.
112 EAST PECAN STREET, SUITE 1000
SAN ANTONIO, TEXAS 78205
- --------------------------------------------------------------------------------

INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER

This Information Statement is being mailed on or about August 17, 1998 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 ("Schedule
14D-9") to the holders of shares ("Shares") of common stock, $0.01 par value
(the "Common Stock"), of Dawson Production Services, Inc., a Texas corporation
("Company"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Schedule 14D-9. You are receiving this
Information Statement in connection with the possible election of person
designated by Midland Acquisition Corp. ("Purchaser"), a wholly owned subsidiary
of Key Energy Group, Inc. ("Parent"), to the board of directors of the Company
("Company Board"). Such designation is to be made pursuant to an Agreement and
Plan of Merger, dated August 11, 1998 ("Merger Agreement") by and among Parent,
Purchaser, and the Company.

This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended, and Rule 14f-1 thereunder. YOU ARE URGED TO
READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE NOT, HOWEVER, REQUIRED TO
TAKE ANY ACTION.

Pursuant to the Merger Agreement, Purchaser commenced a cash tender offer
to acquire all of the Shares ("Offer"). The Offer is scheduled to expire at
12:00 Midnight, New York City time, on Monday, September 14, 1998, unless the
Offer is extended. Following the successful completion of the Offer, upon
approval by a shareholder vote, if required, and subject to certain other
conditions, the Purchaser will be merged with and into the Company ("Merger"). A
detailed description of the Merger Agreement is set forth in Item 3, "The Merger
Agreement," of the Company's Schedule 14D-9 delivered to holders of Shares
concurrent herewith.

The information contained in this Information Statement concerning
Purchaser has been furnished to the Company by Purchaser, and the Company
assumes no responsibility for the accuracy or completeness of such information.

21
<PAGE> 24

GENERAL INFORMATION ABOUT THE COMPANY

GENERAL

The Common Stock is the only class of voting securities of the Company
outstanding. Each Share entitles its record holder to one vote. As of August 11,
1998, there were 11,202,965 issued and outstanding shares of the Company's
Common Stock.

THE COMPANY'S BOARD OF DIRECTORS AS AFFECTED BY THE MERGER AGREEMENT

If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement
provides that Parent will be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of the total number of directors (determined after giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent or its affiliates
bears to the total number of Shares then outstanding. The Company has further
agreed, upon the request of Parent, to promptly take all actions necessary to
cause Parent's designees to be so elected, including, if necessary, increasing
the size of the Company Board (to the extent permitted by the Company's Articles
of Incorporation and Bylaws) and seeking the resignations of one or more
existing directors, provided, however, that prior to the effective time of the
Merger, the Company shall use reasonable efforts to retain at least two members
of the Board who are members of the Company Board on the date of the Merger
Agreement.

Parent has informed the Company that Parent will choose Parent's designees
from the list of persons set forth in the following table. With respect to the
Parent's designees, the following table, prepared from information furnished to
the Company by Parent, sets forth the name, age, present principal occupation or
employment and five-year employment history for each of the persons who may be
designated by Parent as Parent's designees. Each of Parent's designees is a
United States citizen. Each occupation set forth opposite a person's name,
unless otherwise indicated, refers to employment with the Parent. If necessary,
the Parent may choose additional or other Parent's designees, subject to the
requirements of Rule 14f-1. Unless otherwise indicated below, the business
address of each person is Two Tower Center, 20th Floor, East Brunswick, New
Jersey 08816.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Francis D. John 44 Chairman of the Board since August 1996 and Chief Executive
Officer and President since October 1989; Chief Financial
Officer from October 1989 through July 1997; Director of the
Purchaser.
Stephen E. 49 Executive Vice President and Chief Financial Officer since
McGregor July 1997; Senior Advisor to BT Wolfensohn from July 1995 to
July 1997; President and Member of Pacific Century Group
L.L.C. from September 1993 to July 1995; President and Chief
Executive Officer of the Purchaser.
Danny R. Evatt 39 Vice President and Chief Accounting Officer since July 1995
and Treasurer since July 1990.
Kenneth V. Huseman 46 Executive Vice President since March 1996 and Chief
Operating Officer since August 1996; Mid-Continent Regional
President of WellTech, Inc. from August 1994 to March 1996
and Vice President and Mid-Continent Regional Manager of
WellTech, Inc. from April 1993 to August 1994; Vice
President and Treasurer of the Purchaser.
Morton Wolkowitz 70 Private investor since 1989; Director of Parent.
</TABLE>

Parent has advised the Company that to the best knowledge of the Parent,
none of the Parent's designees is currently a director of, or holds any position
with, the Company, and except as disclosed in the Offer to Purchase, none of
Parent's designees beneficially owns any securities (or rights to acquire any
securities) of the Company or has been involved in any transactions with the
Company or any or its directors, executive

22
<PAGE> 25

officers or affiliates that are required to be disclosed pursuant to the rules
of the Securities and Exchange Commission ("SEC"), except as may be disclosed in
the Offer. None of the Parent's designees have any family relationship with any
director or executive officer of the Company.

Parent has advised the Company that each of the persons listed in the table
above has consented to act as a director, and that none of such persons have
during the last five years been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was, or is, subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws or is
involved in any other legal proceeding which is required to be disclosed under
Item 401(f) of Regulation S-K promulgated by the SEC.

It is expected that the Parent's designees may assume office at any time
following the purchase by Parent of a majority of the outstanding Shares
pursuant to the Offer, which purchase cannot be earlier than September 15, 1998,
and that, upon assuming office, Parent's designees will thereafter constitute at
least a majority of the Company Board.

23
<PAGE> 26

DIRECTORS AND EXECUTIVE OFFICERS

THE CURRENT MEMBERS OF THE BOARD

The names of the current directors, their ages as of August 15, 1998, and
certain other information about them are set forth below. Some of the current
directors may resign effective immediately following the purchase of Shares by
Purchaser pursuant to the Offer.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael E. Little(1)...................... Chairman of the Board, President and Chief
43 Executive Officer
Russell Banks(1).......................... 78 Director
J. Michael Bell(2)........................ 59 Director
Wm. Ward Greenwood(1)(3).................. 45 Director
Douglas D. Lewis(2)....................... 52 Director
Paul E. McCollam(2)....................... 53 Director
Stephen E. Oakes.......................... 48 Director
Lawrence C. Petrucci(3)................... 39 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.

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, has served on the executive committee
of the board of directors of the American Management Association and is
currently on its general management council.

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. Since 1990, Mr. Greenwood has been 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.

24
<PAGE> 27

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, and the general partner of the RIMCO Parties. Mr. McCollam
serves as a director of the Company pursuant to the Voting Agreement described
below. See "Agreements Relating to Directors."

Stephen F. Oakes has been a director of the Company since 1994. From 1989
to 1992, he served as managing director of Robert Fleming, Inc., an investment
banking company. He has been associated with Resource Investors Management
Company Limited Partnership, a full service investment management company
specializing in the energy industry, and the general partner of RIMCO Partners,
L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III and RIMCO Partners, L.P.
IV (the "RIMCO Parties"), since 1992, serving as managing director since 1993.
Mr Oakes is also a director of Universal Seismic Associates, Inc., a publicly
traded company. Mr. Oakes serves as a director of the Company pursuant to the
Voting Agreement described below. See "Agreements Relating to Directors."

Lawrence C. Petrucci has been a director of the Company since 1996. Since
June 1997, Mr. Petrucci has served as an Associate Director of Scotia Capital
Markets (U.S.A.), Inc., an investment banking and financial advisory service.
From 1991 to 1997, Mr. Petrucci 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.

There are no family relationships among any of the directors or executive
officers of the Company.

AGREEMENTS RELATING TO DIRECTORS

An Agreement Regarding Election of Directors dated as of November 21, 1996
(the "Voting Agreement"), provides that the Company will use its best efforts to
cause the election of two persons reasonably acceptable to the Company
designated by the RIMCO Parties to the Company's Board of Directors 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, as long as the RIMCO
Parties own less than 10% but 5% or more of the issued and outstanding shares of
Common Stock, the Company is required to use its best efforts to elect one
person reasonably acceptable to the Company designated by the RIMCO Parties to
the Company's Board of Directors. Messrs. McCollam and Oakes currently serve as
directors pursuant to these provisions.

INFORMATION CONCERNING THE BOARD

The Board of Directors met eight times in the twelve months ended March 31,
1998. During such twelve-month period, each incumbent director of the Company
attended 75% or more of the aggregate number of (a) meetings of the Board of
Directors held during his tenure, and (b) meetings held by committees of the
Board of Directors on which he served.

The Board of Directors has established standing Audit, Compensation, and
Nomination Committees.

Audit Committee. The Audit Committee annually recommends to the Board of
Directors the appointment of independent certified public accountants as
auditors for the Company, discusses and reviews the fees for the prospective
annual audit, 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
auditors regarding internal controls and accounting procedures and management's
response to those comments. Messrs. Petrucci and Greenwood currently serve on
the Audit Committee. Mr. Greenwood serves as chair of the committee. One vacancy
exists on this Committee. This Committee met four times during the fiscal year
ended March 31, 1998.

Compensation Committee. The Compensation Committee reviews and makes
recommendations to the Board of Directors regarding salaries, compensation and
benefits of executive officers and employees of the Company and administers the
Company's 1995 Incentive Plan. The Compensation Committee currently

25
<PAGE> 28

consists of Messrs. Bell, Lewis and McCollam. Mr. McCollam serves as chair of
the committee. This Committee met four times during fiscal year ended March 31,
1998.

Nominations Committee. The Nominations Committee is responsible for
recommending to the Board of Directors those persons who will be nominated as
the Board of Directors' nominees for positions on the Board of Directors. The
Nominations Committee is comprised of Messrs. Little, Greenwood and Banks. Mr.
Greenwood serves as chair of the committee. The Nominations Committee met once
during the fiscal year ended March 31, 1998. The Nominations Committee will
consider nominations made by shareholders.

COMPENSATION OF DIRECTORS

Pursuant to the Company's director compensation plan, effective September
11, 1997, each director receives (i) an annual retainer of $10,000 earned at
$2,500 per calendar quarter; (ii) Board meeting fees of $2,500 per meeting
attended in person ($500 for meetings attended via teleconference), to a maximum
of $10,000 per fiscal year; (iii) Committee meeting fees of $1,000 per meeting
($1,200 for the Committee Chair), to a maximum of $4,000 per fiscal year (or
$4,800 for the Committee Chair); (iv) annual stock option awards on April 1 of
each year, beginning April 1, 1998, for 5,000 shares of the Company's Common
Stock at the then fair market value, vesting upon termination of service as a
director of the Company, with a five-year term following vesting; and (v) the
reimbursement of reasonable travel expenses incurred in attending meetings of
the Board of Directors.

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information with respect to each
executive officer of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James Byerlotzer..................... 52 Senior Vice President and Chief Operating Officer
P. Mark Stark........................ 43 Chief Financial Officer
Joseph B. Eustace.................... 43 Vice President of East Texas/Gulf Coast Region
Michael R. Furrow.................... 51 Vice President of Permian Basin Region
Jim D. Flynt......................... 53 Vice President of California Region
</TABLE>

Officers are elected annually by the Board of Directors and serve until
their successors are chosen or until their resignation or removal.

James Byerlotzer was appointed Senior Vice President and Chief Operating
Officer of the Company on or about April 3, 1997. Mr. Byerlotzer was employed by
the Company on February 20, 1997 upon the closing of the acquisition by the
Company of a transaction (the "Pride Acquisition") in which it acquired all of
the domestic onshore operations of Pride Petroleum Services, Inc., a Louisiana
corporation ("Pride"). From 1981 until his employment with the Company, Mr.
Byerlotzer was employed by Pride. Beginning in February 1996, Mr. Byerlotzer
served as the Vice President Domestic Operations of Pride. Prior to that time,
he served as Pride's Vice President -- Central Area and in various other
operating positions.

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.

26
<PAGE> 29

Joseph B. Eustace was appointed Vice President of East Texas/Gulf Coast
Region in April 1997. From March 1983 until the Pride Acquisition in February
1997, he served as Vice President of Operations and Chief Operating Officer of
the Company. 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.

Michael R. Furrow was appointed Vice President of Permian Basin Region in
April 1997. He was employed by the Company in February 1997 upon the closing of
the Pride Acquisition. Mr. Furrow joined Pride Petroleum Services, Inc. in
February, 1990 where he held the positions of Vice President and area manager in
locations such as Alice, Texas and Bakersfield, California. He has served in his
capacity as a regional manager over the Permian Basin region since January 1996.
Prior to his employment with Pride, Mr. Furrow worked for Harkins & Company for
six years and with Shell Oil Company for 15 years. Pursuant to the provisions of
the Pride Agreement, the Company has agreed that, if it terminates certain
former employees of Pride, including Mr. Furrow, without cause prior to August
1998, the Company shall pay such employee an amount which is equal to the
product of one month's current salary at the time of termination, times such
employee's number of full years of service for Pride.

Jim D. Flynt was appointed Vice President of California Region in April
1997. He was employed by the Company in February 1997 upon the closing of the
Pride Acquisition. Mr. Flynt joined Pride Petroleum Services, Inc. in January,
1996 as the Vice President and area manager for the Western Area which is the
California Region for Dawson. Prior to his employment with Pride, Mr. Flynt
worked for California Production Service for over 19 years, 12 of which were in
the capacity of Vice President of Operations. Pursuant to the provisions of the
Pride Agreement, the Company has agreed that, if it terminates certain former
employees of Pride, including Mr. Flynt, without cause prior to August 1998, the
Company shall pay such employee an amount which is equal to the product of one
month's current salary at the time of termination, times such employee's number
of full years of service for Pride.

EXECUTIVE COMPENSATION

The following table sets forth certain information for the fiscal years
ended March 31, 1998, 1997 and 1996, with respect to the Chief Executive Officer
(Mr. Little), the Chief Operating Officer (Mr. Byerlotzer), the Vice President
of East Texas/Gulf Coast Region (Mr. Eustace), the Vice President of the
California Region (Mr. Flynt) and the Vice President of the Permian Basin (Mr.
Furrow) (collectively, the "Named

27
<PAGE> 30

Executive Officers"). There were no other executive officers of the Company who
received annual compensation (including salary and bonuses earned) which
exceeded $100,000 during fiscal year 1998.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
----------------------- -------------------------
SECURITIES
FISCAL PRINCIPAL UNDERLYING ALL OTHER
NAME YEAR POSITION SALARY BONUS(2) OPTIONS COMPENSATION
---- ------ --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael E.
Little........... 1998 Chairman of the Board, $264,423 $163,489(3) 30,000 --
1997 President and Chief $174,038 $175,000 87,380 --
1996 Executive Officer $150,000 $ 50,000 51,600 --

James Byerlotzer... 1998 Chief Operating $166,519(4) $ 59,265 12,429 --
1997 Officer $ 22,749 -- -- --
1996 -- -- -- --
Joseph B.
Eustace.......... 1998 Vice President of East $132,212 $ 33,398(3) 7,125 --
1997 Texas/Gulf Coast $124,000 $ 80,000 63,520 --
1996 Region $ 96,200 $ 20,000 17,200 --

Jim D. Flynt....... 1998 Vice President of $120,000(4) $ 30,802 6,964 --
1997 California Region $ 20,577 -- -- --
1996 -- -- -- --
Michael R.
Furrow........... 1998 Vice President of $112,568(4) $ 45,698 6,429 --
1997 Permian Basin Region $ 18,849 -- -- --
1996 -- -- -- --
</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) Bonuses are awarded annually in the discretion of the Compensation Committee
with respect to performance in the fiscal year indicated; the amount of the
bonuses is determined and the bonuses are paid in the following fiscal year.

(3) In the fiscal 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
non-statutory stock options and incurred federal income tax liability in
connection with such exercises.

(4) Employment commenced February 1, 1997.

STOCK OPTION GRANTS IN FISCAL 1998

The following table shows information concerning individual grants of stock
options during fiscal year 1998 to the Named Executive Officers.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
% OF TOTAL APPRECIATION FOR
NO. OF SECURITIES OPTIONS OPTION TERM
UNDERLYING GRANTED TO EXERCISE EXPIRATION ---------------------------
NAME OPTIONS GRANTED EMPLOYEES PRICE DATE 5% 10%
---- ----------------- ---------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Michael E. Little.......... 30,000 34.7% $17.25 6/30/07 $325,453 $824,762
James Byerlotzer........... 12,429 14.4% $17.25 6/30/07 $134,835 $341,699
Joseph B. Eustace.......... 7,125 8.2% $17.25 6/30/07 $ 77,295 $195,881
Jim D. Flynt............... 6,964 8.0% $17.25 6/30/07 $ 75,548 $191,455
Michael R. Furrow.......... 6,429 7.4% $17.25 6/30/07 $ 69,745 $176,746
</TABLE>

28
<PAGE> 31

STOCK OPTION EXERCISES AND HOLDINGS

The following table sets forth information concerning the exercise of stock
options during the fiscal year ended March 31, 1998, and the number and value of
unexercised stock options held as of the end of the fiscal year ended March 31,
1998 by the Named Executive Officer.

<TABLE>
<CAPTION>
AT MARCH 31, 1998
-----------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF IN-THE-MONEY
OPTIONS OPTIONS
OPTIONS --------------------------- -----------------------------
NAME EXERCISED EXERCISABLE UNEXERCISABLE EXERCISABLE* UNEXERCISABLE*
---- --------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Michael E. Little................... 0 151,052 82,428 $1,907,032 $661,904
James Byerlotzer.................... 0 0 12,429 $ 0 $ 0
Joseph B. Eustace................... 0 64,108 45,237 $ 809,364 $481,164
Jim D. Flynt........................ 0 0 6,964 $ 0 $ 0
Michael R. Furrow................... 0 0 6,429 $ 0 $ 0
</TABLE>

- ---------------
* Based on closing price of $12.625 on March 31, 1998.

ACCELERATION OF OPTION VESTING UNDER MERGER AGREEMENT

Under the Merger Agreement, vesting of all of the Company's outstanding
options will be accelerated immediately prior to the effectiveness of the
Merger, and the Company will pay in cash the net value reflected by each such
option (comparing the exercise price thereof with the Offer Price of $17.50) to
each option holder in cancellation of the option.

EMPLOYMENT AGREEMENTS

Little Employment Agreement. The Company and Michael E. Little, Chairman,
President and Chief Executive Officer of the Company entered into an employment
agreement effective April 1, 1996. Mr. Little and the Company amended this
employment agreement effective April 1, 1998. The employment agreement, as
amended, provides for a four-year term that will expire on March 31, 2000. Mr.
Little's annual base salary is $300,000 for 1997, 1998 and 1999. Mr. Little is
eligible for a bonus pursuant to the benefit plan entitled "Compensation
Program, Board of Directors Summary," which was approved by the Board of
Directors on July 31, 1997. Mr. Little's bonus is capped at 100% of his annual
base salary. Before a change of control of the Company, (i) if Mr. Little
terminates his employment with the Company for cause, or if the Company
terminates Mr. Little's employment without cause, Mr. Little will receive two
year's base salary as severance, and (ii) if Mr. Little terminates his
employment with the Company without cause, or if the Company terminates Mr.
Little's employment for cause, Mr. Little will not receive any severance
payment. For a period of one year after a change of control of the Company, if
Mr. Little terminates his employment with the Company for cause, or if the
Company terminates Mr. Little's employment without cause, Mr. Little will
receive three year's base salary as severance. For a period of 60 days after a
change of control, Mr. Little may terminate his employment with the Company
without cause and still receive three year's base salary as severance. If Mr.
Little is terminated by the Company for cause, even after a change of control,
Mr. Little will not receive any severance. On August 10, 1998, Mr. Little and
the Company entered into a second amendment to the employment agreement, in
which the Company agreed to pay Mr. Little such additional amounts as may be
necessary to cover the taxes Mr. Little would have to pay on any "excess
parachute payments" he is entitled to receive pursuant to his employment
agreement.

29
<PAGE> 32

base salary as severance, and (ii) if Mr. Byerlotzer terminates his employment
with the Company without cause, or if the Company terminates Mr. Byerlotzer's
employment for cause, Mr. Byerlotzer will not receive any severance payment. For
a period of one year after a change of control, if the Company terminates Mr.
Byerlotzer without cause, Mr. Byerlotzer will receive 18 months' salary as
severance. For a period of two years after a change of control, if Mr.
Byerlotzer terminates his employment with the Company for cause, he will receive
one year's salary as severance. After a change of control, if Mr. Byerlotzer
terminates his employment with the Company without cause, or if the Company
terminates Mr. Byerlotzer's employment for cause, Mr. Byerlotzer will not
receive any severance payment. On August 10, 1998, Mr. Byerlotzer and the
Company entered into an amendment to the employment agreement, in which the
Company agreed to pay Mr. Byerlotzer such additional amounts as may be necessary
to cover the taxes Mr. Byerlotzer would have to pay on any "excess parachute
payments" he is entitled to receive pursuant to his employment agreement.

Stark Employment Agreement. The Company and P. Mark Stark, Chief Financial
Officer of the Company, entered into an employment agreement effective April 1,
1998. The employment agreement provides for a two-year term that will expire on
March 31, 2000. Mr. Stark's annual base salary is $120,000 for 1998 and $140,000
for 1999. Mr. Stark is eligible for a bonus from the Company, but such bonus is
discretionary upon a determination by the Board of Directors. Before a change of
control of the Company, (i) if Mr. Stark terminates his employment with the
Company for cause, or if the Company terminates Mr. Stark's employment without
cause, Mr. Stark will receive one year's base salary as severance, and (ii) if
Mr. Stark terminates his employment with the Company without cause, or if the
Company terminates Mr. Stark's employment for cause, Mr. Stark will not receive
any severance payment. For a period of one year after a change of control, if
the Company terminates Mr. Stark without cause, Mr. Stark will receive 18
months' salary as severance. For a period of two years after a change of
control, if Mr. Stark terminates his employment with the Company for cause, he
will receive one year's salary as severance. After a change of control, if Mr.
Stark terminates his employment with the Company without cause, or if the
Company terminates Mr. Stark's employment for cause, Mr. Stark will not receive
any severance payment. On August 10, 1998, Mr. Stark and the Company entered
into an amendment to the employment agreement, in which the Company agreed to
pay Mr. Stark such additional amounts as may be necessary to cover the taxes Mr.
Stark would have to pay on any "excess parachute payments" he is entitled to
receive pursuant to his employment agreement.

Eustace Employment Agreement. The Company and Joseph Eustace, Vice
President of the East Texas/Gulf Coast Region, entered into an employment
agreement effective April 1, 1996. The employment agreement provides for a
three-year term that will expire on March 31, 1999. Mr. Eustace's annual base
salary is $125,000 for the first year, increasing to $132,500 in the second year
and to $140,000 in the third year. Mr. Eustace is eligible for a bonus from the
Company, but such bonus is discretionary upon a determination by the Board of
Directors. If Mr. Eustace's employment is terminated by the Company without
cause, Mr. Eustace will receive one year's salary as severance. If Mr. Eustace's
employment is terminated by the Company without cause during the 12-month period
following a change of control of the Company, Mr. Eustace will receive 18
months' salary as severance. If Mr. Eustace terminates his employment with the
Company for cause within 12 months of a change of control of the Company, Mr.
Eustace will receive 12 months' salary as severance. If the Company terminates
Mr. Eustace's employment for cause, Mr. Eustace is not entitled to any
severance. On August 10, 1998, Mr. Eustace and the Company entered into an
amendment to the employment agreement, in which the Company agreed to pay Mr.
Eustace such additional amounts as may be necessary to cover the taxes Mr.
Eustace would have to pay on any "excess parachute payments" he is entitled to
receive pursuant to his employment agreement.

EMPLOYEE SEVERANCE PAY PLAN

30
<PAGE> 33

to severance benefits from the Company through a separate agreement, in which
case the separate agreement will control.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of July 15, 1998 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, and (iv) all
directors and executive officers as a group. Unless otherwise indicated, each
person has sole voting and dispositive power with respect to such shares.

<TABLE>
<CAPTION>
NUMBER OF PERCENT BENEFICIALLY
NAME OF BENEFICIAL OWNER SHARES(1) OWNED(1)
------------------------ --------- --------------------
<S> <C> <C>
Michael E. Little........................................... 295,197(2) 2.6%
Russell Banks............................................... 11,600(3) *
J. Michael Bell............................................. 21,500(4) *
James Byerlotzer............................................ 3,486(5) *
Joseph B. Eustace........................................... 87,530(6) *
Michael R. Furrow........................................... 2,646(7) *
Wm. Ward Greenwood.......................................... 17,723(8) *
Douglas D. Lewis............................................ 23,933(8) *
Paul E. McCollam............................................ 1,267,334(9) 11.3%
Stephen F. Oakes............................................ 1,263,034(10) 11.3%
Lawrence C. Petrucci........................................ 9,100(11) *
P. Mark Stark............................................... 17,803(12) *
RIMCO Partners, L.P.
RIMCO Partners, L.P. II
RIMCO Partners, L.P. III
RIMCO Partners, L.P. IV................................ 1,280,234(13) 11.4%
Resource Investors Management Company
Limited Partnership, their general partner
RIMCO Associates, Inc., its general partner
22 Waterville Road
Avon, Connecticut 06001
Key Energy Group, Inc....................................... 820,500(14) 7.3%
All executive officers and directors as a group (12
persons).................................................. 1,770,252(15) 15.34%
</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

31
<PAGE> 34

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) Includes immediately exercisable options to purchase 157,052 shares of
Common Stock.

(3) Includes immediately exercisable options to purchase 8,600 shares of Common
Stock.

(4) Includes immediately exercisable options for the purchase of 17,200 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.

(5) Includes immediately exercisable options to purchase 2,486 shares of Common
Stock.

(6) Includes immediately exercisable options to purchase 65,533 shares of
Common Stock.

(7) Includes 560 shares held by Michael R. Furrow's wife, Peggy H. Furrow.

(8) Includes immediately exercisable options to purchase 17,200 shares of
Common Stock.

(9) Includes 1,250,134 shares of Common Stock beneficially owned by the RIMCO
Parties and immediately exercisable options to purchase 17,200 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.

(10) Includes 1,250,134 shares of Common Stock beneficially owned by the RIMCO
Parties and immediately exercisable options to purchase 12,900 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.

(11) Includes immediately exercisable options to purchase 8,600 shares of Common
Stock.

(12) Represents immediately exercisable options to purchase shares of Common
Stock.

(13) 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. 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. Includes immediately
exercisable options to purchase 30,100 shares of Common Stock held by
Messrs. McCollam and Oakes.

(14) The address of Key Energy Group is Two Tower Center, Twentieth Floor, East
Brunswick, NJ 08816.

(15) Includes immediately exercisable options to purchase 338,760 shares of
Common Stock.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On November 1, 1994, the Company loaned Mr. Little, Chairman of the Board,
President and Chief Executive Officer of the Company, $55,456, 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. 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 provides 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 maximum indebtedness from Mr. Little to the Company during the fiscal year
ended March 31, 1998 was $134,374 and the balance due on that indebtedness as of
July 15, 1998 was $135,580.

32
<PAGE> 35

See "Agreements Relating to Directors," in this Information Statement, for
a discussion of the Voting Agreement.

Gene Little, the father of Michael E. Little, serves as an operations
consultant to the Company and received fees and expense reimbursements of
approximately $54,450 in the fiscal year ended March 31, 1998.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

During the fiscal year ended March 31, 1998, based on a review of Forms 3
and 4 furnished to the Company during its most recent fiscal year and Forms 5
furnished to the Company with respect to its most recent fiscal year, Mike
Furrow failed to make a timely filing of one Form 4 which was required to report
one transaction involving the purchase of shares of Common Stock.

33
<PAGE> 36

ANNEX B

MORGAN STANLEY

MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000

August 11, 1998

Board of Directors
Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, TX 78205

Members of the Board:

We understand that Dawson Production Services, Inc. ("Dawson" or the
"Company"), Key Energy Group, Inc. ("Key") and Midland Acquisition Corp., a
wholly-owned subsidiary of Key, ("Midland") propose to enter into an Agreement
and Plan of Merger substantially in the form of the draft dated August 11, 1998
(the "Merger Agreement") which provides, among other things, for (i) the
commencement by Midland of a tender offer (the "Tender Offer") for all
outstanding shares of common stock, par value $.01 per share (the "Dawson Common
Stock") of Dawson for $17.50 per share net to the seller in cash, and (ii) the
subsequent merger (the "Merger") of Midland with and into Dawson. Pursuant to
the Merger, Dawson will become a wholly owned subsidiary of Key, and each
outstanding share of Dawson Common Stock, other than shares held in treasury or
held by Key or any affiliate of Key or as to which dissenters' rights have been
perfected, will be converted into the right to receive $17.50 per share in cash.
The terms and conditions of the Tender Offer and the Merger are more fully set
forth in the Merger Agreement.

You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Dawson Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders (other than Key
and its affiliates).

For purposes of the opinion set forth herein, we have:

(i) reviewed certain publicly available financial statements and other
information of the Company;

(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;

(iii) analyzed certain financial projections prepared by the management of
the Company;

(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;

(v) reviewed the reported prices and trading activity for the Dawson
Common Stock;

(vi) compared the financial performance of the Company and the prices and
trading activity of the Dawson Common Stock with that of certain
other comparable publicly-traded companies and their securities;

(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;

(viii) participated in discussions and negotiations among representatives
of the Company, Key and their financial and legal advisors;

(ix) reviewed the estimates of the fair market value of certain of the
assets of the Company prepared by the management of the Company;
<PAGE> 37
Board of Directors
August 11, 1998
Page 2

(x) reviewed the draft Merger Agreement and certain related documents; and

(xi) performed such other analyses as we have deemed appropriate.

We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgements of the future financial performance of the
Company. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company; however, we have reviewed the estimates referred
to in (ix) above and have relied without independent verification upon such
estimates for purposes of this opinion. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.

We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services.

It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent except that this opinion may be included in its entirety
in any filing made by the Company in respect of the transaction with the
Securities and Exchange Commission. In addition, Morgan Stanley expresses no
opinion or recommendation as to whether the shareholders of the Company should
accept the Tender Offer.

Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Dawson Common Stock is
fair from a financial point of view to such holders (other than Key and its
affiliates).

Very truly yours,

MORGAN STANLEY & CO. INCORPORATED

By: /s/ Gordon E. Dyal
------------------------------------
Gordon E. Dyal
Managing Director

<PAGE> 1
================================================================================

AGREEMENT AND PLAN OF MERGER

by and among

KEY ENERGY GROUP, INC.

MIDLAND ACQUISITION CORP.,

and

DAWSON PRODUCTION SERVICES, INC.

dated as of

August 11, 1998

================================================================================
<PAGE> 2
AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1998, by and
among Key Energy Group, Inc., a Maryland corporation ("Parent"), Midland
Acquisition Corp., a New Jersey corporation and a direct, wholly owned
subsidiary of Parent (the "Purchaser"), and Dawson Production Services, Inc., a
Texas corporation (the "Company").

WHEREAS, the Boards of Directors of Parent, the Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:

ARTICLE I

THE OFFER AND MERGER

Section 1.1 The Offer. (a) As promptly as practicable (but in no event
later than five business days after the public announcement of the execution
hereof), the Purchaser shall commence (within the meaning of Rule 14d2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer (the
"Offer") to purchase for cash all shares of the issued and outstanding common
stock, par value $.01 per share (referred to herein as either the "Shares" or
"Company Common Stock"), of the Company (including the associated Common Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement between
the Company and Harris Trust Company of New York, as Rights Agent, dated as of
September 11, 1997 (the "Rights Agreement")), at a price of $17.50 per Share,
net to the seller in cash (such price, or such higher price per Share as may be
paid in the Offer, being referred to herein as the "Offer Price"), subject to
there being validly tendered and not withdrawn prior to the expiration of the
Offer, that number of Shares which, together with the Shares beneficially owned
<PAGE> 3
by Parent or the Purchaser, represents at least a majority of the Shares
outstanding on a fully diluted basis (the "Minimum Condition") and to the other
conditions set forth in Annex A hereto. The Purchaser shall, on the terms and
subject to the prior satisfaction or waiver (except that the Minimum Condition
may not be waived) of the conditions of the Offer, accept for payment and pay
for Shares tendered as soon as it is legally permitted to do so under applicable
law. The obligations of the Purchaser to commence the Offer and to accept for
payment and to pay for any Shares validly tendered on or prior to the expiration
of the Offer and not withdrawn shall be subject only to the Minimum Condition
and the other conditions set forth in Annex A hereto. The Offer shall be made by
means of an offer to purchase (the "Offer to Purchase") containing the terms set
forth in this Agreement, the Minimum Condition and the other conditions set
forth in Annex A hereto. The Purchaser shall not amend or waive the Minimum
Condition and shall not decrease the Offer Price or decrease the number of
Shares sought, or amend any other condition of the Offer in any manner adverse
to the holders of the Shares (other than with respect to insignificant changes
or amendments) without the written consent of the Company (such consent to be
authorized by the Board of Directors of the Company or a duly authorized
committee thereof), provided, however, that if on the initial scheduled
expiration date of the Offer (as it may be extended), all conditions to the
Offer shall not have been satisfied or waived, the Offer may be extended from
the time to time until December 31, 1998. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by law in
connection with such increase in each case without the consent of the Company.

(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply in
all material respects with the provisions

2
<PAGE> 4
of applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's shareholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent or the Purchaser
with respect to information supplied by the Company in writing for inclusion in
the Offer Documents. Each of Parent and the Purchaser further agrees to take all
steps necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of Parent and the Purchaser, on the one
hand, and the Company, on the other hand, agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false and misleading in any material respect and the
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given the
opportunity to review the Schedule 14D-1 before it is filed with the SEC. In
addition, Parent and the Purchaser agree to provide the Company and its counsel
in writing with any comments Parent, the Purchaser or their counsel may receive
from time to time from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments, and any written or oral responses
thereto.

Section 1.2 Company Actions.

(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, unanimously (i) approved
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger (collectively, the "Transactions"), and such approval constitutes all
requisite approvals for purposes of Article 13.03 A.(1) of the Texas Business
Corporation Act (the "TBCA") and (ii) resolved to recommend that the
shareholders of the Company accept the Offer, tender

<PAGE> 5
their Shares thereunder to the Purchaser and approve and adopt this Agreement
and the Merger. The Company represents that the actions set forth in this
Section 1.2(a) and all other actions it has taken in connection therewith are
sufficient to render the provisions of Part Thirteen of the TBCA restricting
business combinations with certain persons inapplicable to the Offer and the
Merger.

(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall, subject to the fiduciary
duties of the Company's directors under applicable law and to the provisions of
this Agreement, contain the recommendation referred to in clause (ii) of Section
1.2(a) hereof. The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information supplied by Parent or the Purchaser in writing for
inclusion in the Offer Documents. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand, and
Parent and the Purchaser, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false and misleading in any material respect and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given the opportunity to review
the Schedule 14D-9 before it is filed with the SEC. In addition, the Company
agrees to provide Parent, the Purchaser and their counsel in writing with

4
<PAGE> 6
any comments the Company or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt
of such comments, and any written or oral responses thereto.

(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent date, and
shall furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
shareholders of the Company. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request of the Company deliver or cause to be delivered to
the Company all copies of such information then in its possession or the
possession of its agents or representatives.

(d) As promptly as practicable on or after the date hereof, but
in no event later than five days following announcement of the Offer, the
Company will amend the Rights Agreement, as necessary (the "Rights Amendment"),
(i) to prevent this Agreement or the consummation of any of the transactions
contemplated hereby or thereby, including without limitation, the publication or
other announcement of the Offer and the consummation of the Offer and the
Merger, from resulting in the distribution of separate rights certificates or
the occurrence of a Distribution Date (as defined in the Rights Agreement) or
being deemed a Triggering Event (as defined in the Rights Agreement) and (ii) to
provide that neither Parent nor the Purchaser shall be deemed to be an Acquiring
Person (as defined in the Rights Agreement) by reason of the transactions
expressly provided for in this Agreement. The Company represents that the Rights
Amendment will be sufficient to render the Rights inoperative with respect to
any acquisition of Shares by Parent, the Purchaser or any of their affiliates
pursuant to this Agreement. The Company represents that as a result of the
Rights Amendment, the Rights will not be

5
<PAGE> 7
exercisable upon or at any time after, the acceptance for payment of Shares
pursuant to the Offer.

Section 1.3 Directors.

(a) Promptly upon the purchase of and payment for any Shares by
Parent or any of its subsidiaries which represents at least a majority of the
outstanding shares of Company Common Stock (on a fully diluted basis), Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as is equal to the
product of the total number of directors on such Board (giving effect to the
directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser, Parent and any of their affiliates bears to the total number of
shares of Company Common Stock then outstanding. The Company shall, upon request
of the Purchaser, use its best efforts promptly either to increase the size of
its Board of Directors or, at the Company's election, secure the resignations of
such number of its incumbent directors as is necessary to enable Parent's
designees to be so elected to the Company's Board, and shall cause Parent's
designees to be so elected. At such time, the Company shall also cause persons
designated by Parent to constitute the same percentage (rounded up to the next
whole number) as is on the Company's Board of Directors of (i) each committee of
the Company's Board of Directors, (ii) each board of directors (or similar body)
of each Subsidiary (as defined in Section 3.1) of the Company and (iii) each
committee (or similar body) of each such board, in each case only to the extent
permitted by applicable law or the rules of any stock exchange on which the
Company Common Stock is listed. Notwithstanding the foregoing, until the
Effective Time (as defined in Section 1.5 hereof), the Company shall use all
reasonable efforts to retain as a member of its Board of Directors at least two
directors who are directors of the Company on the date hereof; provided, that
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors of the Company. The Company's obligations under this
Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly

6
<PAGE> 8
take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order
to fulfill its obligations under this Section 1.3(a), including mailing to
shareholders the information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable Parent's designees to be elected to the Company's Board of
Directors. Parent or the Purchaser will supply the Company any information with
respect to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of this Section
1.3(a) are in addition to and shall not limit any rights which the Purchaser,
Parent or any of their affiliates may have as a holder or beneficial owner of
Shares as a matter of law with respect to the election of directors or
otherwise.

(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors, any amendment of this
Agreement, any termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of Parent or the Purchaser
hereunder, any waiver of any condition or any of the Company's rights hereunder
or other action by the Company hereunder may be effected only by the action of a
majority of the directors of the Company then in office who were directors of
the Company on the date hereof, which action shall be deemed to constitute the
action of the full Board of Directors; provided, that if there shall be no such
directors, such actions may be effected by majority vote of the entire Board of
Directors of the Company.

Section 1.4 The Merger.

(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 1.5 hereof), the Company and the Purchaser
shall consummate a merger (the "Merger") pursuant to which (i) the Purchaser
shall be merged with and into the Company and the separate corporate existence
of the Purchaser shall thereupon cease, (ii) the Company shall be the successor
or surviving corporation in the Merger and shall continue to be governed by the
laws of the State of Texas, and (iii) the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. At Parent's election, the Merger may

7
<PAGE> 9
alternatively be structured so that (x) the Company is merged with and into
Parent, the Purchaser or any other direct or indirect subsidiary of Parent or
(y) any direct or indirect subsidiary of Parent other than the Purchaser is
merged with and into the Company. In the event of such an election, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
such election. The corporation surviving the Merger is sometimes hereinafter
referred to as the "Surviving Corporation." The Merger shall have the effects
set forth in the TBCA and the New Jersey Business Corporation Act (the "NJBCA").

(b) Unless otherwise determined by Parent prior to the Effective
Time, the Articles of Incorporation of the Surviving Corporation shall, as a
result of the Merger, be changed so as to read in their entirety as closely as
possible to the Certificate of Incorporation of Purchaser immediately prior to
the Effective Time, except as to the name of the Surviving Corporation (in the
case of a merger where the Company is the Surviving Corporation) and except to
the extent necessary (in the case of a merger where the Company is the Surviving
Corporation) to comply with or conform to Texas law until thereafter amended as
provided by law and such Articles of Incorporation.

(c) Unless otherwise determined by Parent prior to the Effective
Time, the By-laws of the Surviving Corporation shall, as a result of the Merger,
be changed so as to read in their entirety as closely as possible to the By-laws
of Purchaser immediately prior to the Effective Time, except to the extent
necessary (in the case of a merger where the Company is the Surviving
Corporation) to comply with or conform to Texas law until thereafter amended as
provided by law, the Articles of Incorporation of the Surviving Corporation and
such By-laws.

Section 1.5 Effective Time. Parent, the Purchaser and the Company will
cause appropriate Articles of Merger (the "Articles of Merger") to be executed
and filed on the date of the Closing (as defined in Section 1.6 hereof) (or on
such other date as Parent and the Company may agree) with the Secretary of State
of the State of Texas as provided in the TBCA and an appropriate Certificate of
Merger (the "Certificate of Merger") to be

8
<PAGE> 10
executed and filed on the date of the Closing (or on such other date as Parent
and the Company may agree) with the Secretary of State of the State of New
Jersey as provided in the NJBCA. The Merger shall become effective on the date
on which the Articles of Merger and the Certificate of Merger have been duly
filed with the appropriate Secretaries of State or such time as is agreed upon
by the parties and specified in the Articles of Merger and the Certificate of
Merger, and such time is hereinafter referred to as the "Effective Time."

Section 1.6 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article VI hereof (the "Closing Date"), at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New York Avenue, N.W.,
Washington, D.C. 20005, unless another date or place is agreed to in writing by
the parties hereto.

Section 1.7 Directors and Officers of the Surviving Corporation. The
directors and officers of the Purchaser at the Effective Time shall, from and
after the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws.

Section 1.8 Shareholders' Meeting.

(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:

(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon this Agreement;

9
<PAGE> 11
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and
use its reasonable efforts (x) to obtain and furnish the information
required to be included by the SEC in the Proxy Statement (as
hereinafter defined) and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive
proxy or information statement (the "Proxy Statement") to be mailed to
its shareholders and (y) to obtain the necessary approvals of the
Merger and this Agreement by its shareholders; and

(iii) subject to the fiduciary obligations of the Board under
applicable law as advised by independent counsel, include in the
Proxy Statement the recommendation of the Board that shareholders of
the Company vote in favor of the approval of the Merger and the
adoption of this Agreement.

(b) Parent agrees that it will vote, or cause to be voted, all of
the Shares then owned by it, the Purchaser or any of its other subsidiaries and
affiliates in favor of the approval of the Merger and the adoption of this
Agreement.

Section 1.9 Merger Without Meeting of Shareholders. Notwithstanding
Section 1.8 hereof, in the event that Parent, the Purchaser or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
each class of capital stock of the Company, pursuant to the Offer or otherwise,
the parties hereto agree, at the request of Parent and subject to Article VI
hereof, to take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition, without a
meeting of shareholders of the Company, in accordance with Article 5.16 of the
TBCA and Section 14A:10-5.1 of the NJBCA.

10
<PAGE> 12
ARTICLE II

CONVERSION OF SECURITIES

Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock or common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):

(a) Purchaser Common Stock. Each issued and outstanding share of
the Purchaser Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.

(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by Parent, the Purchaser or any
other wholly owned Subsidiary (as defined in Section 3.1 hereof) of Parent shall
be cancelled and retired and shall cease to exist and no stock of Parent or
other consideration shall be delivered in exchange therefor.

(c) Exchange of Shares. Each issued and outstanding share of
Company Common Stock, including the associated Rights (other than shares to be
cancelled in accordance with Section 2.1(b) hereof) shall be converted into the
right to receive the Offer Price, payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such share of Company Common Stock in the manner provided
in Section 2.2 hereof. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2 hereof, without
interest.

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<PAGE> 13
Section 2.2 Exchange of Certificates.

(a) Paying Agent. Parent shall designate a bank or trust company
to act as agent for the holders of shares of Company Common Stock in connection
with the Merger (the "Paying Agent") to receive the funds to which holders of
shares of Company Common Stock shall become entitled pursuant to Section
2.1(c)hereof. Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation.

(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares were converted pursuant to Section 2.1 hereof into the right to
receive the Merger Consideration (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each share of Company Common Stock formerly represented by such Certificate and
the Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by

12
<PAGE> 14
this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
in cash as contemplated by this Section 2.2, without interest thereon.

(c) Transfer Books; No Further Ownership Rights in Company Common
Stock. At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article II.

(d) Termination of Fund; No Liability. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.

Section 2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such Shares in accordance
with the TBCA ("Dissenting Shares") shall not be converted into a right to
receive the Merger Consideration, unless such holder fails to perfect or

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<PAGE> 15
withdraws or otherwise loses his or her right to appraisal. A holder of
Dissenting Shares shall be entitled to receive payment of the appraised value of
such Shares held by him or her in accordance with the provisions of Article 5.12
or 5.16 of the TBCA, unless, after the Effective Time, such holder fails to
perfect or withdraws or loses his or her right to appraisal, in which case such
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration, without interest thereon.

Section 2.4 Company Option Plans.

(a) Parent and the Company shall take all actions necessary to
provide that, effective as of the Effective Time, (i) each outstanding employee
stock option to purchase Shares (an "Employee Option"), whether or not granted
under the Dawson Production Services, Inc. Amended and Restated 1995 Incentive
Plan (the "Option Plan") and each outstanding non-employee director option to
purchase Shares, whether or not granted under the Option Plan ("Director
Options" and collectively with Employee Options, "Options"), whether or not then
exercisable or vested, shall become fully exercisable and vested, and (ii) each
Option that, pursuant to its terms, can be cancelled by the Company without the
holder's consent shall be cancelled, and each other Option which its holder
elects to cancel shall be cancelled, and in consideration of such cancellation,
and except to the extent that Parent or the Purchaser and the holder of any such
Option otherwise agree, the Company shall pay to such holders of such cancelled
Options an amount in respect thereof equal to the product of (A) the excess, if
any, of the Offer Price over the exercise price thereof and (B) the number of
Shares subject thereto (such payment to be net of applicable withholding and
excise taxes). Notwithstanding the foregoing, any payment to the holders of
Options contemplated by this Section 2.3 may be withheld in respect of any
Option until any necessary consents or releases are obtained.

(b) Except as provided herein or as otherwise agreed to by the
parties, (i) the Option Plan shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in

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<PAGE> 16
respect of the capital stock of the Company or any of its subsidiaries shall be
terminated as of the Effective Time and (ii) the Company shall, as soon as
practicable after the date hereof, use its best efforts to ensure that following
the Effective Time no holder of Options or any participant in the Option Plan or
any other plans, programs or arrangements shall have any right thereunder to
acquire any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and the Purchaser as
follows:

Section 3.1 Organization. Each of the Company and its Subsidiaries is
a corporation, partnership or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority,
and governmental approvals would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole. As used in this Agreement, the
word "Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding such
partnerships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii) at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. As used in
this Agreement, any reference to any event, change or effect being material or
having a material adverse effect on or with respect to

<PAGE> 17
any entity (or group of entities taken as a whole) means such event, change or
effect is materially adverse to the consolidated financial condition, businesses
or results of operations of such entity (or, if used with respect thereto, of
such group of entities taken as a whole). The Company and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998 sets forth a
complete list of the Company's active Subsidiaries. The Company's inactive
subsidiaries have no operations or liabilities.

Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock, 60,000 shares of
Series A 10% Cumulative Convertible Preferred Stock, without par value (the
"Series A Preferred Stock"), and 500,000 preferred shares, without par value
(together with the Series A Preferred Stock, the "Preferred Stock"). As of the
date hereof, (i) 11,202,965 shares of Company Common Stock are issued and
outstanding, (ii) 102,500 shares of Company Common Stock are issued and held in
the treasury of the Company and (iii) 812,766 shares of Company Common Stock are
reserved for issuance upon exercise of outstanding Options. As of the date
hereof, there are no shares of Preferred Stock issued and outstanding. All the
outstanding shares of the Company's capital stock are, and all shares which may
be issued pursuant to the exercise of outstanding Options or Rights will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Other than a $1.5 million
Subordinated Convertible Debenture, dated December 1, 1994, there are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except as set forth above and
except for the transactions contemplated by this Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company

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<PAGE> 18
authorized, issued or outstanding and (ii) there are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries, obligating the Company
or any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. Except as contemplated by this Agreement, there are
no outstanding contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Shares, or the capital stock of
the Company or any Subsidiary or affiliate of the Company or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary or any other entity.

(b) All of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its Subsidiaries free and clear of
all liens, charges, claims or encumbrances.

(c) Except for an agreement relating to the election of directors
between the Company and RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO
Partners L.P. III and RIMCO Partners L.P. IV, dated November 21, 1996, there are
no voting trusts or other agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of the Subsidiaries. None of the Company or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of the Company, or any of its Subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement.

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Section 3.3 Authorization; Validity of Agreement; Company Action. (a)
The Company has full corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the necessary approval of its shareholders,
to consummate the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly authorized by its Board of
Directors and, except for obtaining the approval of its shareholders as
contemplated by Section 1.8 hereof, no other corporate action on the part of the
Company is necessary to authorize the execution and delivery by the Company of
this Agreement and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
is a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement, including the Offer, the acquisition of Shares pursuant to the Offer
and the Merger, including, but not limited to, all actions required to render
the provisions of Part Thirteen of the TBCA restricting business combinations
with certain persons inapplicable to such transactions.

Section 3.4 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state securities
or blue sky laws, the TBCA and the NJBCA, neither the execution, delivery or
performance of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby nor compliance by the Company with

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any of the provisions hereof will (i) conflict with or result in any breach of
any provision of the articles of incorporation or by-laws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole, (iii) except for the 9 3/8%
Senior Notes due February 1, 2007 (the "Senior Notes") and the Credit Agreement
between the Company and The Frost National Bank, dated February 20, 1997
(relating to a $50.0 million working capital revolving facility), result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound and which has been (or was required by law to have been) filed as an
exhibit to the Company SEC Documents (as defined in Section 3.5 hereof) filed
prior to the date hereof (the "Material Agreements") or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company,
any of its Subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (iii) and (iv), violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries taken as a whole, and which will not materially
impair the ability of the Company to consummate the transactions contemplated
hereby.

Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1996 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act")(as such documents have
been amended since the time of their filing,

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<PAGE> 21
collectively, the "Company SEC Documents"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. None of
the Subsidiaries is required to file any forms, reports or other documents with
the SEC pursuant to Section 12 or 15 of the Exchange Act. The financial
statements of the Company (the "1998 Financial Statements") included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998,
as amended (including the related notes thereto) (the "1998 Form 10-K") have
been prepared from and are in accordance with, the books and records of the
Company and its consolidated subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto and subject, in the case of quarterly financial statements, to normal
and recurring year-end adjustments) and fairly present the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of the Company and its consolidated
subsidiaries as at the dates thereof or for the periods presented therein.

Section 3.6 Absence of Certain Changes or Events. Except as set forth
on Schedule 3.6 or as disclosed in the Company SEC Documents filed prior to the
date hereof, since March 31, 1998, the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary and usual course and
there has not occurred (i) any events, changes, or effects (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries, taken as a whole; (ii)

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<PAGE> 22
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or of any of its Subsidiaries; (iii) any change by the Company or any of
its Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP; (iv) any entry by the Company or any of its
Subsidiaries into any commitment or transaction material to the Company and its
Subsidiaries, taken as a whole; or (v) any increase in or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any officers or key employees of the Company or its Subsidiaries,
except in the ordinary course of business consistent with past practice.

Section 3.7 No Undisclosed Liabilities. Except (a) as set forth on
Schedule 3.7, (b) as disclosed in the Company SEC Documents filed prior to the
date hereof and (c) for liabilities and obligations incurred in the ordinary
course of business and consistent with past practice, since March 31, 1998,
neither the Company nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would be reasonably likely to have, a material adverse effect on the
Company and its Subsidiaries taken as a whole or would be required by GAAP to be
reflected on a consolidated balance sheet of the Company and its Subsidiaries
(including the notes thereto).

Section 3.8 Information in Proxy Statement. The Proxy Statement (or
any amendment thereof or supplement thereto) will, at the date mailed to Company
shareholders and at the time of the meeting of Company shareholders to be held
in connection with the Merger, not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, except that no representation is made
by the Company with respect to statements made therein based on

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<PAGE> 23
information supplied by Parent or the Purchaser in writing for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder.

Section 3.9 Employee Benefit Plans; ERISA.

Except as set forth on Schedule 3.9, to the Company's best knowledge:

(a) There are no material employee benefit plans, arrangements,
contracts or agreements (including employment agreements and severance
agreements) of any type (including but not limited to plans described in section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), maintained by the Company, any of its Subsidiaries or any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together with
the Company would be deemed a "single employer" within the meaning of section
4001(b)(15) of ERISA, or with respect to which the Company or any of its
Subsidiaries has or may have a liability, other than those listed on Schedule
3.9 ("Benefit Plans"). Neither the Company nor any ERISA Affiliate has any
formal plan or commitment, whether legally binding or not, to create any
additional Benefit Plan or modify or change any existing Benefit Plan that would
affect any employee or terminated employee of the Company or any Subsidiary.

(b) With respect to each Benefit Plan: (i) if intended to qualify
under section 401(a), 401(k) or 403(a) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code"), such
plan so qualifies, and its trust is exempt from taxation under section 501(a) of
the Code; (ii) such plan has been administered in all material respects in
accordance with its terms and applicable law; (iii) no breaches of fiduciary
duty have occurred which might reasonably be expected to give rise to material
liability on the part of the Company; (iv) no disputes are pending, or, to the
knowledge of the Company, threatened that might reasonably be expected to give
rise to material liability on the part of the Company; (v) no prohibited
transaction (within the meaning of Section 406 of ERISA) has occurred that might
reasonably be expected to give rise to material liability on the part of the

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<PAGE> 24
Company; and (vi) all contributions due as of the date hereof (including any
extensions for such contributions) have been made in full.

(c) Neither the Company nor any ERISA Affiliate maintains or has
maintained or contributed to or been required to contribute to within the last
six years, any employee benefit plan that is subject to Title IV of ERISA.

(d) With respect to each Benefit Plan that is a "welfare plan"
(as defined in section 3(1) of ERISA): except as disclosed in Schedule 3.9, no
such plan provides medical or death benefits with respect to current or former
employees of the Company or any of its Subsidiaries beyond their termination of
employment, other than on an employee-pay-all basis.

(e) Except as set forth on Schedule 3.9, the consummation of the
transactions contemplated by this Agreement, either alone or in connection with
a related event, will not entitle any individual to severance pay or accelerate
the time of payment or vesting, or increase the amount, of compensation or
benefits due to any individual (other than as disclosed in writing).

(f) The maximum amount that could be payable by the Company under
all Benefit Plans (excluding Options and restricted stock) and any other plan,
policy, agreement or arrangement to which the Company or any Subsidiary is a
party, as a result (in whole or in part) of the transactions contemplated hereby
shall not exceed $3,000,000, excluding payments to be made under the Employee
Severance Pay Plan and employer contributions under tax qualified plans.

(g) With respect to each Benefit Plan, the Company has delivered
to Parent accurate and complete copies of all plan texts, summary plan
descriptions, summary of material modifications, trust agreements and other
related agreements including all amendments to the foregoing; the most recent
annual report; the most recent annual and periodic accounting of plan assets;
the most recent determination letter received from the United States Internal
Revenue Service (the "Service"); and the most recent actuarial valuation, to the
extent any of the foregoing may be applicable to a particular Benefit Plan.

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<PAGE> 25
(h) Except for certain agreements disclosed to Parent on Schedule
3.9, neither the Company nor its Subsidiaries is a party to any agreement,
contract or arrangement that could result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.

Section 3.10 Litigation. Except as set forth on Schedule 3.10 and as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, there is no suit, claim, action, proceeding or investigation pending
or, to the best knowledge of the Company, threatened against or affecting, the
Company or any of its Subsidiaries which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or a material adverse effect on the ability of
the Company to consummate the transactions contemplated by this Agreement.

Section 3.11 Conduct of Business. The business of the Company and each
of its Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (i) its respective articles of incorporation or
by-laws or similar organizational documents, (ii) any Material Agreement or
(iii) any federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental authorization or approval applicable to the
Company or any of its Subsidiaries, excluding from the foregoing clauses (ii)
and (iii), defaults or violations that would not, individually or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries,
taken as a whole. Except as previously disclosed to Parent in writing, as of the
date of this Agreement, no investigation or review by any Governmental Entity or
other entity with respect to the Company or any of its Subsidiaries is pending
or, to the best knowledge of the Company, threatened, nor has any Governmental
Entity or other entity indicated an intention to conduct the same, other than,
in each case, those the outcome of which, as far as reasonably can be foreseen,
in the future will not, individually or in the aggregate have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.

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Section 3.12 Environmental Protection.

(a) Except as set forth on Schedule 3.12 or in the Company SEC
Documents filed prior to the date hereof:

(i) The Company and each of its Subsidiaries are in
compliance with all applicable Environmental Laws (as defined in Section
3.12(b)(ii) hereof) except where the failure to comply, individually or in the
aggregate, would not be reasonably likely to have a material adverse effect on
the Company and its Subsidiaries, taken as a whole, and neither the Company nor
any of its Subsidiaries has received any communication (written or oral) from
any person or Governmental Entity that alleges that the Company or any of its
Subsidiaries is not in such compliance with applicable Environmental Laws. To
the knowledge of the Company, future compliance with all applicable
Environmental Laws will not require the Company or its Subsidiaries to incur
costs, beyond those currently budgeted for the three Company fiscal years
beginning with April 1, 1998, that, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.

(ii) (A) The Company and each of its Subsidiaries have
obtained or have applied for all environmental, health and safety permits and
governmental authorizations (collectively, the "Environmental Permits")
necessary for the conduct of their operations except where the failure to so
obtain, individually or in the aggregate, would not be reasonably likely to have
a material adverse effect on the Company and its Subsidiaries, taken as a whole,
(B) all such Environmental Permits are in full force and effect or, where
applicable, a renewal application has been timely filed and is pending agency
approval except where the failure of such Environmental Permits to be in full
force and effect or to have filed a renewal application on a timely basis would
not be reasonably likely to have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries, taken as a whole, (C) the
Company and its Subsidiaries are in material compliance with all terms and
conditions of the Environmental Permits, except where failure to so comply,

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<PAGE> 27
individually or in the aggregate, would not be reasonably likely to have a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
and (D) neither the Company nor any of its Subsidiaries has been advised by any
Governmental Entity of any potential change in the terms and conditions of the
Environmental Permits either prior to or upon their renewal, except for such
potential changes as would not be reasonably likely to have, individually or in
the aggregate, a material adverse effect.

(iii) There are no Environmental Claims (as defined in
Section 3.12(b)(i) hereof) that would be reasonably likely to have, individually
or in the aggregate, a material adverse effect on the Company and its
Subsidiaries, taken as a whole, pending or, to the knowledge of the Company,
threatened, (A) against the Company or any of its Subsidiaries, (B) to the
knowledge of the Company, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law, or (C) against
any currently owned, leased or managed, in whole or in part, real or personal
property or operations of the Company or any of its Subsidiaries or, to the
knowledge of the Company, against any formerly owned, leased or managed, in
whole or in part, real or personal property or operations of the Company or any
of its Subsidiaries.

(iv) The Company has no knowledge of any Releases (as
defined in Section 3.12(b)(iv) hereof) of any Hazardous Material (as defined in
Section 3.12(b)(iii) hereof) that would be reasonably likely to form the basis
of any Environmental Claim against the Company or any of its Subsidiaries, or
against any person or entity whose liability for any Environmental Claim the
Company or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law except for any Environmental Claim which,
individually or in the aggregate, would not be reasonably likely to have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.

(v) The Company has no knowledge, with respect to any
predecessor of the Company or any of its Subsidiaries, of any Environmental
Claim which,

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individually or in the aggregate, would be reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, pending or
threatened, or of any Release of Hazardous Materials that would be reasonably
likely to form the basis of any Environmental Claim which, individually or in
the aggregate, would be reasonably likely to have a material adverse effect on
the Company and its Subsidiaries, taken as a whole.

(b) As used in this Agreement:

(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person or entity (including any Governmental
Entity), alleging potential liability (including, without limitation, potential
responsibility for or liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (A) the presence, Release or threatened Release
into the environment of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the Company or any of its Subsidiaries; or
(B) circumstances forming the basis of any violation or alleged violation of any
Environmental Law or (C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials or the
presence of or exposure to any electromagnetic fields.

(ii) "Environmental Laws" means all federal, state and local
laws, rules, regulations, orders, decrees, judgments or binding agreements
issued, promulgated or entered into by or with any Governmental Entity, relating
to pollution, the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or protection of
human health as it relates to the environment including, without limitation,
laws and regulations relating to noise levels, Releases or threatened Releases
of Hazardous Materials, or otherwise

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<PAGE> 29
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.

(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls
("PCBs"); (B) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import
under any Environmental Law and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which the Company or any of its
Subsidiaries operates.

(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, surface water, groundwater or property.

Section 3.13 Taxes. Except as set forth on Schedule 3.13:

(a) The Company and each of its Subsidiaries have (i) duly filed
(or there has been filed on their behalf or appropriate extensions have been
obtained) with the appropriate governmental authorities all Tax Returns (as
hereinafter defined) required to be filed by them on or prior to the date
hereof, and such Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full or made provision in accordance with
generally accepted accounting principles (or there has been paid or provision
has been made on their behalf) for the payment of all Taxes (as hereinafter
defined) for all periods ending through the date hereof, and will do so through
the Effective Time.

(b) There are no material liens for Taxes upon any property or
assets of the Company or any Subsidiary thereof, except for liens for Taxes not
yet due and

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<PAGE> 30
liens for Taxes the assessment of which is being contested in good
faith.

(c) Neither the Company nor any of its Subsidiaries has made any
change in accounting methods, received a ruling from any taxing authority or
signed an agreement likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.

(d) The Company and each of its Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes (including, without limitation, withholding
of Taxes pursuant to Sections 1441 and 1442 of the Code or similar provisions
under any foreign laws) and have, within the time and the manner prescribed by
law, withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws.

(e) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or its Subsidiaries wherein an
adverse determination or ruling in any one such proceeding or in all such
proceedings in the aggregate could have a material adverse effect on the Company
and its Subsidiaries, taken as a whole, and neither the Company nor its
subsidiaries has received a written notice of any pending audits or proceedings.

(f) The federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all periods through and including March 31, 1994, and no material
deficiencies were asserted as a result of such examinations which have not been
resolved and fully paid.

(g) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either

29
<PAGE> 31
the Company or any of its Subsidiaries with respect to any Taxes is currently in
force.

(h) Neither the Company nor any of its Subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes.

(i) Neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code, or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its Subsidiaries.

(j) "Taxes" shall mean any and all taxes, charges, fees, levies
or other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
occupation, use, service, service use, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the Service or any
taxing authority (whether domestic or foreign including, without limitation, any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including, without limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.

Section 3.14 Labor Relations. There is no labor strike, slowdown or
work stoppage or lockout against the Company or any of its Subsidiaries, there
is no unfair labor practice charge or complaint against or pending before the
National Labor Relations Board (the

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"NLRB") which if decided adversely could have a material adverse effect on the
Company and its Subsidiaries, taken as a whole, and there is no representation
claim or petition pending before the NLRB and no question concerning
representation exists with respect to the employees of the Company or any of its
Subsidiaries.

Section 3.15 Compliance with Laws. The Company and its Subsidiaries
have complied in a timely manner with all laws and governmental regulations and
orders relating to any of the property owned, leased or used by them, or
applicable to their business, including, but not limited to, equal employment
opportunity, discrimination, occupational safety and health, environmental and
antitrust laws, except where the failure to so comply would not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.

Section 3.16 Insurance. As of the date hereof, the Company and each of
its Subsidiaries are insured by insurers, reasonably believed by the Company to
be of recognized financial responsibility and solvency, against such losses and
risks and in such amounts as are customary in the businesses in which they are
engaged.

Section 3.17 Contracts. Except as set forth on Schedule 3.17 or as
disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998, there are no agreements that are material to the Company and its
Subsidiaries, taken as a whole. Each Material Agreement is legally valid and
binding and in full force and effect, except where failure to be legally valid
and binding and in full force and effect would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, and there are no
defaults thereunder, except those defaults that would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole. The
Company has previously made available for inspection by Parent or the Purchaser
all Material Agreements.

Section 3.18 Property. The Company and each of the Subsidiaries, as
the case may be, have sufficient title or leaseholds to property to conduct
their respective businesses as currently conducted with only such exceptions as
individually or in the aggregate would

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not have a material adverse effect on the Company and the Subsidiaries, taken as
a whole.

Section 3.19 Equipment. The Company and its Subsidiaries have such
ownership of or such rights by license, lease or other agreement to all
equipment used or necessary to conduct their respective businesses as currently
conducted (the "Equipment") with only such exceptions as individually or in the
aggregate would not have a material adverse effect on the Company and the
Subsidiaries, taken as a whole. The Equipment is in good operating condition and
repair and adequate for the uses to which it is being put. None of the Equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost.

Section 3.20 Permits. The Company and each of its Subsidiaries has all
permits, licenses, franchises and other governmental authorizations necessary to
conduct their respective businesses as currently conducted with only such
exceptions as individually or in the aggregate would not have a material adverse
effect on the Company and the Subsidiaries, taken as a whole. All such permits,
licenses, franchises and authorizations are in full force and effect and the
Company is not aware of any pending or threatened suspension, cancellation or
termination of any such permit, license, franchise or authorization, with only
such exceptions as individually or in the aggregate would not have a material
adverse effect on the Company and the Subsidiaries, taken as a whole.

Section 3.21 Intellectual Property. Except as disclosed in the Company
SEC Documents filed prior to the date hereof, and except for such claims, which
individually or in the aggregate, would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole, there are no pending or
threatened claims of which the Company or any of its Subsidiaries have been
given written notice, by any person against their use of any material
trademarks, trade names, service marks, service names, mark registrations,
logos, assumed names and copyright registrations, patents and all applications
therefor which are owned by the Company or its Subsidiaries and used in their
respective operations as currently

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conducted (collectively, the "Intellectual Property"). The Company and each of
its Subsidiaries have such ownership of or such rights by license, lease or
other agreement to the Intellectual Property as are necessary to permit them to
conduct their respective operations as currently conducted, except where the
failure to have such rights would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole.

Section 3.22 Opinion of Financial Advisor. The Company has received an
opinion from Morgan Stanley & Co. Incorporated to the effect that the
consideration to be received by the shareholders of the Company pursuant to the
Offer and the Merger is fair to such shareholders from a financial point of
view, a copy of which opinion will be delivered to Parent.

Section 3.23 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the Merger.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER

Parent and the Purchaser represent and warrant to the Company as
follows:

Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate or
other power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries, taken as a whole. Parent and each
of its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or

<PAGE> 35
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a material
adverse effect on Parent and its Subsidiaries, taken as a whole.

Section 4.2 Authorization; Validity of Agreement; Necessary Action.
Each of Parent and the Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the Merger and of the other transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and the Purchaser and no other corporate proceedings on the part of
Parent and the Purchaser are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly
executed and delivered by Parent and the Purchaser, as the case may be, and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of each of Parent and the
Purchaser, as the case may be, enforceable against them in accordance with its
respective terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the HSR Act, the TBCA, the
NJBCA, state securities or blue sky laws and, the laws of other states in which
Parent or the Purchaser is qualified to do or is doing business and applicable
state takeover laws, neither the execution, delivery or performance of this
Agreement by Parent and the Purchaser nor the consummation by Parent and the
Purchaser of the transactions contemplated hereby nor compliance by Parent and
the Purchaser with any of the provisions hereof will (i) conflict with or result
in any breach of any provision of the respective certificate of incorporation or
by-laws of Parent and the Purchaser,

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(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have a
material adverse effect on Parent and its Subsidiaries, taken as a whole), (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, excluding from the foregoing clauses (iii) and (iv) violations, breaches
or defaults which would not, individually or in the aggregate, have a material
adverse effect on Parent and its Subsidiaries taken as a whole.

Section 4.4 Information in Proxy Statement; Schedule 14D-9. None of
the information supplied by Parent or the Purchaser for inclusion or
incorporation by reference in the Proxy Statement or the Schedule 14D-9 will, at
the date mailed to shareholders and at the time of the meeting of shareholders
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.

Section 4.5 Financing. Parent has received (a) a commitment letter
(the "Commitment Letter") from PNC Capital Markets, Inc. and PNC Bank, National
Association (collectively, "PNC") indicating its willingness, upon the terms and
subject to the conditions set forth therein, to lend to Parent up to
$450,000,000 and (b) proposed commitment arrangements from Bear Stearns & Co.
and Lehman Brothers Inc. with respect to certain bridge financing (the "Proposed
Bridge Arrangements"). True and complete copies of the Commitment Letter and the
Proposed Bridge Arrangements received to date in connection with financing the
Offer

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and the Merger, payment of all fees and expenses in connection therewith and, if
necessary as a result of the Offer and the Merger, refinancing the Senior Notes
(collectively, the "Financing") have been delivered to the Company, and Parent
shall promptly deliver to the Company true and complete copies of all final
documentation relating to the Financing received by Parent after the date
hereof. The aggregate proceeds of the Financing, if obtained, will be in an
amount sufficient to acquire all the Shares in the Offer and the Merger, to pay
all fees and expenses in connection therewith and, if necessary, to effect a
refinancing of the Senior Notes.

Section 4.6 Purchaser's Operations. The Purchaser was formed solely
for the purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.

ARTICLE V

COVENANTS

Section 5.1 Interim Operations of the Company. The Company covenants
and agrees that, except (i) as expressly contemplated by this Agreement, or (ii)
as agreed in writing by Parent, after the date hereof, and prior to the time the
directors designated by Parent have been elected to, and shall constitute a
majority of, the Board of Directors of the Company pursuant to Section 1.3
hereof (the "Appointment Date"):

(a) the business of the Company and each of its Subsidiaries
shall be conducted only in the ordinary and usual course and, to the extent
consistent therewith, each of the Company and its Subsidiaries shall use its
best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors and business
partners;

(b) the Company will not, directly or indirectly, (i) sell,
transfer or pledge or agree to sell, transfer or pledge any Company Common
Stock, Pre-

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ferred Stock or capital stock of any of its Subsidiaries beneficially owned by
it, either directly or indirectly; or (ii) split, combine or reclassify the
outstanding Company Common Stock or any outstanding capital stock of any of the
Subsidiaries of the Company;

(c) except for those actions contemplated in Section 1.2 hereof,
neither the Company nor any of its Subsidiaries shall: (i) amend its articles of
incorporation or by-laws or similar organizational documents; (ii) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (iii) issue, sell, pledge, dispose
of or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of capital stock of any class of the Company or any of
its Subsidiaries, other than shares of Company Common Stock reserved for
issuance on the date hereof upon exercise of outstanding Rights pursuant to the
Rights Agreement or issuances pursuant to the exercise of Options outstanding on
the date hereof; (iv) transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any material assets other than in the ordinary and usual course
of business and consistent with past practice, or incur or modify any material
indebtedness or other liability, other than in the ordinary and usual course of
business and consistent with past practice; or (v) redeem, purchase or otherwise
acquire directly or indirectly more than 5,000 Shares of its capital stock;

(d) neither the Company nor any of its Subsidiaries shall: (i)
grant any increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any of its executive officers or key
employees or (A) adopt any new, or (B) amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become payable
under any existing, bonus, incentive compensation, deferred compensation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employee benefit plan agreement or arrangement; or (ii)
enter into any employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to

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any officer, director or employee of the Company or any of
its Subsidiaries;

(e) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of its material contracts or waive, release or assign any
material rights or claims, except in the ordinary course of business and
consistent with past practice;

(f) neither the Company nor any of its Subsidiaries shall permit
any material insurance policy naming it as a beneficiary or a loss payable payee
to be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;

(g) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt, or except in the ordinary course of
business, incur or assume any short-term indebtedness in amounts not consistent
with past practice; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other person, except in the ordinary course of business and consistent
with past practice; (iii) make any loans, advances or capital contributions to,
or investments in, any other person (other than to wholly owned Subsidiaries of
the Company or customary loans or advances to employees in accordance with past
practice); or (iv) except for commitments or transactions not in excess of
$500,000, enter into any material commitment or transaction (including, but not
limited to, any borrowing, capital expenditure or purchase, sale or lease of
assets);

(h) neither the Company nor any of its Subsidiaries shall change
any of the accounting principles used by it unless required by GAAP;

(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, (x) in
the ordinary course of business and consistent with past practice, properly
reflected or reserved against in, the consolidated

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financial statements (or the notes thereto) as of and for the fiscal year ended
March 31, 1998 of the Company and its consolidated Subsidiaries, (y) incurred
since March 31, 1998 in the ordinary course of business and consistent with past
practice or (z) which are legally required to be paid, discharged or satisfied
(provided that if such claims, liabilities or obligations referred to in this
clause (z) are legally required to be paid and are also not otherwise payable in
accordance with clauses (x) or (y) above, the Company will notify Parent in
writing if such claims, liabilities or obligations exceed, individually or in
the aggregate, $500,000 in value, reasonably in advance of their payment).
Notwithstanding the foregoing, the Company shall be entitled to pay on a timely
basis all reasonable, documented fees and expenses related to this Agreement and
the transactions contemplated hereby;

(j) neither the Company nor any of its Subsidiaries will adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger);

(k) neither the Company nor any of its Subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any material respect at,
or as of any time prior to, the Effective Time; and

(l) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing.

Section 5.2 Rights Agreement. Except for the amendments contemplated
by Section 1.2(d) hereof or amendments approved in writing by Parent or the
Purchaser, the Company will not, following the date hereof, amend the Rights
Agreement in any manner. In addition the Company covenants and agrees that it
will not redeem the Rights unless such redemption is consented to in writing by
Parent prior to such redemption.

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Section 5.3 HSR Act. The Company and Parent shall take all reasonable
actions necessary to file as soon as practicable following the date hereof
notifications under the HSR Act and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission and the Antitrust Division
of the Department of Justice for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received from
any State Attorney General or other Governmental Entity in connection with
antitrust matters.

Section 5.4 Access to Information. Upon reasonable notice, the Company
shall (and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Parent, access, during normal business hours during the period prior to the
Appointment Date, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to the Parent (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. After the Appointment Date, the Company shall
provide Parent and such persons as Parent shall designate with all such
information, at such time, as Parent shall request. Unless otherwise required by
law and until the Appointment Date, Parent will hold any such information which
is nonpublic in confidence in accordance with the provisions of the letter
agreement, dated August 8, 1998 among the Company, Parent and the Purchaser (the
"Confidentiality Agreement").

Section 5.5 Consents and Approvals. Each of the Company, Parent and
the Purchaser will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to this Agreement
and the transactions contemplated hereby (which actions shall include, without
limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information to each other in connection
with any

40
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such requirements imposed upon any of them or any of their Subsidiaries in
connection with this Agreement and the transactions contemplated hereby. Each of
the Company, Parent and the Purchaser will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party
required to be obtained or made by Parent, the Purchaser, the Company or any of
their Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.

Section 5.6 Employee Benefits. Parent agrees that, effective as of the
Effective Time and for a period of 18 months thereafter, the Surviving
Corporation and its Subsidiaries shall provide benefits to their employees that
are comparable with those provided by Parent to similarly situated employees of
Parent or any of its Subsidiaries, taking into account all relevant factors,
including, without limitation, the businesses in which the Surviving Corporation
and its Subsidiaries are engaged. Parent further agrees that effective as of the
Effective Time (i) all employer contributions made to the Company's 401(k) Plan
shall be fully vested and (ii) all employees of the Surviving Corporation will
be provided credit for pay and benefits purposes, by the Surviving Corporation,
for all prior service with the Company (including, as applicable, service with
any other entity which has merged into or has been acquired by the Company)
substantially comparable in all material respects to the credit for service
provided by the Company as of the date hereof; provided, however, that such
crediting shall not apply for benefit accrual purposes under any defined benefit
plan and shall not result in any duplication of benefits.

Section 5.7 No Solicitation. Neither the Company nor any of its
Subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its and each of its Subsidiaries' officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, provide any
information to, or enter into any agreement with, any corporation, partnership,

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person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any merger, tender offer, exchange offer, sale of
assets, sale of shares of capital stock or debt securities or similar
transactions involving the Company or any Subsidiary, division or operating or
principal business unit of the Company (an "Acquisition Proposal"). The Company
further agrees that it will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Notwithstanding the foregoing, the Company may,
directly or indirectly, provide access and furnish information concerning its
business, properties or assets to any corporation, partnership, person or other
entity or group pursuant to appropriate confidentiality agreements, and may
negotiate and participate in discussions and negotiations with such entity or
group if (w) such entity or group has submitted an unsolicited bona fide written
proposal to the Board of Directors of the Company relating to any such
transaction, (x) such proposal provides for the acquisition for cash and/or
publicly traded securities of all of the outstanding Shares, (y) the Board of
Directors of the Company determines in good faith, after consultation with its
independent financial advisor, that such proposal is financially superior to the
Offer and the Merger and fully financed or reasonably capable of being financed,
and (z) the Board of Directors of the Company determines in good faith, after
consultation with independent legal counsel, that the failure to provide such
information or access or to engage in such discussions or negotiations would
violate their fiduciary duties to the Company's shareholders under applicable
law. A proposal meeting all of the criteria in the preceding sentence is
referred to herein as a "Superior Proposal." Nothing contained in this Section
5.7 shall prohibit the Company or its Board of Directors from taking and
disclosing to the Company's shareholders a position with respect to a tender
offer by a third party pursuant to Rules l4d-9 and l4e-2(a) promulgated under
the Exchange Act. The Company will immediately notify Parent of any Acquisition
Proposal, or if an inquiry is made, will keep Parent fully apprised of all
developments with respect to any Acquisition Proposal, will immediately provide
to Parent copies of any written materials received by the Company in connection
with any Acquisition Proposal, discussion, negotiation or inquiry and the
identify of the party making any Acquisition

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Proposal or inquiry or engaging in such discussion or negotiation. The Company
will promptly provide to Parent any non-public information concerning the
Company provided to any other party which was not previously provided to Parent.
The Company agrees not to release any third party from, or waive any provisions
of, any confidentiality or standstill agreement to which the Company is a party.
Notwithstanding anything to the contrary contained in this Agreement, except in
connection with the valid termination of this Agreement pursuant to Section
7.1(c)(i) hereof, neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw, or modify or change in a manner adverse to
Parent or the Purchaser, or propose to withdraw, or propose to modify or change
in a manner adverse to Parent or the Purchaser, the approval or recommendation
by such Board of Directors or any such committee of the Offer, this Agreement or
the Merger, (ii) approve or recommend or propose to approve or recommend, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal.

Section 5.8 Brokers or Finders. The Company represents, as to itself,
its Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any brokers'
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement except Morgan Stanley & Co.,
Inc., whose fees and expenses will be paid by the Company in accordance with the
Company's agreements with such firm (a copy of which has been delivered by the
Company to Parent prior to the date of this Agreement), and each of Parent and
the Company agrees to indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliates.

Section 5.9 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove

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any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement. Parent and the Purchaser agree to use best efforts to enter
into the Financing pursuant to the Commitment Letter and on terms substantially
similar to those contained in either of the Proposed Bridge Arrangements and
to obtain the funding thereunder to the extent necessary to fund the Offer and
the Merger. Parent and the Purchaser also agree to use their best efforts to
maintain the ability to accept proposed bridge arrangements on terms
substantially similar to those contained in either of the Proposed Bridge
Arrangements. The Company agrees to cooperate with Parent and the Purchaser with
respect to consummating such financing. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of the Company and Parent
shall use all reasonable efforts to take, or cause to be taken, all such
necessary actions.

Section 5.10 Reserved.

Section 5.11 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without the
prior consultation of the other party, except as may be required by law or by
any listing agreement with a national securities exchange.

Section 5.12 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence of any event the occurrence, or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be

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complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.12 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.

Section 5.13 Directors' and Officers' Indemnification. For six years
after the Effective Time, Parent shall, or shall cause the Surviving Corporation
to, indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of the Company and its Subsidiaries (each an
"Indemnified Party") against all losses, claims, damages, liabilities, fees and
expenses (including reasonable fees and disbursements of counsel and judgments,
fines, losses, claims, liabilities and amounts paid in settlement (provided that
any such settlement is effected with the written consent of the Parent or the
Surviving Corporation)) in connection with any claim, suit, action, proceeding
or investigation that is, in whole or in part, based on or arising out of the
fact that such person is or was a director, officer, employee or agent of the
Company or its Subsidiaries and arising out of actions or omissions occurring at
or prior to the Effective Time, to the fullest extent permitted under Texas law.

Section 5.14 Disposition of Litigation. Each party agrees to cause a
dismissal with prejudice immediately prior to the Appointment Date of Midland
Acquisition Corp. v. Dawson Production Services, Inc. et al., Civil Action No.
(W.D. Tex. Midland/Odessa), including any and all counterclaims asserted
therein, with each party bearing its own costs and expenses in connection
therewith. The Company agrees that it will not settle any litigation currently
pending, or commenced after the date hereof, against the Company or any of its
directors by any shareholder of the Company relating to the Offer or this
Agreement, without the prior written consent of Parent.

Section 5.15 Consulting Agreements. The Company shall use its best
efforts to cause Mr. Michael E. Little, Mr. Joseph B. Eustice and Mr. James J.
Byerlotzer to enter into consulting agreements with Parent and the Purchaser on
the terms set forth in the term sheets executed by Messrs. Little, Eustice and
Byerlotzer on the date hereof.

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ARTICLE VI

CONDITIONS

Section 6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:

(a) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the holders of Company
Common Stock, if required by applicable law and the Restated Articles of
Incorporation, in order to consummate the Merger;

(b) Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or domestic
government or any governmental agency or authority of competent jurisdiction
which prohibits the consummation of the Merger and all foreign or domestic
governmental consents, orders and approvals required for the consummation of the
Merger and the transactions contemplated hereby shall have been obtained and
shall be in effect at the Effective Time;

(c) Injunctions. There shall be no order or injunction of a
foreign or United States federal or state court or other governmental authority
of competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and

(d) Purchase of Shares in Offer. Parent, the Purchaser or their
affiliates shall have purchased shares of Company Common Stock pursuant to the
Offer.

ARTICLE VII

TERMINATION

Section 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may

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be abandoned at any time prior to the Effective Time, whether before
or after shareholder approval thereof:

(a) By the mutual consent of the Board of Directors of
Parent and the Board of Directors of the Company.

(b) By either of the Board of Directors of the Company or the
Board of Directors of Parent:

(i) if shares of Company Common Stock shall not have been
purchased pursuant to the Offer on or prior to [December 31, 1998];
provided, however, that the right to terminate this Agreement under
this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Purchaser to purchase
shares of Company Common Stock pursuant to the Offer on or prior to
such date; or

(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their reasonable
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final
and non-appealable.

(i) if, prior to the purchase of shares of Company Common
Stock pursuant to the Offer, the Board of Directors of the Company
shall have withdrawn, or modified or changed in a manner adverse to
Parent or the Purchaser its approval or recommendation of the Offer,
this Agreement or the Merger in order to approve and permit the
Company to execute a definitive agreement providing for a Superior
Proposal; provided that (A) at least five (5) business days prior to
terminating this Agreement pursuant to this Section 7.1(c)(i) the
Company has provided Parent with written notice advising Parent that
the Board of Directors of the

47
<PAGE> 49
Company has received a Superior Proposal that it intends to accept,
specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal, and (B) the
Company shall have caused its financial and legal advisors to
negotiate in good faith with Parent to make such adjustments in the
terms and conditions of this Agreement as would enable the Company to
proceed with the transactions contemplated herein on such adjusted
terms; and further provided that simultaneously with any termination
of this Agreement pursuant to this Section 7.1(c)(i), the Company
shall pay to Parent the Termination Fee (as defined in Section 8.1(b)
hereof); and further provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(i) if the Company is in
material breach of this Agreement; or

(ii) if, prior to the purchase of shares of Company Common Stock
pursuant to the Offer, Parent or the Purchaser breaches or fails in
any material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its
representations and warranties in any material respect; or

(iii) if Parent or the Purchaser shall have terminated the Offer,
or the Offer shall have expired, without Parent or the Purchaser, as
the case may be, purchasing any shares of Company Common Stock
pursuant thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(iii) if the Company is in
material breach of this Agreement; or

(iv) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent, the Purchaser or
any of their affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer; provided, that the Company may not
terminate this Agreement pursuant to this Section 7.1(c)(iv) if the
Company is in material breach of this Agreement.

48
<PAGE> 50
(d) By the Board of Directors of Parent:

(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent, the Purchaser, or
any of their affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer; provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(i) if Parent or the
Purchaser is in material breach of this Agreement; or

(ii) if prior to the purchase of shares of Company Common Stock
pursuant to the Offer, the Board of Directors of the Company shall
have withdrawn, or modified or changed in a manner adverse to Parent
or the Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger or shall have recommended an Acquisition
Proposal or offer, or shall have executed an agreement in principle
(or similar agreement) or definitive agreement providing for a tender
offer or exchange offer for any shares of capital stock of the
Company, or a merger, consolidation or other business combination with
a person or entity other than Parent, the Purchaser or their
affiliates (or the Board of Directors of the Company resolves to do
any of the foregoing); provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(ii) if Parent or the
Purchaser is in material breach of this Agreement; or

(iii) if Parent or the Purchaser, as the case may be, shall have
terminated the Offer, or the Offer shall have expired without Parent
or the Purchaser, as the case may be, purchasing any shares of Company
Common Stock thereunder, provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(iii) if it or the Purchaser
has failed to purchase shares of Company Common Stock in the Offer in
violation of the material terms thereof or hereof.

Section 7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in

49
<PAGE> 51
Section 7.1 hereof, written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void,
and there shall be no liability on the part of the Parent, the Purchaser or the
Company except (A) for fraud or for intentional material breach of this
Agreement and (B) as set forth in this Section 7.2 and Section 8.1.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Fees and Expenses. (a) Except as contemplated by this
Agreement, including Sections 8.1(b), 8.1(c) and 8.1(d) hereof, all costs and
expenses incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.

(b) If (w) the Board of Directors of the Company shall terminate
this Agreement pursuant to Section 7.1(c)(i) hereof, (x) the Board of Directors
of Parent shall terminate this Agreement pursuant to Section 7.1(d)(ii) hereof,
(y) the Board of Directors of the Company shall terminate this Agreement
pursuant to Section 7.1(b)(i) or Section 7.1 (c)(iii) or the Board of Directors
of Parent shall terminate this Agreement pursuant to Section 7.1(b)(i) or
Section 7.1(d)(iii) and prior thereto there shall have been publicly announced
another Acquisition Proposal or (z) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(i) or Section 7.1(d)(iii)
hereof, in each case due to a material breach of this Agreement by the Company,
then in any such case as described in clause (w), (x), (y) or (z) (each such
case of termination being referred to as a "Trigger Event"), the Company shall
pay to Parent (not later than one business day after such termination of this
Agreement or, in the case of any termination by the Company pursuant to Section
7.1(c)(i) hereof, simultaneously with such termination) an amount equal to $10
million (the "Termination Fee").

50
<PAGE> 52

(c) Upon the termination of this Agreement due to the occurrence
of a Trigger Event, the Company agrees that, in addition to the payment of the
Termination Fee provided for in Section 8.1(b) hereof, it shall promptly
reimburse Parent for all actual, documented and reasonable out-of-pocket
expenses incurred, or to be incurred by Parent, the Purchaser and their
affiliates (including the fees and expenses of legal counsel, accountants,
financial advisors, other consultants, financial printers and financing sources)
("Expenses") in connection with the Offer, the Merger and the consummation of
the transactions contemplated by this Agreement, in an amount not to exceed $5
million in the aggregate.

(d) If the Company shall terminate this Agreement pursuant to
Section 7.1(c)(ii) hereof, and the Company is not in material breach of this
Agreement at the time of such termination, or if the Purchaser fails to fund the
purchase of Shares pursuant to the Offer as a result of its failure to secure
the Financing pursuant to the Commitment Letter and/or the Proposed Bridge
Arrangements, or otherwise secure the Financing, Parent shall pay to the Company
(not later than one business day after such termination) an amount equal to the
Termination Fee, together with an amount not to exceed $5 million as
reimbursement to the Company for its actual, documented and reasonable
out-of-pocket Expenses.

Section 8.2 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the shareholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action taken
by their respective Boards of Directors (which in the case of the Company shall
include approvals as contemplated in Section 1.3(b) hereof), at any time prior
to the Closing Date with respect to any of the terms contained herein; provided,
however, that after the approval of this Agreement by the shareholders of the
Company, no such amendment, modification or supplement shall reduce or change
the Merger Consideration.

Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other

51
<PAGE> 53
document delivered pursuant to this Agreement shall survive the
Effective Time.

Section 8.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

(a) if to Parent or the Purchaser, to:

Key Energy Group, Inc.
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
Telephone No.: (732) 247-4822
Telecopy No.: (732) 247-5148

with a copy to:

Michael P. Rogan, Esq.
C. Kevin Barnette, Esq.
Skadden, Arps, Slate, Meagher
& Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Telephone No.: (202) 371-7000
Telecopy No.: (202) 393-5760

and

(b) if to the Company, to:

Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205
Attention: Mark Stark
Telephone No.: (210) 476-0420
Telecopy No.: (210) 354-1041

with a copy to:

Joseph A. Cialone, II, Esq.
Baker & Botts, L.L.P.
One Shell Plaza

52
<PAGE> 54
910 Louisiana
Houston, Texas 77002
Telephone No.: (713) 229-1234
Telecopy No.: (713) 229-1522

53
<PAGE> 55

and:

J. Rowland Cook, Esq.
Jenkens & Gilchrist
2200 One American Center
600 Congress Avenue
Austin, Texas 78701-3215
Telephone No.: (512) 499-3800
Telecopy No.: (512) 404-3520

Section 8.5 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to August 11, 1998. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
l2b-2 of the Exchange Act.

Section 8.6 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.

Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Sections 5.6 and 5.13 hereof are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.

54
<PAGE> 56
Section 8.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.

Section 8.9 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas without giving
effect to the principles of conflicts of law thereof.

Section 8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.

55
<PAGE> 57
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.

KEY ENERGY GROUP, INC.

By:
------------------------
Name:
Title:

MIDLAND ACQUISITION CORP.

By:
------------------------
Name:
Title:

DAWSON PRODUCTION SERVICES, INC.

By:
------------------------
Name:
Title:

56
<PAGE> 58
ANNEX A

CONDITIONS TO THE TENDER OFFER

Notwithstanding any other provisions of the Offer, and in addition to
(and not in limitation of) the Purchaser's rights to extend and amend the Offer
at any time in its sole discretion (subject to the provisions of the Merger
Agreement), the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer as to any Shares not then paid for, if (i) any applicable
waiting period under the HSR Act has not expired or terminated, (ii) the Minimum
Condition has not been satisfied, (iii) the Rights Agreement shall not have been
amended in a manner which renders the Rights inoperative with respect to any
acquisition of Shares by Parent or the Purchaser, (iv) Purchaser has not
received funds under the Commitment Letter to enable the Purchaser to purchase
all Shares outstanding pursuant to the Offer and the Merger or has not obtained
a definitive financing commitment on terms substantially similar to those
contained in either of the Proposed Bridge Arrangements or (v) at any time on or
after August 11, 1998 and before the time of payment for any such Shares, any of
the following events shall occur or shall be determined by the Purchaser to have
occurred:

(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or applicable to the Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or administrative agency or
authority or court or legislative body or commission which directly or
indirectly (l) prohibits, or imposes any material limitations on, Parent's or
the Purchaser's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or compels Parent or the Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective Subsidiaries, in each case taken

A-1
<PAGE> 59
as a whole, (2) prohibits, or makes illegal the acceptance for payment, payment
for or purchase of Shares or the consummation of the Offer or the Merger, (3)
results in the delay in or restricts the ability of the Purchaser, or renders
the Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares, (4) imposes material limitations on the ability of the Purchaser or
Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's shareholders, or (5) otherwise
materially adversely affects the consolidated financial condition, businesses or
results of operations of the Company and its Subsidiaries, taken as a whole;

(b) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange for a period in excess of three hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States, (4) any limitation (whether or not mandatory) by
any foreign or United States governmental authority on the extension of credit
by banks or other financial institutions, (5) any decline in either the Dow
Jones Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 20% measured from the close of business on
August 11, 1998 or (6) in the case of any of the foregoing existing at the time
of the commencement of the Offer, a material acceleration or worsening thereof;

(c) the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and correct as of the date of
consummation of the Offer as though made on or as of such date, and the failure
to be true and correct has or is reasonably likely to have a material adverse
effect on the Company, except (i) for changes specifically permitted by the
Merger Agreement and (ii) those representations and warranties that address
matters only as of a particular date are true and correct as of such date, or
the Company shall have breached or failed in any material respect to perform or
comply with any obligation, agreement

A-2
<PAGE> 60
or covenant required by the Merger Agreement to be performed or complied with by
it and such failure shall have or be reasonably likely to have a material
adverse effect on the Company;

(d) the Merger Agreement shall have been terminated in accordance
with its terms;

(e) (i) it shall have been publicly disclosed or Parent or the
Purchaser shall have otherwise learned that any person, entity or "group" (as
defined in Section 13(d)(3) of the Exchange Act), other than Parent or its
affiliates or any group of which any of them is a member, shall have acquired
beneficial ownership (determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of more than 14.9% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of stock, the formation
of a group or otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 14.9% of
any class or series of capital stock of the Company (including the Shares); or
(ii) any person or group shall have entered into a definitive agreement or
agreement in principle with the Company with respect to a merger, consolidation
or other business combination with the Company; or

(f) the Company's Board of Directors shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement, or the Merger, or recommended another proposal or offer, or shall
have resolved to do any of the foregoing;

which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser giving rise to such condition) makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payments.

The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be waived by Parent or the Purchaser, in whole or in part at any
time and from time to time in the sole discretion of Parent or the Purchaser.
The failure by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.

A-3
<PAGE> 61
Index of Defined Terms

<TABLE>
<CAPTION>
Defined Term Section No.
- ------------ -----------

<S> <C>
Acquisition Proposal ........................................................... 5.7
Appointment Date................................................................ 5.1
Articles of Merger.............................................................. 1.5(a)
Benefit Plans................................................................... 3.9(a)
Certificate of Merger........................................................... 1.5
Certificates.................................................................... 2.2(b)
Closing......................................................................... 1.6
Closing Date.................................................................... 1.6
Code............................................................................ 3.9(b)
Commitment Letter............................................................... 4.5
Company......................................................................... Recitals
Company Common Stock............................................................ 1.1(a)
Company SEC Documents........................................................... 3.5
Director Options................................................................ 2.4(a)
Dissenting Shares............................................................... 2.3
Effective Time.................................................................. 1.5
Employee Option................................................................. 2.4(a)
Environmental Claim............................................................. 3.12(b)(i)
Environmental Laws.............................................................. 3.12(b)(ii)
Environmental Permits........................................................... 3.12(a)(ii)
Equipment....................................................................... 3.19
ERISA........................................................................... 3.9(a)
ERISA Affiliate................................................................. 3.9(a)
Exchange Act.................................................................... 1.1(a)
Financing....................................................................... 4.5
GAAP............................................................................ 3.5
Governmental Entity............................................................. 3.4
Hazardous Materials............................................................. 3.12(b)(iii)
HSR Act......................................................................... 3.4
Indemnified Party............................................................... 5.13
Intellectual Property........................................................... 3.21
Material Agreements............................................................. 3.4
Merger.......................................................................... 1.4(a)
Merger Consideration............................................................ 2.1(c)
Minimum Condition............................................................... 1.1(a)
1998 Financial Statements....................................................... 3.5
1998 Form 10-K.................................................................. 3.5
NJBCA........................................................................... 1.4(a)
NLRB............................................................................ 3.14
Offer........................................................................... 1.1(a)
Offer Documents................................................................. 1.1(b)
Offer Price..................................................................... 1.1(a)
</TABLE>

i
<PAGE> 62

<TABLE>
<CAPTION>
Defined Term Section No.
- ------------ -----------

<S> <C>
Offer to Purchase............................................................... 1.1(a)
Option Plan..................................................................... 2.4(a)
Options......................................................................... 2.4(a)
Parent.......................................................................... Recitals
Paying Agent.................................................................... 2.2(a)
PCBs............................................................................ 3.12(b)(iii)
PNC............................................................................. 4.5
Preferred Stock................................................................. 3.2(a)
Proposed Bridge Arrangements.................................................... 4.5
Proxy Statement................................................................. 1.8(a)(ii)
Purchaser....................................................................... Recitals
Purchaser Common Stock.......................................................... 2.1
Release......................................................................... 3.12(b)(iv)
Rights.......................................................................... 1.1(a)
Rights Agreement................................................................ 1.1(a)
Rights Amendment................................................................ 1.2(d)
Schedule 14D-1.................................................................. 1.1(b)
Schedule 14D-9.................................................................. 1.2(b)
SEC............................................................................. 1.1(b)
Securities Act.................................................................. 3.5
Senior Notes.................................................................... 3.4
Series A Preferred Stock........................................................ 3.2(a)
Service......................................................................... 3.9(h)
Shares.......................................................................... 1.1(a)
Special Meeting................................................................. 1.8(a)(i)
Subsidiary...................................................................... 3.1
Superior Proposal............................................................... 5.7
Surviving Corporation........................................................... 1.4(a)
Taxes........................................................................... 3.13(j)
Tax Return...................................................................... 3.13(j)
TBCA............................................................................ 1.2(a)
Termination Fee................................................................. 8.1(b)
Transactions.................................................................... 1.2(a)
Trigger Event................................................................... 8.1(b)
Voting Debt..................................................................... 3.2(a)
</TABLE>

ii
<PAGE> 63
<TABLE>
<S> <C>
ARTICLE I THE OFFER AND MERGER..............................................................1

Section 1.1 The Offer.........................................................................1
Section 1.2 Company Actions...................................................................3
Section 1.3 Directors.........................................................................6
Section 1.4 The Merger........................................................................7
Section 1.5 Effective Time....................................................................8
Section 1.6 Closing...........................................................................9
Section 1.7 Directors and Officers of the Surviving Corporation...............................9
Section 1.8 Shareholders' Meeting.............................................................9
Section 1.9 Merger Without Meeting of Shareholders...........................................10

ARTICLE II CONVERSION OF SECURITIES.........................................................11

Section 2.1 Conversion of Capital Stock......................................................11
Section 2.2 Exchange of Certificates.........................................................12
Section 2.3 Dissenting Shares................................................................13
Section 2.4 Company Option Plans.............................................................14

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................15

Section 3.1 Organization.....................................................................15
Section 3.2 Capitalization...................................................................16
Section 3.3 Authorization; Validity of Agreement; Company Action.............................17
Section 3.4 Consents and Approvals; No Violations............................................18
Section 3.5 SEC Reports and Financial Statements.............................................19
Section 3.6 Absence of Certain Changes or Events.............................................20
Section 3.7 No Undisclosed Liabilities.......................................................21
Section 3.8 Information in Proxy Statement...................................................21
Section 3.9 Employee Benefit Plans; ERISA....................................................22
Section 3.10 Litigation.......................................................................24
Section 3.11 Conduct of Business..............................................................24
Section 3.12 Environmental Protection.........................................................24
Section 3.13 Taxes............................................................................28
Section 3.14 Labor Relations..................................................................30
Section 3.15 Compliance with Laws.............................................................31
Section 3.16 Insurance........................................................................31
Section 3.17 Contracts........................................................................31
Section 3.18 Property.........................................................................31
Section 3.19 Equipment........................................................................32
Section 3.20 Permits..........................................................................32
Section 3.21 Intellectual Property............................................................32
Section 3.22 Opinion of Financial Advisor.....................................................33
Section 3.23 Vote Required....................................................................33

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER.......................33

Section 4.1 Organization.....................................................................33
</TABLE>

i
<PAGE> 64
<TABLE>
<CAPTION>
Page
----

<S> <C> <C>
Section 4.2 Authorization; Validity of Agreement; Necessary Action...........................34
Section 4.3 Consents and Approvals; No Violations............................................34
Section 4.4 Information in Proxy Statement...................................................35
Section 4.5 Financing........................................................................35
Section 4.6 Purchaser's Operations...........................................................36

ARTICLE V COVENANTS........................................................................36

Section 5.1 Interim Operations of the Company................................................36
Section 5.2 Rights Agreement.................................................................39
Section 5.3 HSR Act..........................................................................39
Section 5.4 Access to Information............................................................40
Section 5.5 Consents and Approvals...........................................................40
Section 5.6 Employee Benefits................................................................41
Section 5.7 No Solicitation..................................................................41
Section 5.8 Brokers or Finders...............................................................43
Section 5.9 Additional Agreements............................................................43
Section 5.10 Reserved.........................................................................44
Section 5.11 Publicity........................................................................44
Section 5.12 Notification of Certain Matters..................................................44
Section 5.13 Directors' and Officers' Indemnification........................................44
Section 5.14 Disposition of Litigation. .....................................................45
Section 5.15 Consulting Agreements. .........................................................45

ARTICLE VI CONDITIONS.......................................................................46

Section 6.1 Conditions to Each Party's Obligation To Effect the Merger.......................46

ARTICLE VII TERMINATION......................................................................46

Section 7.1 Termination......................................................................46
Section 7.2 Effect of Termination............................................................49

ARTICLE VIII MISCELLANEOUS....................................................................50

Section 8.1 Fees and Expenses................................................................50
Section 8.2 Amendment and Modification.......................................................51
Section 8.3 Nonsurvival of Representations and Warranties....................................51
Section 8.4 Notices..........................................................................51
Section 8.5 Interpretation...................................................................53
Section 8.6 Counterparts.....................................................................53
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership..............53
Section 8.8 Severability.....................................................................54
Section 8.9 Governing Law....................................................................54
Section 8.10 Assignment.......................................................................54

CONDITIONS TO THE TENDER OFFER................................................................Annex A
</TABLE>

<PAGE> 1
EXHIBIT (c)(2)

August 8, 1998

Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205

Ladies and Gentlemen:

The parties (the "Parties" and, individually, a "Party") to this letter
agreement (the "Letter Agreement") are considering a negotiated transaction that
would constitute a combination of the Parties (a "Transaction"). In that
connection, each Party or its Representatives (as hereinafter defined) may
furnish, orally, electronically, in writing or by inspection, to the other Party
and its Representatives certain information, material and documents regarding
the former Party and its business, assets, financial condition, results of
operations and prospects that may be helpful to the latter Party in evaluating
and/or negotiating a potential Transaction. Such information, material and
documents furnished pursuant to this Letter Agreement, and all notes, analyses,
compilations, studies or other documents, whether prepared by either Party or
its Representatives, which contain or otherwise reflect such information,
material or documents, are herein called the "Evaluation Material". The term
"Evaluation Material" does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by the
receiving Party or its Representatives in violation of this Letter Agreement,
(ii) was available to the receiving Party prior to its disclosure by the
providing Party or its Representatives or (iii) was or becomes available to the
receiving Party from a source other than the providing Party or its
Representatives without any violation known to the receiving Party of any duty
or obligation owed by the source to the providing Party.

As a condition to the furnishing of Evaluation Material by one Party
hereto to the other Party, each Party agrees with the other as follows:

1. All Evaluation Material furnished by one Party or its Representatives
to the other Party or its Representatives shall be deemed confidential and shall
be kept and maintained by the latter Party and its Representatives under
appropriate safe guards. All Evaluation Material shall be used by such Party
solely for the purpose of evaluating or negotiating a possible Transaction and
shall not be used for any other purpose or for any purpose detrimental to any of
the Parties, including, without limitation, in any litigation now or hereafter
commenced between the Parties, in any

<PAGE> 2

tender offer initiated by any of the parties, or in any proxy solicitation
involving the Parties. All Evaluation Material shall be kept confidential by
such Party and its Representatives for a period of two (2) years from the date
hereof. Notwithstanding the foregoing, the Parties agree that (i) any of such
information may be disclosed to directors, officers, employees or other
representatives of a Party (the directors, officers, employees and other
representatives being collectively called such Party's "Representatives") who
need to know the Evaluation Material for the purpose of evaluating a possible
Transaction, it being understood that (a) such Party's Representatives shall be
informed of the confidential nature of the Evaluation Material and shall be
directed to treat it confidentially and not to use it other than for the
purposes described above, (b) no Evaluation Material may be disclosed to any
litigation attorney for any Party who is involved in any litigation now or
hereafter pending between the Parties and (c) in any event, each Party shall be
responsible for any breach of this Letter Agreement by any of its
Representatives; (ii) any disclosure of a Party's Evaluation Material may be
made to the extent required by law or regulation (including Regulation 14A and
14D under the Securities Exchange Act of 1934) or to which such Party consents
in writing; and (iii) the restrictions set forth herein shall be without
prejudice to any Party's right to commence and conduct any tender offer, proxy
solicitation or litigation (including, without limitation, the right to seek
material constituting Evaluation Material through the discovery process).

2. Both Parties agree to use their best efforts to safeguard the
Evaluation Material from disclosure to anyone other than as permitted hereby,
and neither Party will distribute the Evaluation Material relating to the other
Party to anyone other than as permitted hereby without prior written
authorization from such other Party.

3. Without the prior written consent of the other Party, such Party will
not disclose, and will not permit its Representatives to disclose, to any person
other than those permitted hereunder to have access to the Evaluation Material
(i) the fact that the Evaluation Material has been made available to such Party
or that such Party has inspected any portion of the Evaluation Material, (ii)
the fact that discussions or negotiations are taking place concerning a possible
Transaction or (iii) any of the terms, conditions or other facts with respect to
any such possible Transaction, including the status thereof, except as required
by law, regulation (including Regulations 14A and 14D under the Securities
Exchange Act of 1934), legal process or stock exchange policy.

4. If either Party or its Representatives is requested or required (by
oral question, interrogatories, requests for information or documents, subpoena,
Civil Investigative Demand, or similar process) by any court or governmental
agency or

2
<PAGE> 3

authority to disclose any of the other Party's Evaluation Material, the Party
receiving such request or demand will provide the other Party with prompt notice
of such request or demand so that such other Party shall have an opportunity to
seek an appropriate protective order. In addition, each Party agrees to take all
reasonable steps necessary to prevent disclosure of such other Party's
Evaluation Material, including seeking an appropriate protective order, or, if
the information is required to be disclosed, confidential treatment. It is
further agreed that, if, in the absence of a protective order, either Party or
any of its Representatives is legally required to disclose information
concerning the other Party, such Party or its Representatives may disclose such
information without liability hereunder, but neither Party shall be relieved of
any liability hereunder for any previous disclosure by such Party or any of its
Representatives that was not permitted by this Letter Agreement. In addition,
the disclosure of Evaluation Material by either Party shall not be deemed a
waiver of its right to challenge or object to the production thereof pursuant to
any discovery request or subpoena.

5. If the Parties do not proceed with the Transaction which is the subject
of this Letter Agreement, within a reasonable time and in any event within
thirty (30) days after being so requested by the other Party hereto, a Party
shall redeliver to the other all Evaluation Material which such Party has
received from the other, including without limitation all copies, extras or
other reproductions of such Evaluation Material, and each Party will destroy all
Evaluation Material prepared by it or its Representatives based upon the
Evaluation Material supplied by the other Party (including all written material,
memoranda, notes and other writings or recordings whatsoever). Upon request by
the other Party, such destruction shall be certified in writing to the other
Party by one of the destroying Party's Representatives who shall supervise such
destruction.

6. Each Party understands and acknowledges that any and all information
contained in the Evaluation Material is being or will be provided by the other
Party without any representation or warranty, express or implied, as to the
accuracy or completeness of the Evaluation Material so provided, except as set
forth in any Transaction Agreement. It is further understood that the scope of
any representations and warranties to be given by a Party with respect to any
Evaluation Material in the Transaction Agreement will be negotiated along with
other terms and conditions thereof if discussions between the Parties should
progress to that point.

7. Each Party hereto hereby acknowledges that such Party is aware (and
that its Representatives who are apprised of this matter have been advised) that
the United States securities laws prohibit such Party, its Representatives and
any other

3
<PAGE> 4

person or entity who has received material non-public information about the
other Party from purchasing or selling securities of the other Party or from
communicating such information to any person under circumstances under which
such other person may be expected to purchase or sell securities of the other
Party.

8. Each Party understands and agrees that no contract or agreement
providing for a Transaction between the Parties shall be deemed to exist between
the Parties unless and until a definitive written agreement setting forth the
terms, conditions and other provisions relating to a Transaction (a
"Transaction Agreement") has been executed and delivered, and each Party hereby
waives, in advance, any claims (including without limitation breach of contract)
based on any alleged agreement between the Parties to effect a Transaction
unless and until a Transaction Agreement between the Parties shall have been
executed and delivered. Each Party also agrees that, unless and until a
Transaction Agreement between the parties has been executed and delivered, the
other Party has no legal obligation of any kind whatsoever to negotiate with a
view to entering into a Transaction Agreement or to engage in a Transaction by
virtue of this Letter Agreement or any other written, electronic or oral
expression with respect thereto. For purposes of this Letter Agreement, the
"Trans action Agreement" does not include an executed letter of intent or any
other preliminary written agreement nor does it include any written, electronic
or verbal acceptance of an offer or bid on the part of either Party.

It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this Letter Agreement by either Party or its
Representatives and that without prejudice to any rights or remedies at law or
in equity otherwise available to the other Party, such other Party shall, if the
other Party breaches any provision of this Letter Agreement, be entitled to
injunctive relief, specific performance or other appropriate equitable remedies
for any such breach. No failure or delay by either Party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.

This Letter Agreement shall be binding upon the successors and assigns of
each Party hereto and shall inure to the benefit of, and be enforceable by, the
successors and assigns of each such Party.

The provisions of this Letter Agreement shall be severable if any of the
provisions hereof are held by a court for competent jurisdiction to be invalid,
void or

4
<PAGE> 5

otherwise unenforceable, and the remaining provisions shall remain enforceable
to the fullest extent permitted by law.

This Letter Agreement shall be construed (both as to validity and perfor-
mance) and enforced in accordance with and governed by, the laws of the State of
Texas applicable to agreements made and to be performed wholly within such
jurisdiction.

This Letter Agreement may be waived, amended or modified only by an
instrument in writing signed by the Party against which such waiver, amendment
or modification is sought to be enforced, and such written instrument shall set
forth specifically the provisions of this Letter Agreement that are to be so
waived, amended or modified.

This Letter Agreement may be executed in any number of counterparts, each
of such counterpart shall for all purposes be deemed an original and all such
counter parts shall together constitute but one and the same instrument.

Please indicate your agreement with the foregoing by executing the
accompanying copy of this Letter Agreement and returning it to us, whereupon
it shall constitute a binding agreement between us as of the date first above
written.

Very truly yours,

KEY ENERGY GROUP, INC.

By: /s/ JACK D. LOFTIS, JR.
--------------------------
Name: Jack D. Loftis, Jr.
Title: General Counsel

MIDLAND ACQUISITION CORP.

By: /s/ JACK D. LOFTIS, JR.
--------------------------
Name: Jack D. Loftis, Jr.
Title: Secretary

<PAGE> 1

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into to be effective as of the 20th day of July, 1998, by and between Dawson
Production Services, Inc., a Texas corporation ("Dawson"), and ________ a Texas
resident ("Indemnitee").

WHEREAS, competent and experienced persons are reluctant to serve or
to continue to serve corporations as directors or in other capacities unless
they are provided with adequate protection through insurance or indemnification
(or both) against claims and actions against them arising out of their service
to and activities on behalf of those corporations;

WHEREAS, the Board of Directors of Dawson has determined that the
continuation of present trends in litigation will make it more difficult to
attract and retain competent and experienced persons, that this situation is
detrimental to the best interests of the shareholders of Dawson and that such
corporation should act to assure its directors and officers that there will be
increased certainty of adequate protection in the future;

WHEREAS, the Articles of Incorporation of Dawson require Dawson to
indemnify its directors and officers to the fullest extent permitted by law;

WHEREAS, it is reasonable, prudent, and necessary for Dawson to
obligate itself contractually to indemnify its directors and officers to the
fullest extent permitted by applicable law in order to induce them to serve or
continue to serve such corporation;

WHEREAS, Indemnitee is willing to serve, continue to serve, and to
take on additional service for or on behalf of Dawson on the condition that he
be indemnified to the fullest extent permitted by law; and

WHEREAS, concurrently with the execution of this Agreement, Indemnitee
is agreeing to serve or to continue to serve as a director or officer of
Dawson.

NOW, THEREFORE, in consideration of the foregoing premises,
Indemnitee's agreement to serve or continue to serve as a director or officer
of Dawson, and the covenants contained in this Agreement, the parties hereto
hereby covenant and agree as follows:

1. Certain Definitions:

(a) Acquiring Person: any Person other than (i) the
Company, (ii) any of the Company's Subsidiaries, (iii) any employee benefit
plan of the Company or of a Subsidiary of the Company or of a corporation owned
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, or (iv) any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or of a Subsidiary of the Company or of a corporation owned
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
<PAGE> 2
(b) Change in Control shall be deemed to have occurred
if:

(i) any Acquiring Person, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the then outstanding Voting Securities of the Company; or

(ii) members of the Incumbent Board cease
for any reason to constitute at least a majority of the Board of Directors of
the Company; or

(iii) a public announcement is made of a
tender or exchange offer by any Acquiring Person for 50% or more of the
outstanding Voting Securities of the Company, and the Board of Directors of the
Company approves or fails to oppose that tender or exchange offer in its
statements in Schedule 14D-9 under the Exchange Act; or

(iv) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
partnership or other entity (or, if no such approval is required, the
consummation of such a merger or consolidation of the Company), other than a
merger or consolidation that would result in the Voting Securities of the
Company outstanding immediately prior to the consummation thereof continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity or of a parent of the surviving entity) a
majority of the combined voting power of the Voting Securities of the surviving
entity (or its parent) outstanding immediately after that merger or
consolidation; or

(v) the shareholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all the Company's
assets (or, if no such approval is required, the consummation of such a
liquidation, sale, or disposition in one transaction or series of related
transactions) other than a liquidation, sale, or disposition of all or
substantially all the Company's assets in one transaction or a series of
related transactions to a corporation owned directly or indirectly by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company.

(c) Claim: any threatened, pending, or completed action,
suit, or proceeding (including, without limitation, securities laws actions,
suits, and proceedings), or any inquiry or investigation (including discovery),
whether asserted, instituted or conducted, directly or indirectly (including,
without limitation, shareholder derivative suits) by the Company or any other
party, that Indemnitee in good faith believes might lead to the institution of
any action, suit, or proceeding, whether civil, criminal, administrative,
investigative, or other.

(d) Company: Dawson Production Services, Inc.

(e) Expenses: all costs, expenses (including attorneys'
and expert witnesses' fees), and obligations paid or incurred in connection
with investigating, defending (including

2
<PAGE> 3

affirmative defenses and counterclaims), being a witness in, or participating
in (including on appeal), or preparing to defend, be a witness in, or
participate in, any Claim relating to any Indemnifiable Event.

(f) Incumbent Board: individuals who, as of July 20,
1998, constitute the Board of Directors of the Company and any other individual
who becomes a director of the Company after that date and whose election or
appointment by the Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board.

(g) Indemnifiable Event: any event or occurrence related
to the fact that Indemnitee is or was a director, officer, employee, agent, or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent, or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust, or other
enterprise, or by reason of anything done or not done by Indemnitee in any such
capacity. For purposes of this Agreement, the Company agrees that Indemnitee's
service on behalf of or with respect to any Subsidiary of the Company shall be
deemed to be at the request of the Company.

(h) Person: any person or entity of any nature
whatsoever, specifically including an individual, a firm, a company, a
corporation, a partnership, a limited liability company, a trust, or other
entity. A Person, together with that Person's Affiliates and Associates (as
those terms are defined in Rule 12b-2 under the Exchange Act), and any Persons
acting as a partnership, limited partnership, joint venture, association,
syndicate, or other group (whether or not formally organized), or otherwise
acting jointly or in concert or in a coordinated or consciously parallel manner
(whether or not pursuant to any express agreement), for the purpose of
acquiring, holding, voting, or disposing of securities of the Company with such
Person, shall be deemed a single "Person."

(i) Potential Change in Control: shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control; (ii) any Acquiring
Person becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 15% or more of the combined voting power of the
outstanding Voting Securities of the Company; or (iii) the Board of Directors
of the Company adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.

(j) Reviewing Party: any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board (including Special Counsel referred
to in Section 3) who is not a party to the particular Claim for which
Indemnitee is seeking indemnification.

(k) Special Counsel: special, independent counsel
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the
Company or for Indemnitee within the last three years (other than as Special
Counsel under this Agreement or similar agreements).

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<PAGE> 4
(l) Subsidiary: with respect to any Person, any
corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by that Person.

(m) Voting Securities: any securities that vote
generally in the election of directors, in the admission of general partners,
or in the selection of any other similar governing body.

2. Basic Indemnification and Expense Reimbursement Arrangement.

(a) If Indemnitee was, is, or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Claim by reason of (or arising in part out
of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the
fullest extent permitted by law as soon as practicable but in any event no
later than 30 days after written demand is presented to the Company, against
any and all Expenses, judgments, fines, penalties, and amounts paid in
settlement (including all interest, assessments, and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties, or amounts paid in settlement) of or with respect to that Claim.
Notwithstanding the foregoing, the obligations of the Company under Section
2(a) shall be subject to the condition that the Reviewing Party shall not have
determined (in a written opinion, in any case in which Special Counsel referred
to in Section 3 hereof is involved) that Indemnitee would not be permitted to
be indemnified under applicable law. Nothing contained in this Agreement shall
require any determination under this Section 2(a) to be made by the Reviewing
Party prior to the disposition or conclusion of the Claim against the
Indemnitee; provided, however, that Expense Advances (defined below) shall
continue to be made by the Company pursuant to and to the extent required by
the provisions of Section 2(b).

(b) If so requested by Indemnitee, the Company shall pay
any and all Expenses incurred by Indemnitee (or, if applicable, reimburse
Indemnitee for any and all Expenses incurred by Indemnitee and previously paid
by Indemnitee) within two business days after such request (an "Expense
Advance"). The Company shall be obligated to make or pay an Expense Advance in
advance of the final disposition or conclusion of any Claim. In connection
with any request for an Expense Advance, if requested by the Company,
Indemnitee or Indemnitee's counsel shall submit an affidavit stating that the
Expenses incurred were reasonable. Any dispute as to the reasonableness of any
Expense shall not delay an Expense Advance by the Company, and the Company
agrees that any such dispute shall be resolved only upon the disposition or
conclusion of the underlying Claim against the Indemnitee. If, when, and to
the extent that the Reviewing Party determines that Indemnitee would not be
permitted to be indemnified with respect to a Claim under applicable law, the
Company shall be entitled to be reimbursed by Indemnitee and Indemnitee hereby
agrees to reimburse the Company without interest (which agreement shall be an
unsecured obligation of Indemnitee) for all related Expense Advances
theretofore made or paid by the Company; provided, however, that if Indemnitee
has commenced legal proceedings in a court of competent jurisdiction to secure
a determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not

4
<PAGE> 5
be required to reimburse the Company for any Expense Advance, and the Company
shall be obligated to continue to make Expense Advances, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). If there has not been a Change in
Control, the Reviewing Party shall be selected by the Board of Directors of the
Company. If there has been a Change in Control, the Reviewing Party shall be
advised by or shall be Special Counsel referred to in Section 3 hereof, if and
as Indemnitee so requests. If there has been no determination by the Reviewing
Party or if the Reviewing Party determines that Indemnitee substantively would
not be permitted to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation in any court in the
State of Texas having subject matter jurisdiction thereof and in which venue is
proper seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, and the Company
hereby consents to service of process and to appear in any such proceeding.
Any determination by the Reviewing Party otherwise shall be conclusive and
binding on the Company and Indemnitee.

3. Change in Control. The Company agrees that, if there is a
Change in Control and if Indemnitee requests in writing that Special Counsel
advise the Reviewing Party or be the Reviewing Party, then the Company shall
not deny any indemnification payments (and Expense Advances shall continue to
be paid by the Company pursuant to Section 2(b)) that Indemnitee requests or
demands under this Agreement or any other agreement or law now or hereafter in
effect relating to Claims for Indemnifiable Events. The Company further agrees
not to request or seek reimbursement from Indemnitee of any related Expense
Advances unless, with respect to a denied indemnification payment, Special
Counsel has rendered its written opinion to the Company and Indemnitee that the
Company would not be permitted under applicable law to pay Indemnitee such
indemnification payment. The Company agrees to pay the reasonable fees of
Special Counsel referred to in this Section 3 and to indemnify fully Special
Counsel against any and all expenses (including attorneys' fees), claims,
liabilities, and damages arising out of or relating to this Agreement or
Special Counsel's engagement pursuant hereto.

4. Establishment of Trust. In the event of a Potential Change in
Control, and in the event the Company has not maintained an insurance policy or
policies providing for directors' and officers' liability insurance for the
benefit of Indemnitee with an aggregate policy limit (for all beneficiaries of
such policy or policies) of $5,000,000 or more, the Company shall, upon written
request by Indemnitee, create a trust for the benefit of Indemnitee (the
"Trust") and from time to time upon written request of Indemnitee the Company
shall fund the Trust in an amount sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be incurred in
connection with investigating, preparing for, and defending any Claim relating
to an Indemnifiable Event, and any and all judgments, fines, penalties, and
settlement amounts of any and all Claims relating to an Indemnifiable Event
from time to time actually paid or claimed, reasonably anticipated, or proposed
to be paid; provided, however, that Indemnitee may not request funding so that
the amount in the Trust exceeds $250,000 without an actual Change in Control.
Upon a Change in Control, the amount or amounts to be deposited in the Trust
pursuant to the foregoing funding obligation shall be determined by the
Reviewing Party. The terms of the Trust shall provide that, upon a Change in
Control, (i) the Trust shall not be revoked or the principal thereof invaded,
without the written consent of Indemnitee; (ii) the trustee of the Trust

5
<PAGE> 6
shall advance, within two business days of a request by Indemnitee, any and all
Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust
under the circumstances in which Indemnitee would be required to reimburse the
Company for Expense Advances under Section 2(b) of this Agreement); (iii) the
Trust shall continue to be funded by the Company in accordance with the funding
obligation set forth above; (iv) the trustee of the Trust shall promptly pay to
Indemnitee all amounts for which Indemnitee shall be entitled to
indemnification pursuant to this Agreement or otherwise; and (v) all unexpended
funds in that Trust shall revert to the Company upon a final determination by
the Reviewing Party or a court of competent jurisdiction, as the case may be,
that Indemnitee has been fully indemnified under the terms of this Agreement.
The trustee of the Trust shall be chosen by Indemnitee. Nothing in this
Section 4 shall relieve the Company of any of its obligations under this
Agreement.

5. Indemnification for Additional Expenses. The Company shall
indemnify Indemnitee against any and all costs and expenses (including
attorneys' and expert witnesses' fees) and, if requested by Indemnitee, shall
(within two business days of that request) advance those costs and expenses to
Indemnitee, that are incurred by Indemnitee in connection with any claim
asserted against or action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement or any other
agreement or provision of the Company's Articles of Incorporation or Bylaws now
or hereafter in effect relating to Claims for Indemnifiable Events or (ii)
recovery under any directors' and officers' liability insurance policies
maintained by the Company, regardless of whether Indemnitee ultimately is
determined to be entitled to that indemnification, advance expense payment, or
insurance recovery, as the case may be.

6. Partial Indemnity. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties, and amounts paid in
settlement of a Claim but not, however, for all of the total amount thereof,
the Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled. Moreover, notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful on the merits
or otherwise in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.

7. Contribution.

(a) Contribution Payment. To the extent the
indemnification provided for under any provision of this Agreement is
determined (in the manner hereinabove provided) not to be permitted under
applicable law, then if Indemnitee was, is, or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or
other participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company, in lieu of indemnifying Indemnitee, shall
contribute to the amount of any and all Expenses, judgments, fines, or
penalties assessed against or incurred or paid by Indemnitee on account of that
Claim and any and all amounts paid in settlement of that Claim (including all
interest, assessments, and other charges paid or payable in connection with or
in respect of such Expenses, judgments, fines,

6
<PAGE> 7
penalties, or amounts paid in settlement) for which such indemnification is not
permitted ("Contribution Amounts"), in such proportion as is appropriate to
reflect the relative fault with respect to the Indemnifiable Event giving rise
to the Contribution Amounts of Indemnitee, on the one hand, and of the Company
and any and all other parties (including officers and directors of the Company
other than Indemnitee) who may be at fault with respect to such Indemnifiable
Event (collectively, including the Company, the "Third Parties") on the other
hand.

(b) Relative Fault. The relative fault of the Third
Parties and the Indemnitee shall be determined (i) by reference to the relative
fault of Indemnitee as determined by the court or other governmental agency
assessing the Contribution Amount, or (ii) to the extent such court or other
governmental agency does not apportion relative fault, by the Reviewing Party
(which shall include Special Counsel) after giving effect to, among other
things, the relative intent, knowledge, access to information, and opportunity
to prevent or correct the applicable Indemnifiable Event and other relevant
equitable considerations of each party. The Company and Indemnitee agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 7(b).

8. Burden of Proof. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified under any provision of this Agreement or to receive contribution
pursuant to Section 7 of this Agreement, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.

9. No Presumption. For purposes of this Agreement, the
termination of any claim, action, suit, or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.

10. Non-exclusivity. The rights of Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Company's
Articles of Incorporation or Bylaws, the Texas Business Corporation Act or
otherwise. To the extent that a change in the Texas Business Corporation Act
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Company's Articles of
Incorporation or Bylaws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by that change.

11. Liability Insurance. Except as otherwise agreed to by the
Company and Indemnitee in a written agreement, to the extent the Company
maintains an insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by that policy or those
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any Company director or officer.

12. Period of Limitations. No legal action shall be brought and
no cause of action shall be asserted, instituted or conducted, directly or
indirectly (including, without limitation,

7
<PAGE> 8
shareholder derivative suits), by or on behalf of the Company or any affiliate
of the Company against Indemnitee or Indemnitee's spouse, heirs, executors, or
personal or legal representatives after the expiration of three years from the
date of accrual of that cause of action, and any claim or cause of action of
the Company or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within that three-year period;
provided, however, that, if any shorter period of limitations is otherwise
applicable to any such cause of action, the shorter period shall govern.

13. Termination. This Agreement, and the obligations of the
Company to indemnify Indemnitee set forth herein, shall terminate automatically
six years after the termination of Indemnitee's status as a director, officer,
employee, trustee, agent or fiduciary of the Company, a Subsidiary of the
Company, or any corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise for which Indemnitee was serving at the request of
the Company. Notwithstanding the above, if there is a Claim relating to an
Indemnifiable Event pending against Indemnitee which arose prior to the end of
the six-year period stated above, the Company's obligation to indemnify
Indemnitee shall continue with respect to such Claim until the final resolution
of such Claim, even if such resolution does not occur until after the end of
such six-year period.

14. Amendments. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall that waiver constitute a continuing waiver.

15. Subrogation. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of that payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure those rights, including the
execution of the documents necessary to enable the Company effectively to bring
suit to enforce those rights.

16. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, provision of the Company's Articles of
Incorporation or Bylaws or otherwise) of the amounts otherwise indemnifiable
hereunder.

17. Binding Effect; Merger. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns (including any direct or indirect successor by
purchase, merger, consolidation, or otherwise to all or substantially all of
the business or assets of the Company), spouses, heirs, and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or
another enterprise at the Company's request.

8
<PAGE> 9
18. Severability. If any provision of this Agreement is held by
final judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalid, illegal or unenforceable provision shall be
severed from the remainder of this Agreement, and the remainder of this
Agreement shall be enforced. In addition, the invalid, illegal or
unenforceable provision shall be deemed to be automatically modified, and, as
so modified, to be included in this Agreement, such modification being made to
the minimum extent necessary to render the provision valid, legal and
enforceable. Notwithstanding the foregoing, however, if the severed or
modified provision concerns all or a portion of the essential consideration to
be delivered under this Agreement by one party to the other, the remaining
provisions of this Agreement shall also be modified to the extent necessary to
equitably adjust the parties' respective rights and obligations hereunder.

19. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas
applicable to contracts made and to be performed in that state without giving
effect to the principles of conflicts of laws or choice of laws.

20. Construction. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Pronouns shall be construed to include the
masculine, feminine, neuter, singular and plural as the contest requires.

21. Superseding Prior Agreements. This Agreement replaces and
supersedes any prior indemnification agreement or other arrangement, written or
oral, between Dawson and Indemnitee, expressly excluding, however, Indemnitee's
rights to indemnification under the Articles of Incorporation of the Company,
the Bylaws of the Company, and the Texas Business Corporation Act.

22. Notices. Whenever this Agreement requires or permits notice
to be given by one party to the other, such notice must be in writing to be
effective and shall be deemed delivered and received by the party to whom it is
sent upon actual receipt (by any means) of such notice. Receipt of a notice by
any officer of the Company shall be deemed receipt of such notice by the
Company.

23. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.

9
<PAGE> 10
EXECUTED as of the date first written above.

DAWSON PRODUCTION SERVICES, INC.,
a Texas corporation

By:
------------------------------------------
P. Mark Stark, Chief Financial Officer

INDEMNITEE:

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

10
<PAGE> 11
CERTIFICATE OF INCORPORATION OF
DAWSON PRODUCTION SERVICES, INC.

ARTICLE IX: INDEMNIFICATION

The Corporation shall indemnify any person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding (as
hereinafter defined) because the person (i) is or was a director or officer of
the Corporation or (ii) while a director or officer of the Corporation, is or
was serving at a request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent that a corporation may grant indemnification to a director under
the Texas Business Corporation Act, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article Nine in effect. Any
repeal or amendment of this Article Nine shall be prospective only and shall not
limit the rights of any such director or officer or the obligations of the
Corporation with respect to any claim arising from or related to the services of
such director or officer in any of the foregoing capacities prior to any such
repeal or amendment of this Article Nine. Such right shall include the right to
be paid or reimbursed by the Corporation for expenses incurred in defending any
such proceeding in advance of its final disposition to the maximum extent
permitted under the Texas Business Corporation Act, as the same exists or may
hereafter be amended. If a claim for indemnification or advancement of expenses
hereunder is not paid in full by the Corporation within 90 days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall be entitled
to be paid also the expenses of prosecuting such claim. It shall be a defense to
any such action that such indemnification or advancement of costs of defense are
not permitted under the Texas Business Corporation act, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or any committee thereof, special
legal counsel, or shareholders) to have made its determination prior to the
commencement of such action that indemnification of, or advancement of costs of
defense to, the claimant is permissible in the circumstances nor an actual
determination by the Corporation (including its Board of Directors or any
committee thereof, special legal counsel, or shareholders) that such
indemnification or advancement is not permissible, shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his heirs, executors, administrators, and personal representatives.
The rights conferred above shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, bylaw, resolution of
shareholders or directors, agreement, or otherwise.

<PAGE> 12

The Corporation may additionally indemnify any person covered by the
grant of mandatory indemnification contained above to such further extent as is
permitted by law and may indemnify any other person to the fullest extent
permitted by law.

To the extent permitted by the applicable law, the grant of
mandatory indemnification to any person pursuant to this Article Nine shall
extend to proceedings involving the negligence of such person.

As used herein, the term "proceeding" means any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such an
action, suit, or proceeding.

<PAGE> 13

BYLAWS OF DAWSON PRODUCTION SERVICES, INC.

ARTICLE EIGHT: INDEMNIFICATION

8.01 Indemnification. The Corporation shall indemnify any person
who was, is, or is threatened to be made a named defendant or respondent in a
proceeding (as hereinafter defined) because the person (a) is or was a director
or officer of the Corporation or (b) while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other enterprise,
the fullest extent that a corporation may grant indemnification to a director
under the Texas Business Corporation Act, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article Eight is in effect.
Any repeal or amendment of this Article Eight shall be prospective only and
shall not limit the rights of any such director or officer or the obligations of
the Corporation with respect to any claim arising from or related to the
services of such director or officer in any of the foregoing capacities prior to
any such repeal or amendment of this Article Eight. Such right shall include the
right to be paid or reimbursed by the Corporation for expenses incurred in
defending any such proceeding in advance of its final disposition to the maximum
extent permitted under the Texas Business Corporation Act, as the same exists or
may hereafter be amended. If a claim for indemnification or advancement of
expenses hereunder is not paid in full by the Corporation within ninety days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim, and if successful in whole or in part, the claimant shall
be entitled to be paid also the expenses of prosecuting such claims. It shall be
a defense to any such action that such indemnification or advancement of costs
of defense are not permitted under the Texas Business Corporation Act, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors or any committee thereof,
special legal counsel, or shareholders) to have made its determination prior to
the commencement of such action that indemnification of, or advancement of costs
of defense to, the claimant is permissible in the circumstances nor an actual
determination by the Corporation (including its Board of Directors or any
committee thereof, special legal counsel, or shareholders) that such
indemnification or advancement is not permissible, shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his heirs, executors, administrators, and personal representatives.
The rights conferred above shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, bylaw, resolution of
shareholders or directors, agreement, or otherwise. As used herein, The term
"proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, any appeal in such an action suit, or proceeding, and any inquiry
or investigation that could lead to such an

<PAGE> 14

action, suit, or proceeding, and any inquiry or investigation that could lead to
such an action, suit, or proceeding.

8.02 Additional Indemnification. The Corporation may additionally
indemnify any person covered by the grant of mandatory indemnification contained
above to such further extent as is permitted by law and may indemnify any other
person to the fullest extent permitted by law.

8.03 Negligence. To the extent permitted by then applicable law, the
grant of mandatory indemnification to any person pursuant to this Article Eight
shall extend to proceedings involving the negligence of such person.

<PAGE> 1

EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into to be effective April 1, 1996 (the "Effective Date"), by and
between DAWSON PRODUCTION SERVICES, INC. (together with its successors, the
"Company") and MICHAEL E. LITTLE (the "Executive").

WHEREAS, the Executive is an individual residing in __________, Texas;

WHEREAS, the Company is a Texas business corporation engaged in the
well-servicing business with its principal place of business in San Antonio,
Texas;

WHEREAS, the Executive has considerable experience, expertise and
training in management related to the types of services offered by the Company;
and

WHEREAS, the Company desires and intends to employ the Executive as
Chief Executive Officer and President of the Company pursuant to the terms and
conditions set forth in this Agreement; and

WHEREAS, both the Company and the Executive have read and understood
the terms and provisions set forth in this Agreement, and have been afforded a
reasonable opportunity to review this Agreement with their respective legal
counsel.

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Employment Agreement, the Executive and the Company agree as
follows:

1. RESPONSIBILITIES:

a. The Executive acknowledges and agrees that he shall be
employed as Chief Executive Officer and President of the Company. The
Executive covenants and agrees that he will faithfully devote his best efforts
and such portion of his time, attention and skill to the business of the
Company as is necessary to perform his obligations under this Agreement.

b. The Executive acknowledges and agrees that he has a fiduciary
duty of loyalty to the Company, and that he will not engage in any activity
which will or could in any way, harm the business, business interests or
reputation of the Company.

c. The Executive acknowledges and agrees that, as Chief Executive
Officer and President of the Company, he shall be responsible for actively
supervising the overall management of the Company and its subsidiaries, subject
to and in accordance with the authority and direction of the Board of Directors
of the Company (the "Board of Directors").

Executive Employment Agreement
Michael E. Little - Page 1
<PAGE> 2
d. The Executive acknowledges and agrees that he will not
directly or indirectly engage in competition with the Company at any time
during the existence of the employment relationship between the Company and the
Executive, and Executive will not on his own behalf, or as another's agent,
employee, partner, shareholder or otherwise, engage in any of the same or
similar duties and/or responsibilities required by the Executive's position
with the Company, other than as an employee of the Company pursuant to this
Agreement.

e. The Executive acknowledges and agrees that all information
concerning the Company's products, techniques, equipment, pricing, business
projections, business plans and strategies, marketing plans, sales techniques,
customer contacts, customer needs and prospective customers is highly sensitive
and confidential, and has been obtained only through significant effort and
expense to the Company; and that, as a result, the Executive must agree to
treat this information as highly confidential trade secret information at all
times during the existence of the employment relationship between the Company
and the Executive, and after the termination of the employment relationship.

2. COMPENSATION: During his employment pursuant to this Agreement, the
Company agrees to provide the Executive the following compensation:

a. BASE SALARY: From the Effective Date until changed as
provided in this section, the Company agrees to pay the Executive an annual
salary of $175,000.00 during the first year of employment with the Company
under this Agreement, payable in at least equal monthly installments in
accordance with the Company's ordinary payroll policies and procedures for
executive compensation. Such salary shall increase to an annual rate of
$200,000.00 on April 1, 1997 and to an annual rate of $225,000.00 on April 1,
1998. Such salary shall be subject to withholding for the prescribed federal
income tax, social security and other items as required by law and for other
items consistent with the Company's policy with respect to health insurance and
other benefit plans for similarly situated employees. The above-described
annual salary as in effect from time-to-time hereunder is referred to herein as
the "Base Salary."

b. BUSINESS EXPENSES: The Company shall reimburse all reasonable
travel and entertainment expenses incurred by Executive in connection with the
performance of his duties pursuant to this Agreement. The Executive shall
provide the Company with a written monthly accounting of his expenses on a form
acceptable to the Company and satisfying any applicable federal income tax
reporting or record keeping requirements, within a reasonable time following
the end of each month.

c. DISCRETIONARY INCENTIVE BONUS: In the discretion of the Board
of Directors of the Company, and without implying any obligation on the Company
ever to award a bonus to Executive, Executive may from time to time be awarded
an annual cash bonus during the term of his employment under this Agreement, in
an amount of up to fifty percent (50%) of the Executive's then current Base
Salary. If the Company has an executive bonus plan in effect (as any such plan
may be amended from time-to-time), the annual bonus to Executive referenced in
the preceding sentence shall be in general accordance with such plan and with
Executive's status and position with the Company; provided, however, all such
bonuses are entirely discretionary

Executive Employment Agreement
Michael E. Little - Page 2
<PAGE> 3
with the Board of Directors. If and to the extent a bonus is ever considered
for Executive, it is expected that any such bonus will be based not only on
Executive's individual performance and his relative position, service tenure
and responsibilities with Company, but also on the performance and
profitability of the entire business of Company.

d. EMPLOYEE BENEFITS: The Executive acknowledges and agrees that
certain employee benefits will be provided to the Executive incident to his
employment as Chief Executive Officer and President of the Company. During the
term of this Agreement, Executive shall be entitled to receive such benefits as
are made available to other personnel of the Company in comparable positions,
with comparable duties and responsibilities. Any benefits substantially in
excess of those granted other salaried employees of Company shall be the
subject of prior approval of the Board of Directors. Additionally, for
purposes of determining eligibility, funding or vesting with respect to any
other benefits, the Executive's prior service with Company and any predecessor
of Company shall be deemed to be service with the Company.

3. DURATION: The duration of this Agreement shall be defined and
determined as follows:

a. INITIAL TERM: This Agreement shall continue in full force and
effect for three (3) years (the "Initial Term"), commencing on the Effective
Date and expiring on April 1, 1999 (the "Expiration Date"), unless terminated
prior to the Expiration Date in accordance with Section 3(c).

b. RENEWAL: This Agreement is not subject to an automatic
renewal on the Expiration Date and is renewable only if both parties mutually
agree in writing. Executive acknowledges and agrees that he shall provide
written notice of his proposed terms for renewal of this Agreement to the
Board of Directors or the Compensation Committee no later than six (6) months
prior to the Expiration Date.

c. TERMINATION: This Agreement may be terminated by the Company
as follows:

(1) DEATH: In the event of the Executive's death, this
Agreement shall terminate immediately, without notice, on the date of the
Executive's death; provided, however, that the Company shall pay the
Executive's estate the Base Salary that the Executive would have earned for a
period of ninety (90) days following the date of death and a pro rated amount
of the discretionary incentive bonus, if any, paid to Executive for the prior
contract year pursuant to Section 2(c), in the time and manner in which the
Executive would have been paid such compensation. In addition, the Executive's
designated beneficiaries shall be entitled to receive any life insurance
benefits provided to the Executive in accordance with the applicable plan
documents and/or insurance policies governing such benefits.

(2) DISABILITY: In the event the Executive becomes
physically or mentally disabled, as that term is defined by 29 CFR Section
1630.2(g)(1), and is unable to perform the essential functions of his position,
with reasonable accommodation, for a period of one hundred eighty (180)
consecutive days, this Agreement shall terminate immediately, without notice.

Executive Employment Agreement
Michael E. Little - Page 3
<PAGE> 4
(3) GOOD CAUSE:

(a) This Agreement may be terminated by providing
the Executive with thirty (30) days written notice that the Company is
terminating the Agreement for Good Cause, as defined herein ("Notice of
Termination for Good Cause") at any time during his employment. In the event
that Good Cause exists for terminating this Agreement, the Company may elect to
provide the Executive with thirty (30) days pay in lieu of notice, in addition
to any other amounts due under this Agreement.

(b) For purposes of this Agreement, "Good Cause"
shall be defined as follows:

i) Any act or omission constituting
fraud under the law of the State of
Texas; or

ii) Conviction of, or a plea of nolo
contendere to, a felony or any
misdemeanor involving moral
turpitude; or

iii) Embezzlement or theft of Company
property or funds; or

iv) The material breach of any provision
of this Agreement; or continued
gross neglect of his duties under
this Agreement; or unauthorized
competition with the Company during
his employment pursuant to this
Agreement; or unauthorized use of
Confidential Information (as defined
in Section 9); which is materially
detrimental to the Company; or

v) Engagement in gross misconduct in
the course and scope of his
employment with the Company,
including, without limitation,
dishonesty, unlawful harassment,
abuse of alcohol or controlled
substances, or fighting.

Executive Employment Agreement
Michael E. Little - Page 4
<PAGE> 5
(c) In the event the Company believes "Good
Cause" exists for terminating this Agreement pursuant to this section, the
Company shall be required to give the Executive written Notice of the acts or
omissions constituting "Good Cause" ("Cause Notice"), and no Notice of
Termination shall be communicated by the Company unless and until the Executive
fails to cure such acts or omissions within fifteen (15) days after receipt of
the Cause Notice.

(d) In the event the Company communicates Notice
of Termination For Good Cause pursuant to this section, the Executive shall
have the right to a hearing before the Board of Directors, within fifteen (15)
days after the date such Notice is received, to contest the alleged "Good
Cause" for the Notice of Termination. In the event that the Board of Directors
affirms the "Good Cause" for termination, the Executive shall have the right to
give Arbitration Notice under Section 10(a) prior to the effective date of
termination of this Agreement; provided, however, that in the event that the
Executive communicates Arbitration Notice, the Company shall have the right to
discontinue any payments required under this Agreement (subject to the payment
of such amounts into an interest bearing account in accordance with Section
10(b)) and suspend the Executive from performing any duties under this
Agreement pending the outcome of the arbitration proceeding.

(4) WITHOUT GOOD CAUSE:

(a) This Agreement shall terminate by the Company
providing thirty (30) days written notice to the Executive that the Company is
terminating the Agreement Without Good Cause, as defined herein ("Notice of
Termination Without Good Cause"), at any time during his employment; provided,
however, that the Company shall be required to pay Severance Pay in accordance
with the SEVERANCE provisions in Section 5.

(b) Any termination of this Agreement which is
not for "Good Cause," as defined above, or which does not result from the death
of the Executive, or the disability of the Executive, shall be deemed to be a
termination "Without Good Cause." Furthermore, in the event that the Company
communicates a Notice of Termination for Good Cause, and the arbitrators
pursuant to Section 10 determine that no Good Cause exists or existed for the
Notice of Termination that was originally communicated, then such Notice of
Termination shall be deemed to have been a communication of a Notice of
Termination Without Good Cause, as appropriate, for all purposes under this
Agreement.

(5) RESIGNATION: The Executive shall be entitled to
terminate this Agreement by providing the Company with a written Notice of
Resignation at least thirty (30) days prior to his intended resignation date,
subject to the following provisions:

(a) RESIGNATION FOR GOOD REASON: The Executive
shall have the right to resign for any "Good Reason," as defined herein, and
such resignation shall be deemed to be a termination "Without Good Cause" as
defined in Section 3(c)(4) for all purposes under this Agreement, including the
"Change in Control" provisions set forth in Section 4 and the Severance

Executive Employment Agreement
Michael E. Little - Page 5
<PAGE> 6
provisions set forth in Section 5. For purposes of this Section, the term
"Good Reason" shall be defined as:

i) The Company's failure in any
material respect to perform any
provision of this Agreement; or

ii) Any material changes in the duties
and responsibilities of the
Executive under this Agreement
without the written consent of the
Executive; or

iii) The hiring or promotion by the
Company of another executive
employee to a position of equal or
greater responsibility for the
management of the Company without
the written consent of the
Executive; or

iv) The Company's directing the
Executive to work at a location
other than the Company's principal
office.

(b) RESIGNATION WITHOUT GOOD REASON: Any
resignation by the Executive for any reason other than "Good Reason," as
defined above, shall be deemed to be a resignation "Without Good Reason." In
the event of a Resignation Without Good Reason, the "Change in Control"
provisions in Section 4 and the Severance provisions in Section 5 shall be
inapplicable.

4. CHANGE OF CONTROL: The parties acknowledge that the Executive has
agreed to assume the position of Chief Executive Officer and President and to
enter into this Agreement based upon his confidence in the current shareholders
of the Company and the support of the Board of Directors for the development of
a new strategy for the Company. Accordingly, if the Company should undergo a
"Change of Control," as defined in this section, the parties agree as follows:

a. DEFINITIONS: For purposes of this Agreement, a "Change of
Control" shall be deemed to exist in the event that any of the following
occurs:

(1) a change in the ownership of the capital stock of the
Company where a corporation, person or group acting
in concert (a "Person") as described in Section
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), holds or acquires,
directly or indirectly, beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) of a number of shares of capital stock
of the Company which constitutes 40% or more (or, 30%
or more in the event the Company is subject to the
reporting requirements of Sections 12 or 15(d) under
the Exchange Act) of the combined voting power of the

Executive Employment Agreement
Michael E. Little - Page 6
<PAGE> 7
Company's then outstanding capital stock then
entitled to vote generally in the election of
directors; or

(2) the persons who were members of the Board of
Directors immediately prior to a tender offer,
exchange offer, contested election or any combination
of the foregoing, cease to constitute a majority of
the Board of Directors of the Company; or

(3) a dissolution of the Company, or the adoption by the
Company of a plan of liquidation, or the adoption by
the Company of a merger, consolidation or
reorganization involving the Company in which the
Company is not the surviving entity, or a sale of all
or substantially all of the assets of the Company
(for purposes of this Agreement, a sale of all or
substantially all of the assets of the Company shall
be deemed to occur if any Person acquires, or during
the 12-month period ending on the date of the most
recent acquisition by such Person, has acquired,
gross assets of the Company that have an aggregate
fair market value equal to 50% or more of the fair
market value of all of the gross assets of the
Company immediately prior to such acquisition or
acquisitions); or

(4) a tender offer or exchange offer is made by any Person
which, if successfully completed, would result in
such Person beneficially owning (within the meaning
of Rule 13d-3 promulgated under the Exchange Act)
either 50% or more of the Company's outstanding
shares of Common Stock or shares of capital stock
having 50% or more of the combined voting power of
the Company's then outstanding capital stock (other
than an offer made by the Company), and sufficient
shares are acquired under the offer to cause such
person to own 30% or more of the voting power; or

(5) a change in control is reported or is required to be
reported by the Company in response to either Item
6(e) of Schedule 14A of Regulations 14A promulgated
under the Exchange Act or Item 1 of Form 8-K
promulgated under the Exchange Act, which change in
control has not been approved by a majority of the
Board of Directors then in office who were directors
at the beginning of the two-year period ending on the
date the reported change in control occurred; or

Executive Employment Agreement
Michael E. Little - Page 7
<PAGE> 8
(6) during any period of two consecutive years,
individuals who, at the beginning of such period
constituted the entire Board of Directors of the
Company, cease for any reason (other than death) to
constitute a majority of the directors, unless the
election, or the nomination for election, by the
Company's stockholders, of each new director was
approved by a vote of at least a majority of the
directors then still in office who were directors at
the beginning of the period.

For purposes of Section 4(a)(1) above, if a Person were the beneficial owner of
30% or more or 40% or more, as applicable, of the combined voting power of the
Company's then outstanding securities as of the Effective Date and such Person
thereafter accumulates more than 5% of additional voting power, a Change of
Control of the Company shall be deemed to have occurred, notwithstanding
anything in this Agreement to the contrary. A Change of Control shall include
any other transactions or series of related transactions occurring which have
substantially the same effect as the transactions specified in any of the
preceding clauses of Section 4(a)(1)-(6). However, a Change of Control shall
not be deemed to occur if a Person becomes the beneficial owner of the
applicable percentage or more (as referenced above) of the combined voting
power of the Company's then outstanding securities solely by reason of the
Company's redemption or repurchase of securities; but further acquisitions by
such Person that cause such Person to be the beneficial owner of the applicable
percentage or more (as referenced above) of the combined voting power of the
Company's then outstanding securities shall be deemed a Change of Control.

b. VESTING OF STOCK OPTIONS: In the event of a Change of
Control, as defined in this section, all stock options then held by the
Executive for the purchase of equity securities of the Company shall
immediately become vested, effective on the date of the Change of Control.

5. SEVERANCE: Upon termination, Executive shall be entitled to the
following:

a. If the Company terminates this Agreement Without Good Cause as
that term is defined in Section 3(c)(4)(b) of this Agreement, except as
provided in Section 5(b) herein, Company agrees to pay to Executive a cash
payment equal to the sum of: (i) 14, 15 or 16 months' salary of the
Executive's then current, annualized Base Salary during the first, second and
third year, respectively, of this Agreement, less statutory payroll deductions;
(ii) all accrued benefits; and (iii) a prorated amount of any incentive
compensation paid to Executive for the prior year.

b. In the event this Agreement is terminated within 12 months
after the date of a Change of Control as that term is defined in Section 4(a),
by the Company communicating a Notice of Termination Without Good Cause, the
Company agrees to pay the Executive a cash payment equal to the sum of: (i)
three (3) years' salary of the Executive's then current, annualized Base Salary
less statutory payroll deductions; (ii) all accrued benefits; and (iii) a
prorated amount of any incentive compensation paid to Executive for the prior
year.

Executive Employment Agreement
Michael E. Little - Page 8
<PAGE> 9
c. If Executive terminates this Agreement for "Good Reason" as
that term is defined in Section 3(c)(5)(a) of this Agreement within 12 months
after a Change of Control, Company shall pay to Executive a cash payment equal
to the sum of: (i) two (2) years' salary of the Executive's then current,
annualized salary less statutory payroll deductions; (ii) all accrued benefits;
and (iii) a prorated amount of any incentive compensation paid to Executive for
the prior year.

d. If Company terminates this Agreement For Good Cause as that
term is defined in Section 3(c)(3)(b) of this Agreement, Executive shall not be
entitled to receive any additional salary, benefits or incentive compensation
beyond those earned or accrued as of the effective date of the termination.

e. Any termination of the Executive's employment shall not
release either Company or Executive from its or his respective obligations to
the date of termination nor from the provisions of Sections 8 and 9 hereof.

f. In the event this Agreement is terminated by the Company (i)
without "Good Cause"; (ii) upon the death or disability of the Executive as
that term is defined in Section 3(c)(1)- (2) of this Agreement; or (iii) by the
Executive for Good Reason, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested
upon the effective date of the termination.

g. TERMS OF PAYMENT: Severance pay required pursuant to this
Section shall be payable in cash on at least a monthly basis over the period of
time for which severance payments are due.

h. EXCEPTIONS: The severance payments described above shall not
be payable under this section in any of the following circumstances:

(1) In the event that this Agreement is terminated as a
result of the death or disability of the Executive, as provided in Sections
3(c)(1)-(2);

(2) In the event that this Agreement is terminated
pursuant to a Notice of Termination for Good Cause communicated by the Company,
as provided in Section 3(c)(3)(a) and such termination is affirmed by the
arbitrators after an arbitration proceeding under Section 10; or

(3) In the event that the Executive communicates Notice
of Resignation Without Good Reason as defined in Section 3(c)(4)(b).

i. EXCLUSIVITY: The Company and the Executive acknowledge and
agree that the severance payments required under this section are intended to
be exclusive and to supersede any severance pay plans or policies adopted by
the Company and that the Executive shall not be entitled to any additional
severance compensation under any other severance plan or policy adopted by the
Company.

Executive Employment Agreement
Michael E. Little - Page 9
<PAGE> 10
6. STOCK OPTIONS: In the sole discretion of the Board of Directors of
the Company, and without implying any obligation on Company, Company may grant
Executive options to purchase from the Company shares of the Company's common
stock (the "Option Stock") during the terms of his employment under this
Agreement. Executive shall be considered for the grant of options under any
option grant program the Company may have in effect from time-to-time,
consistent with the terms of any such program and with Executive's status and
position with the Company; provided, however, the grant of any option to
purchase stock shall be entirely discretionary with the Board of Directors. If
and to the extent the Company ever considers granting Executive an option to
purchase Option Stock, such grant will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and
profitability of the entire Company.

a. STATUS OF THE EXECUTIVE: The Executive shall not be
considered a stockholder of the Company with respect to any shares of Option
Stock, except to the extent that the shares of Stock have been purchased by and
issued to the Executive.

b. EXERCISE OF OPTIONS: Executive shall have the right to
exercise any option to purchase part of the Option Stock granted to him by
Company after such option has vested in accordance with the vesting provisions
set forth in the option agreement reflecting the grant of options by the
Company.

7. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this
Agreement may not be assigned by either party without the written consent of
the other party. In the event of a "Change of Control" as defined in Section
4(a), the Company's obligations under this Agreement shall be assumed by the
person or entity that survives such transaction, or by the person purchasing
assets constituting such Change of Control. In the event of the Executive's
death, this Agreement shall be enforceable by the Executive's estate, executors
or legal representatives, but only to the extent that such persons may collect
any compensation (including through the exercise of stock options) due to the
Executive under this Agreement.

8. INDEMNIFICATION: During and after the employment of the Executive
pursuant to this Agreement, the Company shall indemnify the Executive against
all judgments, penalties, fines, assessments, losses, amounts paid in
settlement and reasonable expenses (including, but not limited to, attorneys'
fees) for which the Executive may become liable as a result of his performance
of his duties and responsibilities pursuant to this Agreement, to the fullest
extent permissible under the laws of the State of Texas. This provision shall
be in addition to any other provisions of the Company's Articles of
Incorporation, Bylaws or Indemnification Agreements providing for
indemnification to the Executive.

9. NON-COMPETITION AND NON-DISCLOSURE: The Company and the Executive
agree as follows:

Executive Employment Agreement
Michael E. Little - Page 10
<PAGE> 11
to whom disclosure is reasonably necessary or appropriate in connection with
the performance of his duties as an executive of the Company; or (iii)
authorized in writing by the Board of Directors; or (iv) required by any Court
or administrative agency.

b. In the event that this Agreement is terminated for any reason,
the Executive agrees that he shall promptly return all records, files,
documents, materials and copies relating to the business of the Company or its
subsidiaries which came into the possession of the Executive during his
employment pursuant to this Agreement.

c. For purposes of this Agreement, the term "Confidential
Information" shall be defined as any information relating to the business of
the Company or its subsidiaries which is not generally available to the public
and which the Company takes affirmative steps to maintain as confidential. The
term shall not include any information that the Executive was aware of prior to
the date of initial employment by the Company, information that is a matter of
any public record, information contained in any document filed or submitted to
any governmental entity, any information that is common knowledge in any
industry in which the Company does business, any information that has
previously been made available to persons who are not employees of the Company
or any information that is known to the Company's competitors.

d. In the event that the Executive's employment with the Company
is terminated for any reason, the Executive covenants and agrees not to compete
with the Company by engaging 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/or (iii) production services, including well test analysis, pipe testing,
slickline wireline services and fishing and rental tool services for the period
of time by which the Executive's severance payment, if any, is measured. The
geographic scope of this non-compete provision shall be: (i) in Texas south of
a line from the following Texas towns: Del Rio, Bryan, and Jasper; and (ii)
within 50 miles from Iraan, Texas and from Pampa, Texas.

e. In the event that Executive violates any of the
Non-Competition or Non-Disclosure provisions set forth in this Agreement,
Executive acknowledges and agrees that the Company will suffer immediate and
irreparable harm which cannot accurately be calculated in monetary damages.
Consequently, Executive agrees that the Company shall be entitled to immediate
injunctive relief, either by temporary or permanent injunction, to prevent any
such violations. Executive agrees that this relief shall be in addition to any
other legal or equitable relief to which the Company would be legally entitled
under Texas law.

10. ARBITRATION: The Company and the Executive agree as follows:

Executive Employment Agreement
Michael E. Little - Page 11
<PAGE> 12
agree that either party must request arbitration of any claim or controversy
within sixty (60) days of the date the claim or controversy first arises, by
giving written notice of the party's request for arbitration ("Arbitration
Notice"). Failure to effectively communicate the Arbitration Notice within the
time limitation set forth in this section shall constitute a waiver of the
claim or controversy.

b. In the event that any dispute arising under this Agreement
concerns any payment required to be made under any provision of this Agreement,
either party agrees to deposit the amount of the disputed payment in an
interest bearing account with a financial institution acceptable to the other
party within five (5) days after either party effectively communicates its
Arbitration Notice. In the event that any dispute arising under this Agreement
concerns the amount of any payment required to be made under any provision of
this Agreement, either party agrees to pay the undisputed portion of the
payment to the other party and deposit the disputed portion of the payment in
an interest bearing account with a financial institution acceptable to the
other party within five (5) days after either party effectively communicates
its Arbitration Notice.

c. All claims or controversies subject to arbitration under this
Agreement shall be submitted to an arbitration hearing within thirty (30) days
after the Arbitration Notice is communicated. All claims or controversies
shall be resolved by a panel of three (3) arbitrators selected in accordance
with the applicable Commercial Arbitration Rules. Either party may request
that the arbitration proceeding be stenographically recorded by a Certified
Shorthand Reporter. The arbitrators shall issue a written decision with
respect to all claims or controversies submitted under this section within
thirty (30) days after the completion of the arbitration hearing. The parties
are entitled to be represented by legal counsel at any arbitration hearing and
each party shall be responsible for its own attorneys' fees. The Company shall
be responsible for paying for all expenses in the event of any arbitration
under this section.

d. The parties agree that this section may be specifically
enforced by either party, and submission to arbitration compelled, by any court
of competent jurisdiction. The parties further acknowledge and agree that the
decision of the arbitrators may be specifically enforced by either party in any
court of competent jurisdiction.

11. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:

a. SEVERABILITY: The parties acknowledge and agree that each
provision of this Agreement shall be enforceable independently of every other
provision. Furthermore, the parties acknowledge and agree that, in the event
any provision of this Agreement is determined to be unenforceable for any
reason, the remaining covenants and/or provisions will remain effective,
binding and enforceable.

b. WAIVER: The parties acknowledge and agree that the failure of
either to enforce any provision of this Agreement shall not constitute a waiver
of that particular provision, or of any other provisions, of this Agreement.

Executive Employment Agreement
Michael E. Little - Page 12
<PAGE> 13
c. CHOICE OF LAW/VENUE: The parties acknowledge and agree that
except as specifically provided otherwise in this Agreement, the law of Texas
will govern the validity, interpretation and effect of this Agreement and any
other dispute relating to, or arising out of, the employment relationship
between the Company and the Executive. Proper venue for any litigation or
arbitration concerning this Agreement shall be in San Antonio, Texas.

d. MODIFICATION: The parties acknowledge and agree that this
Agreement constitutes the complete and entire agreement between the parties;
that the parties have executed this Agreement based upon the express terms and
provisions set forth herein; that the parties have not relied on any
representations, oral or written, which are not set forth in this Agreement;
that no previous agreement, either oral or written, shall have any effect on
the terms or provisions of this Agreement; and that all previous agreements,
either oral or written, are expressly superseded and revoked by this Agreement.
In addition, the parties acknowledge and agree that the provisions of this
Agreement may not be modified by any subsequent agreement unless the modifying
agreement (i) is in writing (ii) contains an express provision referencing this
Agreement (iii) is signed by the Executive and (iv) is approved by the Board of
Directors.

e. EXECUTION: The parties agree that this Agreement may be
executed in multiple counterparts, each of which shall be deemed an Original
for all purposes.

f. HEADINGS: The parties agree that the subject headings set
forth at the beginning of each section in this Agreement are provided for ease
of reference only, and shall not be utilized for any purpose in connection with
the construction, interpretation or enforcement of this Agreement.

12. LEGAL CONSULTATION: The parties acknowledge and agree that both
parties have been accorded a reasonable opportunity to review this Agreement
with legal counsel prior to executing the agreement.

13. NOTICES: The parties acknowledge and agree that any and all Notices
required to be delivered under the terms of this Agreement shall be forwarded
by personal delivery or certified U.S. mail. Notices shall be deemed to be
communicated and effective on the day of receipt. Such Notices shall be
addressed to each party as follows:

MICHAEL E. LITTLE
137 Deer Run
Pleasanton, Texas 78206

DAWSON PRODUCTION SERVICES, INC.
901 N.E. Loop 410, Suite 700
San Antonio, Texas 78209

Executive Employment Agreement
Michael E. Little - Page 13
<PAGE> 14
With a copy to:

J. Rowland Cook, Esq.
Jenkens & Gilchrist,
A Professional Corporation
2200 One American Center
600 Congress Avenue
Austin, Texas 78701

Any party hereto may change its or his address for the purpose of receiving
notices and other communications as herein provided by a written notice given
in the manner aforesaid to the other party or parties hereto.

EXECUTED on this 6th day of March, 1996.

MICHAEL E. LITTLE

/s/Michael E. Little
--------------------------------------------------

DAWSON PRODUCTION SERVICES, INC.

By: /s/Joseph B. Eustace
-----------------------------------------------
Name: Joseph B. Eustace
Title: Vice President of Operations and Chief
Operating Officer

Executive Employment Agreement
Michael E. Little - Page 14

<PAGE> 1

AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT ("Amendment") is made and entered into to be effective
April 1, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and MICHAEL E. LITTLE ("Executive").

WHEREAS, Executive and the Company entered into an Executive
Employment Agreement, dated April 1, 1996 ("Agreement"); and

WHEREAS, Executive and the Company desire to amend the Agreement; and

WHEREAS, both the Company and Executive have read and understand the
terms and provisions set forth in this Amendment, and have been afforded a
reasonable opportunity to review this Amendment with their respective legal
counsel;

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, Executive and the Company agree as follows:

1. The second sentence of Section 2(a), entitled BASE SALARY, is hereby
amended as follows:

Such salary shall increase to an annual rate of $300,000.00 on April
1, 1997 and shall remain at an annual rate of $300,000 for each year
thereafter, unless modified by agreement between Executive and the
Company.

2. A new second sentence is added to Section 2(b), entitled BUSINESS
EXPENSES, as follows:

The Company shall also reimburse all reasonable automobile expenses,
as per the standard employment manual for the Company, as such manual
may be amended from time to time by the Company.

3. Section 2(c), entitled DISCRETIONARY INCENTIVE BONUS, is hereby
amended in its entirety as follows:

Executive may from time to time be awarded an annual cash bonus during
the term of his employment under this Agreement, in an amount of up to
one hundred percent (100%) of the Executive's then current Base
Salary. Executive shall be considered for this bonus under the benefit
plan entitled "Compensation Program, Board of Directors Summary" dated
and approved by the Board of Directors on July 31, 1997, or any other
benefit plan the Company may have in effect from time to time,
consistent with the terms of any such program and with Executive's
status and position with the Company.

Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 1
<PAGE> 2
4. The second sentence of Section 2(d), entitled EMPLOYEE BENEFITS, is
hereby amended as follows:

During the term of this Agreement, Executive shall be entitled to
receive such benefits (which shall include vacation as per the
standard employment manual for the Company, as such manual may be
amended from time to time by the Company) as are made available to
other personnel of the Company in comparable positions, with
comparable duties and responsibilities.

5. A new second sentence is added to Section 3(a), entitled INITIAL
TERM, as follows:

If on March 31, 1999, this Agreement has not been replaced with a new
employment agreement between Executive and the Company or terminated
in accordance with Section 3(c), then this Agreement shall have the
termination date extended to March 31, 2000, under the same terms and
conditions which were in effect for the period from April 1, 1998 to
March 31, 1999.

6. A new first sentence is added to Section 3(c)(5)(a), entitled
RESIGNATION FOR GOOD REASON, as follows:

Executive shall have the right to resign for any "Good Reason," as
defined herein, and such resignation shall be deemed to be a
termination by the Company "Without Good Cause," except as set forth
in Section 5(c) with respect to the resignation of the Executive for a
"Good Reason" during the one-year period following a Change of
Control.

7. Section 3(c)(5)(a)(iv) is hereby amended in its entirety, as follows:

The Company's directing the Executive to work at a location other than
San Antonio, Texas.

8. A new Section 3(c)(5)(a)(v), is hereby added, as follows:

After a Change of Control, any material change which, in the sole but
reasonable discretion of the Executive, impacts detrimentally upon
Executive's position within the Company.

9. Section 3(c)(5)(b), entitled RESIGNATION WITHOUT GOOD REASON, is
hereby amended in its entirety, as follows:

Any resignation by the Executive for any reason other than "Good
Reason," as defined above, shall be deemed to be a resignation
"Without Good Reason." Other than as provided in Section 5(c) with
respect to the resignation of the Executive "Without Good Reason"
during the 60-day period following a Change of Control, in the event
of a Resignation Without Good Reason, the "Change in Control"

Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 2
<PAGE> 3
provisions in Section 4 and the Severance provisions in Section 5
shall be inapplicable.

10. Section 5(a) is hereby amended in its entirety, as follows:

If, during the first two years of this Agreement, the Company
terminates this Agreement Without Good Cause as that term is defined
in Section 3(c)(4)(b) of this Agreement, except as provided in Section
5(b) herein, the Company agrees to pay to Executive a cash payment
equal to the sum of: (i) 14 (if terminated during the first year) or
15 (if terminated during the second year) months' salary of the
Executive's then current, annualized Base Salary, respectively, less
statutory payroll deductions; (ii) all accrued benefits; and (iii) a
prorated amount of any incentive compensation paid to Executive for
the prior year. After the first two years of this Agreement, if the
Company terminates this Agreement Without Good Cause as that term is
defined in Section 3(c)(4)(b) of this Agreement, except as provided in
Section 5(b) herein, the Company agrees to pay to Executive a cash
payment equal to the sum of: (i) 24 months' salary of Executive's
then current, annualized Base Salary, less statutory payroll
deductions; (ii) all accrued benefits; and (iii) a prorated amount of
any incentive compensation paid to Executive for the prior year.

11. Section 5(c) is hereby amended in its entirety, as follows:

If Executive terminates this Agreement Without Good Reason within 60
days after a Change of Control, the Company shall pay to Executive a
cash payment equal to the sum of: (i) three (3) years' salary of the
Executive's then current, annualized Base Salary less statutory
payroll deductions; (ii) all accrued benefits; and (iii) a prorated
amount of any incentive compensation paid to Executive for the prior
year. If Executive terminates this Agreement for Good Reason within
12 months after a Change of Control, Company shall pay to Executive a
cash payment equal to the sum of: (i) three (3) years' salary of the
Executive's then current, annualized Base Salary less statutory
payroll deductions; (ii) all accrued benefits; and (iii) a prorated
amount of any incentive compensation paid to Executive for the prior
year.

12. Section 5(h)(3) is hereby amended in its entirety, as follows:

In the event that Executive communicates a Notice of Resignation
Without Good Reason as defined in Section 3(c)(5)(b), other than as
provided in Section 5(c).

13. Section 6, entitled STOCK OPTIONS, is hereby amended in its entirety,
as follows:

The Company may grant Executive options to purchase from the Company
shares of the Company's common stock (the "Option Stock") during the
terms of his employment under this Agreement. Executive shall be
considered for the grant of

Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 3
<PAGE> 4
options under the benefit plan entitled "Compensation Program, Board
of Directors Summary" dated and approved by the Board of Directors on
July 31, 1997, or any other benefit plan the Company may have in
effect from time to time, consistent with the terms of any such
program and with Executive's status and position with the Company.

14. Section 9(d) is hereby amended in its entirety, as follows:

In the event that the Executive's employment with the Company is
terminated for any reason except by the Company for Good Cause without
a Change of Control, Executive covenants and agrees not to compete
with the Company by engaging 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/or (iii)
production services, including well test analysis, pipe testing,
slickline wireline services and fishing and rental tool services, for
the period of time by which the Executive's severance payment, if any,
is measured. The geographic scope of this non-compete provision shall
be: (i) in Texas south of a line from the following Texas towns: Del
Rio, Bryan, and Jasper; and (ii) within 50 miles from Iraan, Texas and
from Pampa, Texas.

In the event that Executive's employment with the Company is
terminated by the Company for Good Cause without a Change of Control,
Executive covenants and agrees not to compete with the Company by
engaging 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/or (iii) production services, including well test
analysis, pipe testing, slickline wireline services and fishing and
rental tool services, for a period of one year from the date of
termination. The geographic scope of this non-compete provision shall
be: (i) in Texas south of a line from the following Texas towns: Del
Rio, Bryan, and Jasper; and (ii) within 50 miles from Iraan, Texas and
from Pampa, Texas.

In the event that Executive's employment with the Company is
terminated for any reason after a Change of Control, Executive shall
not be subject to any obligation not to compete with the Company after
his termination of employment with the Company.

15. All of the provisions of the Agreement which are not amended as set
forth herein shall remain in full force and effect.

**********

Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.

MICHAEL E. LITTLE

/s/ MICHAEL E. LITTLE
----------------------------------------------

DAWSON PRODUCTION SERVICES, INC.

By: /s/ P. MARK STARK
-------------------------------------------
Name: P. Mark Stark
Title: Chief Financial Officer

Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 5

<PAGE> 1
AMENDMENT NO. 2 TO EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT ("Amendment") is made and entered into to be
effective August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC.
(together with its successors, the "Company") and MICHAEL E. LITTLE
("Executive").

WHEREAS, Executive and the Company entered into an Executive
Employment Agreement, dated April 1, 1996, and amended it effective April 1,
1998 ("Agreement"); and

WHEREAS, Executive and the Company desire to further amend the
Agreement; and

WHEREAS, both the Company and Executive have read and understand
the terms and provisions set forth in this Amendment, and have been afforded a
reasonable opportunity to review this Amendment with their respective legal
counsel;

NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth in this Amendment, Executive and the Company agree as
follows:

Section 13 (and all references thereto) shall be redenominated as
Section 14, and a new Section 13 shall be added as follows:

"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that
(i) Executive become entitled to any payments under the
provisions of Section 5 (and related sections to the
extent relevant) ("Severance Payments"), and (ii) some
or all of the Severance Payments are subject to the tax
imposed by Section 4999 of the Code (the "Excise Tax"),
the Company shall pay to Executive, at the same time as
it pays to Executive all or any portion of the
Severance Payments, an amount in cash (the "Excise Tax
Gross-Up Payment") which will be equal to the sum of
(iii) the Excise Tax on the Severance Payments, and
(iv) the federal, state and local income tax, and the
Excise Tax, on the total Excise Tax Gross-up Payment
(which, without limitation, will require the solving of
a quadratic equation). For purposes of determining the
extent to which Severance Payments are subject to the
Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received
by Executive in connection with a Change of Control, or
in connection with Executive's termination of
employment (whether pursuant to the terms of this
Executive Agreement or any other plan (including stock
option plans), arrangement, or agreement with the
Company) (collectively, "Other Benefits") shall be
treated in their entirety as (v) "parachute payments"
within the meaning of section 280G(b)(2) of the Code,
and (vi) "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code, and thus shall be
considered as subject to the Excise Tax except to the
extent, as determined in the written opinion of tax
counsel selected by the Company's independent auditors
and acceptable to Executive

<PAGE> 1

EXECUTIVE EMPLOYMENT AGREEMENT

WHEREAS, the Executive is an individual residing in _______, Texas;

WHEREAS, the Company is a Texas business corporation engaged in the
well-servicing business with its principal place of business in San Antonio,
Texas;

WHEREAS, the Executive has considerable experience, expertise and
training in management related to the types of services offered by the Company;
and

WHEREAS, the Company desires and intends to employ the Executive as
Vice President of Operations and Chief Operating Officer of the Company
pursuant to the terms and conditions set forth in this Agreement; and

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Employment Agreement, the Executive and the Company agree as
follows:

1. RESPONSIBILITIES:

a. The Executive acknowledges and agrees that he shall be
employed as Vice President of Operations and Chief Operating Officer of the
Company. The Executive covenants and agrees that he will faithfully devote his
best efforts and such portion of his time, attention and skill to the business
of the Company as is necessary to perform his obligations under this Agreement.

c. The Executive acknowledges and agrees that he will not
directly or indirectly engage in competition with the Company at any time
during the existence of the employment relationship between the Company and the
Executive, and Executive will not on his own behalf, or as another's agent,
employee, partner, shareholder or otherwise, engage in any of the same or
similar duties and/or responsibilities required by the Executive's position
with the Company, other than as an employee of the Company pursuant to this
Agreement.

Executive Employment Agreement
Joseph B. Eustace - Page 1
<PAGE> 2
d. The Executive acknowledges and agrees that all information
concerning the Company's products, techniques, equipment, pricing, business
projections, business plans and strategies, marketing plans, sales techniques,
customer contacts, customer needs and prospective customers is highly sensitive
and confidential, and has been obtained only through significant effort and
expense to the Company; and that, as a result, the Executive must agree to
treat this information as highly confidential trade secret information at all
times during the existence of the employment relationship between the Company
and the Executive, and after the termination of the employment relationship.

2. COMPENSATION: During his employment pursuant to this Agreement, the
Company agrees to provide the Executive the following compensation:

a. BASE SALARY: From the Effective Date until changed as
provided in this section, the Company agrees to pay the Executive an annual
salary of $125,000.00 during the first year of employment with the Company
under this Agreement, payable in at least equal monthly installments in
accordance with the Company's ordinary payroll policies and procedures for
executive compensation. Such salary shall increase to an annual rate of
$132,500.00 on April 1, 1997 and to an annual rate of $140,000.00 on April
1,1998. Such salary shall be subject to withholding for the prescribed federal
income tax, social security and other items as required by law and for other
items consistent with the Company's policy with respect to health insurance and
other benefit plans for similarly situated employees. The above-described
annual salary as in effect from time-to-time hereunder is referred to herein as
the "Base Salary" subject to renegotiation.

c. DISCRETIONARY INCENTIVE BONUS: In the discretion of the Board
of Directors of the Company, and without implying any obligation on the Company
ever to award a bonus to Executive, Executive may from time to time be awarded
an annual cash bonus during the term of his employment under this Agreement.
If the Company has an executive bonus plan in effect (as any such plan may be
amended from time-to-time), the annual bonus to Executive referenced in the
preceding sentence shall be in general accordance with such plan and with
Executive's status and position with the Company; provided, however, all such
bonuses are entirely discretionary with the Board of Directors. If and to the
extent a bonus is ever considered for Executive, it is expected that any such
bonus will be based not only on Executive's individual performance and his
relative position, service tenure and responsibilities with Company, but also
on the performance and profitability of the entire business of Company.

d. EMPLOYEE BENEFITS: The Executive acknowledges and agrees that
certain employee benefits will be provided to the Executive incident to his
employment as Vice President of

Executive Employment Agreement
Joseph B. Eustace - Page 2
<PAGE> 3
Operations and Chief Operating Officer of the Company. During the term of this
Agreement, Executive shall be entitled to receive such benefits as are made
available to other personnel of the Company in comparable positions, with
comparable duties and responsibilities. Any benefits substantially in excess
of those granted other salaried employees of Company shall be the subject of
prior approval of the Board of Directors. Additionally, for purposes of
determining eligibility, funding or vesting with respect to any other benefits,
the Executive's prior service with Company and any predecessor of Company shall
be deemed to be service with the Company.

3. DURATION: The duration of this Agreement shall be defined and
determined as follows:

a. INITIAL TERM: This Agreement shall continue in full force and
effect for three (3) years (the "Initial Term"), commencing on the
Effective Date and expiring on April 1, 1999 (the "Expiration Date"), unless
terminated prior to the Expiration Date in accordance with Section 3(c).

b. RENEWAL: This Agreement is not subject to an automatic
renewal on the Expiration Date and is renewable only if both parties mutually
agree in writing.

c. TERMINATION: This Agreement may be terminated by the Company
as follows:

(3) GOOD CAUSE:

Executive Employment Agreement
Joseph B. Eustace - Page 3
<PAGE> 4
(b) For purposes of this Agreement, "Good Cause"
shall be defined as follows:

i) Any act or omission constituting
fraud under the law of the State of Texas; or

ii) Conviction of, or a plea of nolo
contendere to, a felony or any misdemeanor
involving moral turpitude; or

iii) Embezzlement or theft of Company
property or funds; or

iv) The material breach of any provision
of this Agreement; or continued gross neglect
of his duties under this Agreement; or
unauthorized competition with the Company
during his employment pursuant to this
Agreement; or unauthorized use of
Confidential Information (as defined in
Section 9); which is materially detrimental
to the Company; or

v) Engagement in gross misconduct in
the course and scope of his employment with
the Company, including, without limitation,
dishonesty, unlawful harassment, abuse of
alcohol or controlled substances, or
fighting.

(c) In the event the Company believes "Good
Cause" exists for terminating this Agreement pursuant to this section, the
Company shall be required to give the Executive written Notice of the acts or
omissions constituting "Good Cause" ("Cause Notice"), and no Notice of
Termination shall be communicated by the Company unless and until the Executive
fails to cure such acts or omissions within fifteen (15) days after receipt of
the Cause Notice.

Executive Employment Agreement
Joseph B. Eustace - Page 4
<PAGE> 5
alleged "Good Cause" for the Notice of Termination. In the event that the
Board of Directors affirms the "Good Cause" for termination, the Executive
shall have the right to give Arbitration Notice under Section 10(a) prior to
the effective date of termination of this Agreement; provided, however, that in
the event that the Executive communicates Arbitration Notice, the Company shall
have the right to discontinue any payments required under this Agreement
(subject to the payment of such amounts into an interest bearing account in
accordance with Section 10(b)) and suspend the Executive from performing any
duties under this Agreement pending the outcome of the arbitration proceeding.

(4) WITHOUT GOOD CAUSE:

i) The Company's failure in any material respect
to perform any provision of this Agreement; or

ii) Any material changes in the duties and
responsibilities of the Executive under this
Agreement without the written consent of the
Executive; or

Executive Employment Agreement
Joseph B. Eustace - Page 5
<PAGE> 6
iii) The hiring or promotion by the Company of
another executive employee to a position of equal or
greater responsibility for the management of the
Company without the written consent of the Executive;
or

iv) The Company's directing the Executive to work
at a location other than the Company's principal
office.

(b) RESIGNATION WITHOUT GOOD REASON: Any resignation by
the Executive for any reason other than "Good Reason," as defined above, shall
be deemed to be a resignation "Without Good Reason." In the event of a
Resignation Without Good Reason, the "Change in Control" provisions in Section
4 and the Severance provisions in Section 5 shall be inapplicable.

4. CHANGE OF CONTROL: The parties acknowledge that the Executive has
agreed to assume the position of Vice President of Operations and Chief
Operating Officer to enter into this Agreement based upon his confidence in the
current shareholders of the Company and the support of the Board of Directors
for the development of a new strategy for the Company. Accordingly, if the
Company should undergo a "Change of Control," as defined in this section, the
parties agree as follows:

a. DEFINITIONS: For purposes of this Agreement, a "Change of
Control" shall be deemed to exist in the event that any of the following
occurs:

Executive Employment Agreement
Joseph B. Eustace - Page 6
<PAGE> 7
(3) a dissolution of the Company, or the adoption by the
Company of a plan of liquidation, or the adoption by
the Company of a merger, consolidation or
reorganization involving the Company in which the
Company is not the surviving entity, or a sale of all
or substantially all of the assets of the Company
(for purposes of this Agreement, a sale of all or
substantially all of the assets of the Company shall
be deemed to occur if any Person acquires, or during
the 12-month period ending on the date of the most
recent acquisition by such Person, has acquired,
gross assets of the Company that have an aggregate
fair market value equal to 50% or more of the fair
market value of all of the gross assets of the
Company immediately prior to such acquisition or
acquisitions); or

(4) a tender offer or exchange offer is made by any
Person which, if successfully completed, would result
in such Person beneficially owning (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) either 50% or more of the Company's outstanding
shares of Common Stock or shares of capital stock
having 50% or more of the combined voting power of
the Company's then outstanding capital stock (other
than an offer made by the Company), and sufficient
shares are acquired under the offer to cause such
person to own 30% or more of the voting power; or

(6) during any period of two consecutive years,
individuals who, at the beginning of such period
constituted the entire Board of Directors of the
Company, cease for any reason (other than death) to
constitute a majority of the directors, unless the
election, or the nomination for election, by the
Company's stockholders, of each new director was
approved by a vote of at least a majority of the
directors then still in office who were directors at
the beginning of the period.

Executive Employment Agreement
Joseph B. Eustace - Page 7
<PAGE> 8
For purposes of Section 4(a)(1) above, if a Person were the beneficial owner of
30% or more or 40% or more, as applicable, of the combined voting power of the
Company's then outstanding securities as of the Effective Date and such Person
thereafter accumulates more than 5% of additional voting power, a Change of
Control of the Company shall be deemed to have occurred, notwithstanding
anything in this Agreement to the contrary. A Change of Control shall include
any other transactions or series of related transactions occurring which have
substantially the same effect as the transactions specified in any of the
preceding clauses of Section 4(a)(1)-(6). However, a Change of Control shall
not be deemed to occur if a Person becomes the beneficial owner of the
applicable percentage or more (as referenced above) of the combined voting
power of the Company's then outstanding securities solely by reason of the
Company's redemption or repurchase of securities; but further acquisitions by
such Person that cause such Person to be the beneficial owner of the applicable
percentage or more (as referenced above) of the combined voting power of the
Company's then outstanding securities shall be deemed a Change of Control.

5. SEVERANCE: Upon termination, Executive shall be entitled to the
following:

a. If the Company terminates this Agreement Without Good Cause as
that term is defined in Section 3(c)(4)(b) of this Agreement, except as
provided in Section 5(b) herein, Company agrees to pay to Executive a cash
payment equal to the sum of: (i) one year's salary of the Executive's then
current, annualized Base Salary, less statutory payroll deductions; (ii) all
accrued benefits; and (iii) a prorated amount of any incentive compensation
paid to Executive for the prior year.

b. In the event this Agreement is terminated within 12 months
after the date of a Change of Control as that term is defined in Section 4(a),
by the Company communicating a Notice of Termination Without Good Cause, the
Company agrees to pay the Executive a cash payment equal to the sum of: (i)
eighteen (18) months' salary of the Executive's then current, annualized Base
Salary less statutory payroll deductions; (ii) all accrued benefits; and (iii)
a prorated amount of any incentive compensation paid to Executive for the prior
year.

c. If Executive terminates this Agreement for "Good Reason" as
that term is defined in Section 3(c)(5)(a) of this Agreement within 12 months
after a Change of Control, Company shall pay to Executive a cash payment equal
to the sum of: (i) one (1) year's salary of the Executive's then current,
annualized salary less statutory payroll deductions; (ii) all accrued benefits;
and (iii) a prorated amount of any incentive compensation paid to Executive for
the prior year.

Executive Employment Agreement
Joseph B. Eustace - Page 8
<PAGE> 9
e. Any termination of the Executive's employment shall not
release either Company or Executive from its or his respective obligations to
the date of termination nor from the provisions of Sections 8 and 9 hereof.

f. In the event this Agreement is terminated by the Company (i)
without "Good Cause"; (ii) upon the death or disability of the Executive as
that term is defined in Section 3(c)(1)-(2) of this Agreement; or (iii) by the
Executive for Good Reason, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested
upon the effective date of the termination.

g. TERMS OF PAYMENT: Severance pay required pursuant to this
Section shall be payable in cash on at least a monthly basis over the period of
time for which severance payments are due.

h. EXCEPTIONS: The severance payments described above shall not
be payable under this section in any of the following circumstances:

(1) In the event that this Agreement is terminated as a
result of the death or disability of the Executive, as provided in Sections
3(c)(1)-(2);

(2) In the event that this Agreement is terminated
pursuant to a Notice of Termination for Good Cause communicated by the Company,
as provided in Section 3(c)(3) and such termination is affirmed by the
arbitrators after an arbitration proceeding under Section 10; or

(3) In the event that the Executive communicates Notice
of Resignation Without Good Reason as defined in Section 3(c)(4)(b).

6. STOCK OPTIONS: In the sole discretion of the Board of Directors of
the Company, and without implying any obligation on Company, Company may grant
Executive options to purchase from the Company shares of the Company's common
stock (the "Option Stock") during the terms of his employment under this
Agreement. Executive shall be considered for the grant of options under any
option grant program the Company may have in effect from time-to-time,
consistent with the terms of any such program and with Executive's status and
position with the Company; provided, however, the grant of any option to
purchase stock shall be entirely discretionary with the Board of Directors. If
and to the extent the Company ever considers granting Executive an option to
purchase Option Stock, such grant will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and
profitability of the entire Company.

Executive Employment Agreement
Joseph B. Eustace - Page 9
<PAGE> 10
a. STATUS OF THE EXECUTIVE: The Executive shall not be
considered a stockholder of the Company with respect to any shares of Option
Stock, except to the extent that the shares of Stock have been purchased by and
issued to the Executive.

9. NON-COMPETITION AND NON-DISCLOSURE: The Company and the Executive
agree as follows:

a. During and after his employment by the Company, the Executive
agrees that he shall not directly or indirectly disclose any Confidential
Information, as defined in this section, unless such disclosure is: (i) to an
employee of the Company or its subsidiaries; or (ii) to a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance of his duties as an executive of the Company; or (iii) authorized
in writing by the Board of Directors; or (iv) required by any Court or
administrative agency.

Executive Employment Agreement
Joseph B. Eustace - Page 10
<PAGE> 11
confidential. The term shall not include any information that the Executive
was aware of prior to the date of initial employment by the Company,
information that is a matter of any public record, information contained in any
document filed or submitted to any governmental entity, any information that is
common knowledge in any industry in which the Company does business, any
information that has previously been made available to persons who are not
employees of the Company or any information that is known to the Company's
competitors.

10. ARBITRATION: The Company and the Executive agree as follows:

a. Any claim or controversy arising out of or relating to this
Agreement, or any breach of this Agreement, shall be settled by final and
binding arbitration in the city of San Antonio, Texas in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the date the claim or controversy arises. The Executive and the Company
agree that either party must request arbitration of any claim or controversy
within sixty (60) days of the date the claim or controversy first arises, by
giving written notice of the party's request for arbitration ("Arbitration
Notice"). Failure to effectively communicate the Arbitration Notice within the
time limitation set forth in this section shall constitute a waiver of the
claim or controversy.

Executive Employment Agreement
Joseph B. Eustace - Page 11
<PAGE> 12
agrees to pay the undisputed portion of the payment to the other party and
deposit the disputed portion of the payment in an interest bearing account with
a financial institution acceptable to the other party within five (5) days
after either party effectively communicates its Arbitration Notice.

11. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:

c. CHOICE OF LAW/VENUE: The parties acknowledge and agree that
except as specifically provided otherwise in this Agreement, the law of Texas
will govern the validity, interpretation and effect of this Agreement and any
other dispute relating to, or arising out of, the employment relationship
between the Company and the Executive. Proper venue for any litigation or
arbitration concerning this Agreement shall be in San Antonio, Texas.

Executive Employment Agreement
Joseph B. Eustace - Page 12
<PAGE> 13
revoked by this Agreement. In addition, the parties acknowledge and agree that
the provisions of this Agreement may not be modified by any subsequent
agreement unless the modifying agreement (i) is in writing (ii) contains an
express provision referencing this Agreement (iii) is signed by the Executive
and (iv) is approved by the Board of Directors.

e. EXECUTION: The parties agree that this Agreement may be
executed in multiple counterparts, each of which shall be deemed an Original
for all purposes.

12. LEGAL CONSULTATION: The parties acknowledge and agree that both
parties have been accorded a reasonable opportunity to review this Agreement
with legal counsel prior to executing the agreement.

JOSEPH B. EUSTACE

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

DAWSON PRODUCTION SERVICES, INC.
901 N.E. Loop 410, Suite 700
San Antonio, Texas 78209

With a copy to:

J. Rowland Cook, Esq.
Jenkens & Gilchrist,
A Professional Corporation
2200 One American Center
600 Congress Avenue
Austin, Texas 78701

Executive Employment Agreement
Joseph B. Eustace - Page 13
<PAGE> 14
EXECUTED on this 6th day of March, 1996.

JOSEPH B. EUSTACE

/s/Joseph B. Eustace
------------------------------------------------

DAWSON PRODUCTION SERVICES, INC.

By:/s/Michael E. Little
---------------------------------------------
Name: Michael E. Little
Title: President and Chief Executive Officer

Executive Employment Agreement
Joseph B. Eustace - Page 14

<PAGE> 1
EXHIBIT 8

AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT ("Amendment") is made and entered into to be effective
August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and JOSEPH B. EUSTACE ("Executive").

WHEREAS, Executive and the Company entered into an Executive
Employment Agreement, dated April 1, 1996 ("Agreement"); and

WHEREAS, Executive and the Company desire to amend the Agreement; and

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, Executive and the Company agree as follows:

Section 13 (and all references thereto) shall be redenominated as
Section 14, and a new Section 13 shall be added as follows:

"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that (i)
Executive become entitled to any payments under the provisions
of Section 5 (and related sections to the extent relevant)
("Severance Payments"), and (ii) some or all of the Severance
Payments are subject to the tax imposed by Section 4999 of the
Code (the "Excise Tax"), the Company shall pay to Executive,
at the same time as it pays to Executive all or any portion of
the Severance Payments, an amount in cash (the "Excise Tax
Gross-Up Payment") which will be equal to the sum of (iii) the
Excise Tax on the Severance Payments, and (iv) the federal,
state and local income tax, and the Excise Tax, on the total
Excise Tax Gross-up Payment (which, without limitation, will
require the solving of a quadratic equation). For purposes of
determining the extent to which Severance Payments are subject
to the Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received by
Executive in connection with a Change of Control, or in
connection with Executive's termination of employment (whether
pursuant to the terms of this Executive Agreement or any other
plan (including stock option plans), arrangement, or agreement
with the Company) (collectively, "Other Benefits") shall be
treated in their entirety as (v) "parachute payments" within
the meaning of section 280G(b)(2) of the Code, and (vi)
"excess parachute payments" within the meaning of section
280G(b)(1) of the Code, and thus shall be considered as

<PAGE> 2

subject to the Excise Tax except to the extent, as determined
in the written opinion of tax counsel selected by the
Company's independent auditors and acceptable to Executive
(who shall not unreasonably withhold approval) such Other
Benefits (vii) do not constitute parachute payments or,
without limitation (viii) do not constitute excess parachute
payments. Without limiting the generality of the foregoing,
the amount required to be taken into account for purposes of
the forgoing determinations, considering the timing, form and
other relevant factors relating to Executive's receipt of
Severance Payments and Other Benefits, shall be determined by
the Company's independent auditors, in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. Without
limitation, for purposes of determining the amount of the
Excise Tax Gross-Up Payment, the Executive shall be deemed to
pay federal, state and local income taxes (as applicable) at
the highest marginal rate in effect for the calendar year in
which the Excise Tax Gross-Up Payment is paid. In the event
that, after the Excise Tax Gross-up Payment is initially
determined and paid, it is finally determined that Executive's
excess parachute payment is more or less than the amount of
excess parachute payment on which the Excise Tax Gross-Up
Payment was based, the Company, or Executive, shall pay, or
repay, to the other the amount which will cause the Excise Tax
Gross-up Payment to equal the amount which would have been
paid had the parties initially used the amount of the finally
determined excess parachute payment in calculating such
amount, plus, in each case, interest on the amount of such
payment, or repayment, at the rate provided in Section
1274(b)(2)(B) of the Code from the date of the original
payment of the Excise Tax Gross-Up Payment through the date of
the payment, or repayment."

All of the provisions of the Agreement which are not amended as set
forth herein shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.

------------------------------------
JOSEPH B. EUSTACE

DAWSON PRODUCTION SERVICES, INC.

By:
---------------------------------
Name: Michael E. Little
Title: Chief Executive Officer
and President

<PAGE> 1
EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and
entered into to be effective July 1, 1998 (the "EFFECTIVE DATE"), by and between
Dawson Production Services, Inc. (together with its successors, the "COMPANY")
and James J. Byerlotzer (the "EXECUTIVE").

WHEREAS, the Executive is an individual residing in San Antonio, Texas;
and

WHEREAS, the Company is a Texas business corporation engaged in the
well-servicing business with its principal place of business in San Antonio,
Texas; and

WHEREAS, the Executive has considerable experience, expertise and
training in management related to the types of services offered by the Company;
and

WHEREAS, the Company desires and intends to employ the Executive as
Chief Operating Officer of the Company pursuant to the terms and conditions set
forth in this Agreement; and

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, the Executive and the Company agree as follows:

1. RESPONSIBILITIES:

a. The Executive acknowledges and agrees that he shall be employed as
Chief Operating Officer of the Company. The Executive covenants and agrees that
he will faithfully devote his best efforts and such portion of his time,
attention and skill to the business of the Company as is necessary to perform
his obligations under this Agreement.

b. The Executive acknowledges and agrees that he has a fiduciary duty
of loyalty to the Company, and that he will not engage in any activity which
will or could in any way, harm the business, business interests or reputation of
the Company.

c. The Executive acknowledges and agrees that he will not directly or
indirectly engage in competition with the Company at any time during the
existence of the employment relationship between the Company and the Executive,
and the Executive will not on his own behalf, or as another's agent, employee,
partner, shareholder or otherwise, engage in any of the same or similar duties
and/or responsibilities required by the Executive's position with the Company,
other than as an employee of the Company pursuant to this Agreement.

Executive Employment Agreement
James J. Byerlotzer - Page 1

<PAGE> 2

d. The Executive acknowledges and agrees that all information
concerning the Company's products, techniques, equipment, pricing, business
projections, business plans and strategies, marketing plans, sales techniques,
customer contacts, customer needs and prospective customers is highly sensitive
and confidential, and has been obtained only through significant effort and
expense to the Company; and that, as a result, the Executive must agree to treat
this information as highly confidential trade secret information at all times
during the existence of the employment relationship between the Company and the
Executive, and after the termination of the employment relationship.

2. COMPENSATION: During his employment pursuant to this Agreement, the
Company agrees to provide the Executive the following compensation:

a. BASE SALARY: From the Effective Date until changed as provided in
this Section, the Company agrees to pay the Executive an annual salary of
$150,000 for each year of employment with the Company under this Agreement,
payable in at least equal monthly installments in accordance with the Company's
ordinary payroll policies and procedures for executive compensation. Such salary
shall be subject to withholding for the prescribed federal income tax, social
security and other items as required by law and for other items consistent with
the Company's policy with respect to health insurance and other benefit plans
for similarly situated employees. The above-described annual salary as in effect
from time to time hereunder is referred to herein as the "BASE SALARY" subject
to renegotiation.

b. BUSINESS EXPENSES: The Company shall reimburse all reasonable
travel and entertainment expenses incurred by the Executive in connection with
the performance of his duties pursuant to this Agreement. The Executive shall
provide the Company with a written monthly accounting of his expenses on a form
acceptable to the Company and satisfying any applicable federal income tax
reporting or record keeping requirements, within a reasonable time following the
end of each month.

c. DISCRETIONARY INCENTIVE BONUS: In the discretion of the Board of
Directors of the Company, and without implying any obligation on the Company
ever to award a bonus to the Executive, the Executive may from time to time be
awarded an annual cash bonus during the term of his employment under this
Agreement. If the Company has an executive bonus plan in effect (as any such
plan may be amended from time to time), the annual bonus to the Executive
referenced in the preceding sentence shall be in general accordance with such
plan and with the Executive's status and position with the Company; provided,
however, all such bonuses are entirely discretionary with the Board of
Directors. If and to the extent a bonus is ever considered for the Executive, it
is expected that any such bonus will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and profitability
of the entire business of the Company.

d. EMPLOYEE BENEFITS: The Executive acknowledges and agrees that
certain employee benefits will be provided to the Executive incident to his
employment as Chief Operating Officer of the Company. During the term of this
Agreement, the Executive shall be entitled to receive such benefits as are made
available to other personnel of the Company in comparable positions,

Executive Employment Agreement
James J. Byerlotzer - Page 2

<PAGE> 3

with comparable duties and responsibilities. Any benefits substantially in
excess of those granted other salaried employees of the Company shall be the
subject of prior approval of the Board of Directors. Additionally, for purposes
of determining eligibility, funding or vesting with respect to any other
benefits, the Executive's prior service with the Company and any predecessor of
the Company shall be deemed to be service with the Company.

3. DURATION: The duration of this Agreement shall be defined and
determined as follows:

a. INITIAL TERM: This Agreement shall continue in full force and
effect for two (2) years commencing on the Effective Date and expiring on June
30, 2000 (the "EXPIRATION DATE"), unless terminated prior to the Expiration Date
in accordance with Section 3(c).

b. RENEWAL: This Agreement is not subject to an automatic renewal on
the Expiration Date and is renewable only if both parties mutually agree in
writing.

c. TERMINATION: This Agreement may be terminated by the Company as
follows:

(1) DEATH: In the event of the Executive's death, this
Agreement shall terminate immediately, without notice, on the date of the
Executive's death; provided, however, that the Company shall pay the Executive's
estate the Base Salary that the Executive would have earned for a period of
ninety (90) days following the date of death and a prorated amount of the
discretionary incentive bonus, if any, paid to the Executive for the prior
contract year pursuant to Section 2(c), in the time and manner in which the
Executive would have been paid such compensation. In addition, the Executive's
designated beneficiaries shall be entitled to receive any life insurance
benefits provided to the Executive in accordance with the applicable plan
documents and/or insurance policies governing such benefits.

(2) DISABILITY: In the event the Executive becomes physically
or mentally disabled, as that term is defined by 29 CFR Section 1630.2(g)(1),
and is unable to perform the essential functions of his position, with
reasonable accommodation, for a period of one hundred eighty (180) consecutive
days, this Agreement shall terminate immediately, without notice.

(3) GOOD CAUSE:

(a) This Agreement may be terminated by providing the
Executive with thirty (30) days written notice that the Company is terminating
the Agreement for Good Cause, as defined herein ("NOTICE OF TERMINATION FOR GOOD
CAUSE") at any time during his employment. In the event that Good Cause exists
for terminating this Agreement, the Company may elect to provide the Executive
with thirty (30) days pay in lieu of notice, in addition to any other amounts
due under this Agreement.

(b) For purposes of this Agreement, "GOOD CAUSE" shall
be defined as follows:

Executive Employment Agreement
James J. Byerlotzer - Page 3

<PAGE> 4

i) Any act or omission constituting fraud under
the law of the State of Texas; or

ii) Conviction of, or a plea of nolo contendere
to, a felony or any misdemeanor involving
moral turpitude; or

iii) Embezzlement or theft of Company property or
funds; or

iv) The material breach of any provision of this
Agreement; or continued gross neglect of his
duties under this Agreement; or unauthorized
competition with the Company during his
employment pursuant to this Agreement; or
unauthorized use of Confidential Information
(as defined in Section 9); which is
materially detrimental to the Company; or

v) Engagement in gross misconduct in the course
and scope of his employment with the Company,
including, without limitation, dishonesty,
unlawful harassment, abuse of alcohol or
controlled substances, or fighting.

(c) In the event the Company believes Good Cause exists
for terminating this Agreement pursuant to this Section, the Company shall be
required to give the Executive written notice of the acts or omissions
constituting Good Cause ("CAUSE NOTICE"), and no Notice of Termination for Good
Cause shall be communicated by the Company unless and until the Executive fails
to cure such acts or omissions within fifteen (15) days after receipt of the
Cause Notice.

(d) In the event the Company communicates Notice of
Termination for Good Cause pursuant to this Section, the Executive shall have
the right to a hearing before the Compensation Committee of the Board of
Directors within fifteen (15) days after the date such Notice is received, to
contest the alleged Good Cause for the Notice of Termination. In the event that
the Compensation Committee of the Board of Directors affirms the Good Cause for
termination, the Executive shall have the right to give an Arbitration Notice
under Section 10(a) prior to the effective date of termination of this
Agreement; provided, however, that in the event that the Executive communicates
an Arbitration Notice, the Company shall have the right to discontinue any
payments required under this Agreement (subject to the payment of such amounts
into an interest bearing account in accordance with Section 10(b)) and suspend
the Executive from performing any duties under this Agreement pending the
outcome of the arbitration proceeding.

(4) WITHOUT GOOD CAUSE:

Executive Employment Agreement
James J. Byerlotzer - Page 4

<PAGE> 5

during his employment; provided, however, that the Company shall be required to
pay severance pay in accordance with the severance provisions in Section 5.

(b) Any termination of this Agreement which is not for
Good Cause, as defined above, or which does not result from the death or
disability of the Executive, shall be deemed to be a termination "WITHOUT GOOD
CAUSE." Furthermore, in the event that the Company communicates a Notice of
Termination for Good Cause, and the arbitrators pursuant to Section 10 determine
that no Good Cause exists or existed for the Notice of Termination that was
originally communicated, then such Notice of Termination shall be deemed to have
been a communication of a Notice of Termination Without Good Cause, as
appropriate, for all purposes under this Agreement.

(5) RESIGNATION: The Executive shall be entitled to terminate
this Agreement by providing the Company with a written notice of resignation at
least thirty (30) days prior to his intended resignation date, subject to the
following provisions:

(a) RESIGNATION FOR GOOD REASON: The Executive shall
have the right to resign for any Good Reason, as defined herein, and such
resignation shall be deemed to be a termination by the Company Without Good
Cause except as set forth in Section 5(c) with respect to a resignation by the
Executive with Good Reason during the two-year period following a Change of
Control. For purposes of this Section, the term "GOOD REASON" shall be defined
as:

i) The Company's failure in any material respect
to perform any provision of this Agreement;
or

ii) Any material changes in the duties and
responsibilities of the Executive under this
Agreement without the written consent of the
Executive; or

iii) The hiring or promotion by the Company of
another executive employee to a position of
equal or greater responsibility for the
management of the Company without the written
consent of the Executive; or

iv) The Company's directing the Executive to work
at a location other than San Antonio, Texas.

(b) RESIGNATION WITHOUT GOOD REASON: Any resignation by
the Executive for any reason other than Good Reason, as defined above, shall be
deemed to be a resignation "WITHOUT GOOD REASON." In the event of a resignation
Without Good Reason, the Change in Control provisions in Section 4 and the
severance provisions in Section 5 shall be inapplicable.

4. CHANGE OF CONTROL: The parties acknowledge that the Executive has
agreed to assume the position of Chief Operating Officer to enter into this
Agreement based upon his confidence

Executive Employment Agreement
James J. Byerlotzer - Page 5

<PAGE> 6

in the current shareholders of the Company and the support of the Board of
Directors for the development of a new strategy for the Company. Accordingly, if
the Company should undergo a Change of Control, as defined in this Section, the
parties agree as follows:

a. DEFINITIONS: For purposes of this Agreement, a "CHANGE OF
CONTROL" shall be deemed to exist in the event that any of the following occurs:

(1) a change in the ownership of the capital stock of the
Company where a corporation, person or group acting in concert (a "PERSON") as
described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), holds or acquires, directly or indirectly, beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of a number of shares of capital stock of the Company which constitutes 40% or
more (or, 30% or more in the event the Company is subject to the reporting
requirements of Sections 12 or 15(d) under the Exchange Act) of the combined
voting power of the Company's then outstanding capital stock then entitled to
vote generally in the election of directors; or

(2) the persons who were members of the Board of Directors
immediately prior to a tender offer, exchange offer, contested election or any
combination of the foregoing, cease to constitute a majority of the Board of
Directors of the Company; or

(3) a dissolution of the Company, or the adoption by the
Company of a plan of liquidation, or the adoption by the Company of a merger,
consolidation or reorganization involving the Company in which the Company is
not the surviving entity, or a sale of all or substantially all of the assets of
the Company (for purposes of this Agreement, a sale of all or substantially all
of the assets of the Company shall be deemed to occur if any Person acquires, or
during the 12-month period ending on the date of the most recent acquisition by
such Person, has acquired gross assets of the Company that have an aggregate
fair market value equal to 50% or more of the fair market value of all of the
gross assets of the Company immediately prior to such acquisition or
acquisitions); or

(4) a tender offer or exchange offer is made by any Person
which, if successfully completed, would result in such Person beneficially
owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
either 50% or more of the Company's outstanding shares of Common Stock or shares
of capital stock having 50% or more of the combined voting power of the
Company's then outstanding capital stock (other than an offer made by the
Company), and sufficient shares are acquired under the offer to cause such
Person to own 30% or more of the voting power; or

(5) a change in control is reported or is required to be
reported by the Company in response to either Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act or Item 1 of Form 8-K
promulgated under the Exchange Act, which change in control has not been
approved by a majority of the Board of Directors then in office who were
directors at the beginning of the two-year period ending on the date the
reported change in control occurred; or

Executive Employment Agreement
James J. Byerlotzer - Page 6

<PAGE> 7

(6) during any period of two consecutive years, individuals
who, at the beginning of such period constituted the entire Board of Directors
of the Company, cease for any reason (other than death) to constitute a majority
of the directors, unless the election, or the nomination for election, by the
Company's shareholders, of each new director was approved by a vote of at least
a majority of the directors then still in office who were directors at the
beginning of the period.

For purposes of Section 4(a)(1) above, if a Person were the beneficial owner of
30% or more or 40% or more, as applicable, of the combined voting power of the
Company's then outstanding securities as of the Effective Date and such Person
thereafter accumulates more than 5% of additional voting power, a Change of
Control of the Company shall be deemed to have occurred, notwithstanding
anything in this Agreement to the contrary. A Change of Control shall include
any other transactions or series of related transactions occurring which have
substantially the same effect as the transactions specified in any of the
preceding clauses of Section 4(a)(1) through (6). However, a Change of Control
shall not be deemed to occur if a Person becomes the beneficial owner of the
applicable percentage or more (as referenced above) of the combined voting power
of the Company's then outstanding securities solely by reason of the Company's
redemption or repurchase of securities; but further acquisitions by such Person
that cause such Person to be the beneficial owner of the applicable percentage
or more (as referenced above) of the combined voting power of the Company's then
outstanding securities shall be deemed a Change of Control.

b. VESTING OF STOCK OPTIONS: In the event of a Change of Control, as
defined in this Section, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested,
effective on the date of the Change of Control.

5. SEVERANCE: Upon termination, the Executive shall be entitled to the
following:

a. Other than as provided in Section 5(b), if the Company terminates
this Agreement Without Good Cause as that term is defined in Section 3(c)(4)(b)
of this Agreement, the Company agrees to pay to the Executive a lump sum cash
payment equal to the sum of: (i) twelve (12) months' salary of the Executive's
then current, annualized Base Salary, less statutory payroll deductions; (ii)
all benefits which accrued prior to the termination of the Agreement; and (iii)
a prorated amount of any incentive compensation paid to the Executive during the
most recent fiscal year which ended prior to the termination of the Agreement,
as described in Sections 5(a)(1) and (2) below. In addition, the Company shall
provide that level of health, dental, vision, disability, and life insurance
benefits comparable to the benefits enjoyed by the Executive immediately prior
to the termination of this Agreement, if any, for a period of twelve (12) months
after termination.

(1) If the termination date occurs after the incentive
compensation is paid to the Executive for the prior fiscal year, the Executive
shall receive a prorated amount of incentive compensation for the period from
the end of the prior fiscal year to the date of termination, based upon the
incentive compensation paid out to the Executive for the prior fiscal year. By
way of example only, if this Agreement is terminated pursuant to this Section on
August 1, 1999, and the Executive has already received his incentive
compensation for the fiscal year April 1, 1998

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James J. Byerlotzer - Page 7

<PAGE> 8

through March 31, 1999, the Executive shall receive 4/12 (or 1/3) of the
incentive compensation he received for the fiscal year April 1, 1998 through
March 31, 1999 upon termination.

(2) If the termination date occurs before the incentive
compensation is paid to the Executive for the prior fiscal year, the Executive
shall receive his entire incentive compensation for the prior fiscal year, plus
a prorated amount of incentive compensation for the period from the end of the
prior fiscal year to the date of termination, based upon the incentive
compensation paid out to the Executive for the prior fiscal year. By way of
example only, if this Agreement is terminated pursuant to this Section on August
1, 1999, and the Executive has not received his incentive compensation for the
fiscal year April 1, 1998 through March 31, 1999, the Executive shall receive
his entire incentive compensation for the fiscal year April 1, 1998 through
March 31, 1999, plus an additional 4/12 (or 1/3) of such incentive compensation
upon termination.

b. If this Agreement is terminated within twelve (12) months after
the date of a Change of Control as that term is defined in Section 4(a) by the
Company communicating a Notice of Termination Without Good Cause, the Company
agrees to pay the Executive a lump sum cash payment equal to the sum of: (i)
eighteen (18) months' salary of the Executive's then current, annualized Base
Salary, less statutory payroll deductions; (ii) all benefits which accrued prior
to the termination of the Agreement; and (iii) a prorated amount of any
incentive compensation paid to the Executive during the most recent fiscal year
which ended prior to the termination of the Agreement, as determined in
accordance with the provisions of Sections 5(a)(1) and 5(a)(2) above. In
addition, the Company shall provide that level of health, dental, vision,
disability, and life insurance benefits comparable to the benefits enjoyed by
the Executive immediately prior to the termination of this Agreement, if any,
for a period of eighteen (18) months after termination.

c. If the Executive terminates this Agreement for Good Reason as
that term is defined in Section 3(c)(5)(a) of this Agreement within twenty-four
(24) months after a Change of Control, the Company agrees to pay to the
Executive a lump sum cash payment equal to the sum of: (i) twelve (12) months'
salary of the Executive's then current, annualized Base Salary, less statutory
payroll deductions; (ii) all benefits which accrued prior to the termination of
the Agreement; and (iii) a prorated amount of any incentive compensation paid to
the Executive during the most recent fiscal year which ended prior to the
termination of the Agreement, as determined in accordance with the provisions of
Sections 5(a)(1) and 5(a)(2) above. In addition, the Company shall provide that
level of health, dental, vision, disability, and life insurance benefits
comparable to the benefits enjoyed by the Executive immediately prior to the
termination of this Agreement, if any, for a period of twelve (12) months after
termination.

d. If the Company terminates this Agreement for Good Cause as that
term is defined in Section 3(c)(3)(b) of this Agreement, the Executive shall not
be entitled to receive any additional salary, benefits or incentive compensation
beyond those earned or accrued as of the effective date of the termination.

Executive Employment Agreement
James J. Byerlotzer - Page 8

<PAGE> 9

e. Any termination of the Executive's employment shall not release
either the Company or the Executive from its or his respective obligations to
the date of termination nor from the provisions of Sections 8 and 9 hereof.

f. In the event this Agreement is terminated by the Company (i)
Without Good Cause; (ii) upon the death or disability of the Executive as those
terms are defined in Sections 3(c)(1) and (2) of this Agreement; or (iii) by the
Executive for Good Reason, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested
upon the effective date of the termination.

g. The severance payments described above shall not be payable under
this Section in any of the following circumstances:

(1) In the event that this Agreement is terminated as a result
of the death or disability of the Executive, as provided in Sections 3(c)(1) and
(2);

(2) In the event that this Agreement is terminated pursuant to
a Notice of Termination for Good Cause communicated by the Company, as provided
in Section 3(c)(3)(a), and (i) such termination is affirmed by the arbitrators
after an arbitration proceeding under Section 10 or (ii) such termination is
uncontested by the Executive; or

(3) In the event that the Executive communicates notice of
resignation Without Good Reason as defined in Section 3(c)(5)(b).

h. The Company and the Executive acknowledge and agree that the
severance payments required under this Section are intended to be exclusive and
to supersede any severance pay plans or policies adopted by the Company and that
the Executive shall not be entitled to any additional severance compensation
under any other severance plan or policy adopted by the Company.

6. STOCK OPTIONS: In the sole discretion of the Board of Directors of the
Company, and without implying any obligation on the Company, the Company may
grant the Executive options to purchase from the Company shares of the Company's
common stock (the "OPTION STOCK") during the terms of his employment under this
Agreement. The Executive shall be considered for the grant of options under any
option grant program the Company may have in effect from time to time,
consistent with the terms of any such program and with the Executive's status
and position with the Company; provided, however, the grant of any option to
purchase stock shall be entirely discretionary with the Board of Directors. If
and to the extent the Company ever considers granting the Executive an option to
purchase Option Stock, such grant will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and profitability
of the entire Company.

Executive Employment Agreement
James J. Byerlotzer - Page 9

<PAGE> 10

a. STATUS OF THE EXECUTIVE: The Executive shall not be considered a
shareholder of the Company with respect to any shares of Option Stock, except to
the extent that the shares of Option Stock have been purchased by and issued to
the Executive.

b. EXERCISE OF OPTIONS: The Executive shall have the right to
exercise any option to purchase part of the Option Stock granted to him by the
Company after such option has vested in accordance with the vesting provisions
set forth in the option agreement, if any, reflecting the grant of options by
the Company.

7. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this
Agreement may not be assigned by either party without the written consent of the
other party. In the event of a Change of Control as defined in Section 4(a), the
Company's obligations under this Agreement shall be assumed by the Person that
survives such transaction, or by the Person purchasing assets constituting such
Change of Control. In the event of the Executive's death, this Agreement shall
be enforceable by the Executive's estate, executors or legal representatives,
but only to the extent that such persons may collect any compensation (including
through the exercise of stock options) due to the Executive under this
Agreement.

8. INDEMNIFICATION: During and after the employment of the Executive
pursuant to this Agreement, the Company shall indemnify the Executive against
all judgments, penalties, fines, assessments, losses, amounts paid in settlement
and reasonable expenses (including, but not limited to, attorneys' fees) for
which the Executive may become liable as a result of his performance of his
duties and responsibilities pursuant to this Agreement, to the fullest extent
permissible under the laws of the State of Texas. This provision shall be in
addition to any other provisions of the Company's Articles of Incorporation,
Bylaws or Indemnification Agreements providing for indemnification to the
Executive.

9. NON-COMPETITION AND NON-DISCLOSURE: The Company and the Executive agree
as follows:

a. During and after his employment by the Company, the Executive
agrees that he shall not directly or indirectly disclose any Confidential
Information, as defined in this Section, unless such disclosure is: (i) to an
employee of the Company or its subsidiaries; or (ii) to a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance of his duties as an executive of the Company; or (iii) authorized in
writing by the Board of Directors; or (iv) required by any court or
administrative agency.

c. For purposes of this Agreement, the term "CONFIDENTIAL
INFORMATION" shall be defined as any information relating to the business of the
Company or its subsidiaries which is not generally available to the public and
which the Company takes affirmative steps to maintain as

Executive Employment Agreement
James J. Byerlotzer - Page 10

<PAGE> 11

confidential. The term shall not include any information that the Executive was
aware of prior to the date of initial employment by the Company, information
that is a matter of any public record, information contained in any document
filed or submitted to any governmental entity, any information that is common
knowledge in any industry in which the Company does business, any information
that has previously been made available to persons who are not employees of the
Company or any information that is known to the Company's competitors.

d. In the event that the Executive's employment with the Company is
terminated for any reason except by the Company for Good Cause without a Change
of Control, the Executive covenants and agrees not to compete with the Company
by engaging 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/or (iii) production
services, including well test analysis, pipe testing, slickline wireline
services and fishing and rental tool services, for the period of time by which
the Executive's severance payment, if any, is measured. The geographic scope of
this non-compete provision shall be the state of Texas, the state of Louisiana,
and the parts of California which lie south of a line drawn from San Luis Obispo
(California), through Bakersfield (California), through Ridgecrest (California)
and ending with Las Vegas (Nevada).

In the event that the Executive's employment with the Company is
terminated by the Company for Good Cause without a Change of Control, the
Executive covenants and agrees not to compete with the Company by engaging 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/or (iii) production services, including well test
analysis, pipe testing, slickline wireline services and fishing and rental tool
services, for a period of one (1) year from the date of termination. The
geographic scope of this non-compete provision shall be the state of Texas, the
state of Louisiana, and the parts of California which lie south of a line drawn
from San Luis Obispo (California), through Bakersfield (California), through
Ridgecrest (California) and ending with Las Vegas (Nevada).

In the event that the Executive's employment with the Company is
terminated for any reason after a Change of Control, Executive shall not be
subject to any obligation not to compete with the Company after his termination
of employment with the Company.

e. In the event that the Executive violates any of the non-
competition or non-disclosure provisions set forth in this Agreement, the
Executive acknowledges and agrees that the Company will suffer immediate and
irreparable harm which cannot accurately be calculated in monetary damages.
Consequently, the Executive agrees that the Company shall be entitled to
immediate injunctive relief, either by temporary or permanent injunction, to
prevent any such violations. The Executive agrees that this relief shall be in
addition to any other legal or equitable relief to which the Company would be
legally entitled under Texas law.

Executive Employment Agreement
James J. Byerlotzer - Page 11

<PAGE> 12

10. ARBITRATION: The Company and the Executive agree as follows:

a. Any claim or controversy arising out of or relating to this
Agreement, or any breach of this Agreement, shall be settled by final and
binding arbitration in the city of San Antonio, Texas in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the date the claim or controversy arises. The Executive and the Company agree
that either party must request arbitration of any claim or controversy within
sixty (60) days of the date the claim or controversy first arises, by giving
written notice of the party's request for arbitration ("ARBITRATION NOTICE").
Failure to effectively communicate the Arbitration Notice within the time
limitation set forth in this Section shall constitute a waiver of the claim or
controversy.

b. In the event that any dispute arising under this Agreement
concerns any payment required to be made under any provision of this Agreement,
either party agrees to deposit the amount of the disputed payment in an interest
bearing account with a financial institution acceptable to the other party
within five (5) days after either party effectively communicates its Arbitration
Notice. In the event that any dispute arising under this Agreement concerns the
amount of any payment required to be made under any provision of this Agreement,
either party agrees to pay the undisputed portion of the payment to the other
party and deposit the disputed portion of the payment in an interest bearing
account with a financial institution acceptable to the other party within five
(5) days after either party effectively communicates its Arbitration Notice.

c. All claims or controversies subject to arbitration under this
Agreement shall be submitted to an arbitration hearing within thirty (30) days
after the Arbitration Notice is communicated. All claims or controversies shall
be resolved by a panel of three (3) arbitrators selected in accordance with the
applicable Commercial Arbitration Rules. Either party may request that the
arbitration proceeding be stenographically recorded by a Certified Shorthand
Reporter. The arbitrators shall issue a written decision with respect to all
claims or controversies submitted under this Section within thirty (30) days
after the completion of the arbitration hearing. The parties are entitled to be
represented by legal counsel at any arbitration hearing and each party shall be
responsible for its own attorneys' fees. The Company shall be responsible for
paying for all expenses in the event of any arbitration under this Section.

d. The parties agree that this Section may be specifically enforced
by either party, and submission to arbitration compelled, by any court of
competent jurisdiction. The parties further acknowledge and agree that the
decision of the arbitrators may be specifically enforced by either party in any
court of competent jurisdiction.

11. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:

Executive Employment Agreement
James J. Byerlotzer - Page 12

<PAGE> 13

unenforceable for any reason, the remaining covenants and/or provisions will
remain effective, binding and enforceable.

b. WAIVER: The parties acknowledge and agree that the failure of
either party to enforce any provision of this Agreement shall not constitute a
waiver of that particular provision, or of any other provisions, of this
Agreement.

d. MODIFICATION: The parties acknowledge and agree that this
Agreement constitutes the complete and entire agreement between the parties;
that the parties have executed this Agreement based upon the express terms and
provisions set forth herein; that the parties have not relied on any
representations, oral or written, which are not set forth in this Agreement;
that no previous agreement, either oral or written, shall have any effect on the
terms or provisions of this Agreement; and that all previous agreements, either
oral or written, are expressly superseded and revoked by this Agreement. In
addition, the parties acknowledge and agree that the provisions of this
Agreement may not be modified by any subsequent agreement unless the modifying
agreement (i) is in writing, (ii) contains an express provision referencing this
Agreement, (iii) is signed by the Executive, and (iv) is approved by the Board
of Directors.

e. EXECUTION: The parties agree that this Agreement may be executed
in multiple counterparts, each of which shall be deemed an original for all
purposes.

f. HEADINGS: The parties agree that the subject headings set forth
at the beginning of each Section in this Agreement are provided for ease of
reference only, and shall not be utilized for any purpose in connection with the
construction, interpretation or enforcement of this Agreement.

g. SURVIVAL: Upon termination of this Agreement, all of the rights
and obligations of the parties pursuant to this Agreement shall terminate,
except that those provisions of this Agreement which expressly provide for
enforceability after termination shall continue in full force effect in
accordance with the terms hereof.

12. LEGAL CONSULTATION: The parties acknowledge and agree that both parties
have been accorded a reasonable opportunity to review this Agreement with legal
counsel prior to executing the Agreement.

13. NOTICES: The parties acknowledge and agree that any and all notices
required to be delivered under the terms of this Agreement shall be forwarded by
personal delivery or certified U.S. mail. Notices shall be deemed to be
communicated and effective on the day of receipt. Such notices shall be
addressed to each party as follows:

Executive Employment Agreement
James J. Byerlotzer - Page 13

<PAGE> 14

James J. Byerlotzer
125 Grant
San Antonio, Texas 78209

Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205

With a copy to:

J. Rowland Cook, Esq.
Jenkens & Gilchrist,
A Professional Corporation
2200 One American Center
600 Congress Avenue
Austin, Texas 78701

Any party hereto may change its or his address for the purpose of receiving
notices and other communications as herein provided by a written notice given in
the manner aforesaid to the other party or parties hereto.

EXECUTED to be effective as of the Effective Date set forth above.

/s/ JAMES J. BYERLOTZER
-------------------------------------
James J. Byerlotzer

DAWSON PRODUCTION SERVICES, INC.

By: /s/ MICHAEL E. LITTLE
----------------------------------
Name: Michael E. Little
--------------------------------
Title: Chairman, President & CEO
-------------------------------

Executive Employment Agreement
James J. Byerlotzer - Page 14

<PAGE> 1
EXHIBIT 10

AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT ("Amendment") is made and entered into to be effective
August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and JAMES J. BYERLOTZER ("Executive").

WHEREAS, Executive and the Company entered into an Executive
Employment Agreement, dated July 1, 1998 ("Agreement"); and

WHEREAS, Executive and the Company desire to amend the Agreement; and

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, Executive and the Company agree as follows:

Section 13 (and all references thereto) shall be redenominated as
Section 14, and a new Section 13 shall be added as follows:

"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that (i)
Executive become entitled to any payments under the provisions
of Section 5 (and related sections to the extent relevant)
("Severance Payments"), and (ii) some or all of the Severance
Payments are subject to the tax imposed by Section 4999 of the
Code (the "Excise Tax"), the Company shall pay to Executive,
at the same time as it pays to Executive all or any portion of
the Severance Payments, an amount in cash (the "Excise Tax
Gross-Up Payment") which will be equal to the sum of (iii) the
Excise Tax on the Severance Payments, and (iv) the federal,
state and local income tax, and the Excise Tax, on the total
Excise Tax Gross-up Payment (which, without limitation, will
require the solving of a quadratic equation). For purposes of
determining the extent to which Severance Payments are subject
to the Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received by
Executive in connection with a Change of Control, or in
connection with Executive's termination of employment (whether
pursuant to the terms of this Executive Agreement or any other
plan (including stock option plans), arrangement, or agreement
with the Company) (collectively, "Other Benefits") shall be
treated in their entirety as (v) "parachute payments" within
the meaning of section 280G(b)(2) of the Code, and (vi)
"excess parachute payments" within the meaning of section
280G(b)(1) of the Code, and thus shall be considered as

<PAGE> 2

All of the provisions of the Agreement which are not amended as set
forth herein shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.

------------------------------------
JAMES J. BYERLOTZER

DAWSON PRODUCTION SERVICES, INC.

By:
---------------------------------
Name: Michael E. Little
Title: Chief Executive Officer
and President

<PAGE> 1

EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and
entered into to be effective April 1, 1998 (the "EFFECTIVE DATE"), by and
between Dawson Production Services, Inc. (together with its successors, the
"COMPANY") and P. Mark Stark (the "EXECUTIVE").

WHEREAS, the Executive is an individual residing in Boerne, Texas; and

WHEREAS, the Company is a Texas business corporation engaged in the
well-servicing business with its principal place of business in San Antonio,
Texas; and

WHEREAS, the Executive has considerable experience, expertise and
training in management related to the types of services offered by the Company;
and

WHEREAS, the Company desires and intends to employ the Executive as
Chief Financial Officer of the Company pursuant to the terms and conditions set
forth in this Agreement; and

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, the Executive and the Company agree as follows:

1. RESPONSIBILITIES:

a. The Executive acknowledges and agrees that he shall be
employed as Chief Financial Officer of the Company. The Executive covenants
and agrees that he will faithfully devote his best efforts and such portion of
his time, attention and skill to the business of the Company as is necessary to
perform his obligations under this Agreement.

c. The Executive acknowledges and agrees that he will not
directly or indirectly engage in competition with the Company at any time
during the existence of the employment relationship between the Company and the
Executive, and the Executive will not on his own behalf, or as another's agent,
employee, partner, shareholder or otherwise, engage in any of the same or
similar duties and/or responsibilities required by the Executive's position
with the Company, other than as an employee of the Company pursuant to this
Agreement.

Executive Employment Agreement
P. Mark Stark - Page 1
<PAGE> 2
d. The Executive acknowledges and agrees that all information
concerning the Company's products, techniques, equipment, pricing, business
projections, business plans and strategies, marketing plans, sales techniques,
customer contacts, customer needs and prospective customers is highly sensitive
and confidential, and has been obtained only through significant effort and
expense to the Company; and that, as a result, the Executive must agree to
treat this information as highly confidential trade secret information at all
times during the existence of the employment relationship between the Company
and the Executive, and after the termination of the employment relationship.

2. COMPENSATION: During his employment pursuant to this Agreement, the
Company agrees to provide the Executive the following compensation:

a. BASE SALARY: From the Effective Date until changed as
provided in this Section, the Company agrees to pay the Executive an annual
salary of $120,000 during the first year of employment with the Company under
this Agreement, payable in at least equal monthly installments in accordance
with the Company's ordinary payroll policies and procedures for executive
compensation. Such salary shall increase to an annual rate of $140,000 on
April 1, 1999. Such salary shall be subject to withholding for the prescribed
federal income tax, social security and other items as required by law and for
other items consistent with the Company's policy with respect to health
insurance and other benefit plans for similarly situated employees. The
above-described annual salary as in effect from time to time hereunder is
referred to herein as the "BASE SALARY."

c. DISCRETIONARY INCENTIVE BONUS: In the discretion of the Board
of Directors of the Company, and without implying any obligation on the Company
ever to award a bonus to the Executive, the Executive may from time to time be
awarded an annual cash bonus during the term of his employment under this
Agreement. If the Company has an executive bonus plan in effect (as any such
plan may be amended from time to time), the annual bonus to the Executive
referenced in the preceding sentence shall be in general accordance with such
plan and with the Executive's status and position with the Company; provided,
however, all such bonuses are entirely discretionary with the Board of
Directors. If and to the extent a bonus is ever considered for the Executive,
it is expected that any such bonus will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and
profitability of the entire business of the Company.

d. EMPLOYEE BENEFITS: The Executive acknowledges and agrees that
certain employee benefits will be provided to the Executive incident to his
employment as Chief Financial Officer of the Company. During the term of this
Agreement, the Executive shall be entitled to receive

Executive Employment Agreement
P. Mark Stark - Page 2
<PAGE> 3
such benefits as are made available to other personnel of the Company in
comparable positions, with comparable duties and responsibilities. Any
benefits substantially in excess of those granted other salaried employees of
the Company shall be the subject of prior approval of the Board of Directors.
Additionally, for purposes of determining eligibility, funding or vesting with
respect to any other benefits, the Executive's prior service with the Company
and any predecessor of the Company shall be deemed to be service with the
Company.

3. DURATION: The duration of this Agreement shall be defined and
determined as follows:

a. INITIAL TERM: This Agreement shall continue in full force and
effect for two (2) years commencing on the Effective Date and expiring on March
31, 2000 (the "EXPIRATION DATE"), unless terminated prior to the Expiration
Date in accordance with Section 3(c).

b. RENEWAL: This Agreement is not subject to an automatic
renewal on the Expiration Date and is renewable only if both parties mutually
agree in writing.

c. TERMINATION: This Agreement may be terminated by the Company
as follows:

(1) DEATH: In the event of the Executive's death, this
Agreement shall terminate immediately, without notice, on the date of the
Executive's death; provided, however, that the Company shall pay the
Executive's estate the Base Salary that the Executive would have earned for a
period of ninety (90) days following the date of death and a prorated amount of
the discretionary incentive bonus, if any, paid to the Executive for the prior
contract year pursuant to Section 2(c), in the time and manner in which the
Executive would have been paid such compensation. In addition, the Executive's
designated beneficiaries shall be entitled to receive any life insurance
benefits provided to the Executive in accordance with the applicable plan
documents and/or insurance policies governing such benefits.

(3) GOOD CAUSE:

(a) This Agreement may be terminated by providing
the Executive with thirty (30) days written notice that the Company is
terminating the Agreement for Good Cause, as defined herein ("NOTICE OF
TERMINATION FOR GOOD CAUSE") at any time during his employment. In the event
that Good Cause exists for terminating this Agreement, the Company may elect to
provide the Executive with thirty (30) days pay in lieu of notice, in addition
to any other amounts due under this Agreement.

(b) For purposes of this Agreement, "GOOD CAUSE"
shall be defined as follows:

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<PAGE> 4
i) Any act or omission constituting fraud
under the law of the State of Texas; or

ii) Conviction of, or a plea of nolo
contendere to, a felony or any
misdemeanor involving moral turpitude;
or

iii) Embezzlement or theft of Company
property or funds; or

iv) The material breach of any provision of
this Agreement; or continued gross
neglect of his duties under this
Agreement; or unauthorized competition
with the Company during his employment
pursuant to this Agreement; or
unauthorized use of Confidential
Information (as defined in Section 9);
which is materially detrimental to the
Company; or

v) Engagement in gross misconduct in the
course and scope of his employment with
the Company, including, without
limitation, dishonesty, unlawful
harassment, abuse of alcohol or
controlled substances, or fighting.

(c) In the event the Company believes Good Cause
exists for terminating this Agreement pursuant to this Section, the Company
shall be required to give the Executive written notice of the acts or omissions
constituting Good Cause ("CAUSE NOTICE"), and no Notice of Termination for Good
Cause shall be communicated by the Company unless and until the Executive fails
to cure such acts or omissions within fifteen (15) days after receipt of the
Cause Notice.

(d) In the event the Company communicates Notice
of Termination for Good Cause pursuant to this Section, the Executive shall
have the right to a hearing before the Compensation Committee of the Board of
Directors within fifteen (15) days after the date such Notice is received, to
contest the alleged Good Cause for the Notice of Termination. In the event
that the Compensation Committee of the Board of Directors affirms the Good
Cause for termination, the Executive shall have the right to give an
Arbitration Notice under Section 10(a) prior to the effective date of
termination of this Agreement; provided, however, that in the event that the
Executive communicates an Arbitration Notice, the Company shall have the right
to discontinue any payments required under this Agreement (subject to the
payment of such amounts into an interest bearing account in accordance with
Section 10(b)) and suspend the Executive from performing any duties under this
Agreement pending the outcome of the arbitration proceeding.

(4) WITHOUT GOOD CAUSE:

Executive Employment Agreement
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<PAGE> 5
during his employment; provided, however, that the Company shall be required to
pay severance pay in accordance with the severance provisions in Section 5.

(b) Any termination of this Agreement which is
not for Good Cause, as defined above, or which does not result from the death
or disability of the Executive, shall be deemed to be a termination "WITHOUT
GOOD CAUSE." Furthermore, in the event that the Company communicates a Notice
of Termination for Good Cause, and the arbitrators pursuant to Section 10
determine that no Good Cause exists or existed for the Notice of Termination
that was originally communicated, then such Notice of Termination shall be
deemed to have been a communication of a Notice of Termination Without Good
Cause, as appropriate, for all purposes under this Agreement.

(5) RESIGNATION: The Executive shall be entitled to
terminate this Agreement by providing the Company with a written notice of
resignation at least thirty (30) days prior to his intended resignation date,
subject to the following provisions:

(a) RESIGNATION FOR GOOD REASON: The Executive
shall have the right to resign for any Good Reason, as defined herein, and such
resignation shall be deemed to be a termination by the Company Without Good
Cause except as set forth in Section 5(c) with respect to a resignation by the
Executive with Good Reason during the two-year period following a Change of
Control. For purposes of this Section, the term "GOOD REASON" shall be defined
as:

i) The Company's failure in any material
respect to perform any provision of
this Agreement; or

ii) Any material changes in the duties and
responsibilities of the Executive under
this Agreement without the written
consent of the Executive; or

iii) The hiring or promotion by the Company
of another executive employee to a
position of equal or greater
responsibility for the management of
the Company without the written consent
of the Executive; or

iv) The Company's directing the Executive
to work at a location other than San
Antonio, Texas.

(b) RESIGNATION WITHOUT GOOD REASON: Any
resignation by the Executive for any reason other than Good Reason, as defined
above, shall be deemed to be a resignation "WITHOUT GOOD REASON." In the event
of a resignation Without Good Reason, the Change in Control provisions in
Section 4 and the severance provisions in Section 5 shall be inapplicable.

4. CHANGE OF CONTROL: The parties acknowledge that the Executive has
agreed to assume the position of Chief Financial Officer to enter into this
Agreement based upon his confidence in

Executive Employment Agreement
P. Mark Stark - Page 5
<PAGE> 6
the current shareholders of the Company and the support of the Board of
Directors for the development of a new strategy for the Company. Accordingly,
if the Company should undergo a Change of Control, as defined in this Section,
the parties agree as follows:

a. DEFINITIONS: For purposes of this Agreement, a "CHANGE OF
CONTROL" shall be deemed to exist in the event that any of the following
occurs:

(1) a change in the ownership of the capital stock of the
Company where a corporation, person or group acting in concert (a "PERSON") as
described in Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), holds or acquires, directly or indirectly,
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of a number of shares of capital stock of the Company which
constitutes 40% or more (or, 30% or more in the event the Company is subject to
the reporting requirements of Sections 12 or 15(d) under the Exchange Act) of
the combined voting power of the Company's then outstanding capital stock then
entitled to vote generally in the election of directors; or

(2) the persons who were members of the Board of
Directors immediately prior to a tender offer, exchange offer, contested
election or any combination of the foregoing, cease to constitute a majority of
the Board of Directors of the Company; or

(3) a dissolution of the Company, or the adoption by the
Company of a plan of liquidation, or the adoption by the Company of a merger,
consolidation or reorganization involving the Company in which the Company is
not the surviving entity, or a sale of all or substantially all of the assets
of the Company (for purposes of this Agreement, a sale of all or substantially
all of the assets of the Company shall be deemed to occur if any Person
acquires, or during the 12-month period ending on the date of the most recent
acquisition by such Person, has acquired gross assets of the Company that have
an aggregate fair market value equal to 50% or more of the fair market value of
all of the gross assets of the Company immediately prior to such acquisition or
acquisitions); or

(4) a tender offer or exchange offer is made by any
Person which, if successfully completed, would result in such Person
beneficially owning (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) either 50% or more of the Company's outstanding shares of Common
Stock or shares of capital stock having 50% or more of the combined voting
power of the Company's then outstanding capital stock (other than an offer made
by the Company), and sufficient shares are acquired under the offer to cause
such Person to own 30% or more of the voting power; or

Executive Employment Agreement
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<PAGE> 7
(6) during any period of two consecutive years,
individuals who, at the beginning of such period constituted the entire Board
of Directors of the Company, cease for any reason (other than death) to
constitute a majority of the directors, unless the election, or the nomination
for election, by the Company's shareholders, of each new director was approved
by a vote of at least a majority of the directors then still in office who were
directors at the beginning of the period.

For purposes of Section 4(a)(1) above, if a Person were the beneficial owner of
30% or more or 40% or more, as applicable, of the combined voting power of the
Company's then outstanding securities as of the Effective Date and such Person
thereafter accumulates more than 5% of additional voting power, a Change of
Control of the Company shall be deemed to have occurred, notwithstanding
anything in this Agreement to the contrary. A Change of Control shall include
any other transactions or series of related transactions occurring which have
substantially the same effect as the transactions specified in any of the
preceding clauses of Section 4(a)(1) through (6). However, a Change of Control
shall not be deemed to occur if a Person becomes the beneficial owner of the
applicable percentage or more (as referenced above) of the combined voting
power of the Company's then outstanding securities solely by reason of the
Company's redemption or repurchase of securities; but further acquisitions by
such Person that cause such Person to be the beneficial owner of the applicable
percentage or more (as referenced above) of the combined voting power of the
Company's then outstanding securities shall be deemed a Change of Control.

b. VESTING OF STOCK OPTIONS: In the event of a Change of
Control, as defined in this Section, all stock options then held by the
Executive for the purchase of equity securities of the Company shall
immediately become vested, effective on the date of the Change of Control.

5. SEVERANCE: Upon termination, the Executive shall be entitled to the
following:

a. Other than as provided in Section 5(b), if the Company
terminates this Agreement Without Good Cause as that term is defined in Section
3(c)(4)(b) of this Agreement, the Company agrees to pay to the Executive a lump
sum cash payment equal to the sum of: (i) twelve (12) months' salary of the
Executive's then current, annualized Base Salary, less statutory payroll
deductions; (ii) all benefits which accrued prior to the termination of the
Agreement; and (iii) a prorated amount of any incentive compensation paid to
the Executive during the most recent fiscal year which ended prior to the
termination of the Agreement, as described in Sections 5(a)(1) and (2) below.
In addition, the Company shall provide that level of health, dental, vision,
disability, and life insurance benefits comparable to the benefits enjoyed by
the Executive immediately prior to the termination of this Agreement, if any,
for a period of twelve (12) months after termination.

(1) If the termination date occurs after the incentive
compensation is paid to the Executive for the prior fiscal year, the Executive
shall receive a prorated amount of incentive compensation for the period from
the end of the prior fiscal year to the date of termination, based upon the
incentive compensation paid out to the Executive for the prior fiscal year. By
way of example only, if this Agreement is terminated pursuant to this Section
on August 1, 1999, and the Executive has already received his incentive
compensation for the fiscal year April 1, 1998

Executive Employment Agreement
P. Mark Stark - Page 7
<PAGE> 8
through March 31, 1999, the Executive shall receive 4/12 (or 1/3) of the
incentive compensation he received for the fiscal year April 1, 1998 through
March 31, 1999 upon termination.

(2) If the termination date occurs before the incentive
compensation is paid to the Executive for the prior fiscal year, the Executive
shall receive his entire incentive compensation for the prior fiscal year, plus
a prorated amount of incentive compensation for the period from the end of the
prior fiscal year to the date of termination, based upon the incentive
compensation paid out to the Executive for the prior fiscal year. By way of
example only, if this Agreement is terminated pursuant to this Section on
August 1, 1999, and the Executive has not received his incentive compensation
for the fiscal year April 1, 1998 through March 31, 1999, the Executive shall
receive his entire incentive compensation for the fiscal year April 1, 1998
through March 31, 1999, plus an additional 4/12 (or 1/3) of such incentive
compensation upon termination.

b. If this Agreement is terminated within twelve (12) months
after the date of a Change of Control as that term is defined in Section 4(a)
by the Company communicating a Notice of Termination Without Good Cause, the
Company agrees to pay the Executive a lump sum cash payment equal to the sum
of: (i) eighteen (18) months' salary of the Executive's then current,
annualized Base Salary, less statutory payroll deductions; (ii) all benefits
which accrued prior to the termination of the Agreement; and (iii) a prorated
amount of any incentive compensation paid to the Executive during the most
recent fiscal year which ended prior to the termination of the Agreement, as
determined in accordance with the provisions of Sections 5(a)(1) and 5(a)(2)
above. In addition, the Company shall provide that level of health, dental,
vision, disability, and life insurance benefits comparable to the benefits
enjoyed by the Executive immediately prior to the termination of this
Agreement, if any, for a period of eighteen (18) months after termination.

c. If the Executive terminates this Agreement for Good Reason as
that term is defined in Section 3(c)(5)(a) of this Agreement within twenty-four
(24) months after a Change of Control, the Company agrees to pay to the
Executive a lump sum cash payment equal to the sum of: (i) twelve (12) months'
salary of the Executive's then current, annualized Base Salary, less statutory
payroll deductions; (ii) all benefits which accrued prior to the termination of
the Agreement; and (iii) a prorated amount of any incentive compensation paid
to the Executive during the most recent fiscal year which ended prior to the
termination of the Agreement, as determined in accordance with the provisions
of Sections 5(a)(1) and 5(a)(2) above. In addition, the Company shall provide
that level of health, dental, vision, disability, and life insurance benefits
comparable to the benefits enjoyed by the Executive immediately prior to the
termination of this Agreement, if any, for a period of twelve (12) months after
termination.

d. If the Company terminates this Agreement for Good Cause as
that term is defined in Section 3(c)(3)(b) of this Agreement, the Executive
shall not be entitled to receive any additional salary, benefits or incentive
compensation beyond those earned or accrued as of the effective date of the
termination.

Executive Employment Agreement
P. Mark Stark - Page 8
<PAGE> 9
e. Any termination of the Executive's employment shall not
release either the Company or the Executive from its or his respective
obligations to the date of termination nor from the provisions of Sections 8
and 9 hereof.

f. In the event this Agreement is terminated by the Company (i)
Without Good Cause; (ii) upon the death or disability of the Executive as those
terms are defined in Sections 3(c)(1) and (2) of this Agreement; or (iii) by
the Executive for Good Reason, all stock options then held by the Executive for
the purchase of equity securities of the Company shall immediately become
vested upon the effective date of the termination.

g. The severance payments described above shall not be payable
under this Section in any of the following circumstances:

(1) In the event that this Agreement is terminated as a
result of the death or disability of the Executive, as provided in Sections
3(c)(1) and (2);

(2) In the event that this Agreement is terminated
pursuant to a Notice of Termination for Good Cause communicated by the Company,
as provided in Section 3(c)(3)(a), and (i) such termination is affirmed by the
arbitrators after an arbitration proceeding under Section 10 or (ii) such
termination is uncontested by the Executive; or

(3) In the event that the Executive communicates notice
of resignation Without Good Reason as defined in Section 3(c)(5)(b).

h. The Company and the Executive acknowledge and agree that the
severance payments required under this Section are intended to be exclusive and
to supersede any severance pay plans or policies adopted by the Company and
that the Executive shall not be entitled to any additional severance
compensation under any other severance plan or policy adopted by the Company.

6. STOCK OPTIONS: In the sole discretion of the Board of Directors of
the Company, and without implying any obligation on the Company, the Company
may grant the Executive options to purchase from the Company shares of the
Company's common stock (the "OPTION STOCK") during the terms of his employment
under this Agreement. The Executive shall be considered for the grant of
options under any option grant program the Company may have in effect from time
to time, consistent with the terms of any such program and with the Executive's
status and position with the Company; provided, however, the grant of any
option to purchase stock shall be entirely discretionary with the Board of
Directors. If and to the extent the Company ever considers granting the
Executive an option to purchase Option Stock, such grant will be based not only
on the Executive's individual performance and his relative position, service
tenure and responsibilities with the Company, but also on the performance and
profitability of the entire Company.

Executive Employment Agreement
P. Mark Stark - Page 9
<PAGE> 10
a. STATUS OF THE EXECUTIVE: The Executive shall not be
considered a shareholder of the Company with respect to any shares of Option
Stock, except to the extent that the shares of Option Stock have been purchased
by and issued to the Executive.

7. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this
Agreement may not be assigned by either party without the written consent of
the other party. In the event of a Change of Control as defined in Section
4(a), the Company's obligations under this Agreement shall be assumed by the
Person that survives such transaction, or by the Person purchasing assets
constituting such Change of Control. In the event of the Executive's death,
this Agreement shall be enforceable by the Executive's estate, executors or
legal representatives, but only to the extent that such persons may collect any
compensation (including through the exercise of stock options) due to the
Executive under this Agreement.

9. NON-COMPETITION AND NON-DISCLOSURE: The Company and the Executive
agree as follows:

a. During and after his employment by the Company, the Executive
agrees that he shall not directly or indirectly disclose any Confidential
Information, as defined in this Section, unless such disclosure is: (i) to an
employee of the Company or its subsidiaries; or (ii) to a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance of his duties as an executive of the Company; or (iii) authorized
in writing by the Board of Directors; or (iv) required by any court or
administrative agency.

c. For purposes of this Agreement, the term "CONFIDENTIAL
INFORMATION" shall be defined as any information relating to the business of
the Company or its subsidiaries which is not generally available to the public
and which the Company takes affirmative steps to maintain as

Executive Employment Agreement
P. Mark Stark - Page 10
<PAGE> 11
confidential. The term shall not include any information that the Executive
was aware of prior to the date of initial employment by the Company,
information that is a matter of any public record, information contained in any
document filed or submitted to any governmental entity, any information that is
common knowledge in any industry in which the Company does business, any
information that has previously been made available to persons who are not
employees of the Company or any information that is known to the Company's
competitors.

d. In the event that the Executive's employment with the Company
is terminated for any reason except by the Company for Good Cause without a
Change of Control, the Executive covenants and agrees not to compete with the
Company by engaging 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/or (iii)
production services, including well test analysis, pipe testing, slickline
wireline services and fishing and rental tool services, for the period of time
by which the Executive's severance payment, if any, is measured. The geographic
scope of this non-compete provision shall be the state of Texas, the state of
Louisiana, and the parts of California which lie south of a line drawn from San
Luis Obispo (California), through Bakersfield (California), through Ridgecrest
(California) and ending with Las Vegas (Nevada).

In the event that the Executive's employment with the Company is
terminated for any reason after a Change of Control, the Executive shall not be
subject to any obligation not to compete with the Company after his termination
of employment with the Company.

e. In the event that the Executive violates any of the
non-competition or non-disclosure provisions set forth in this Agreement, the
Executive acknowledges and agrees that the Company will suffer immediate and
irreparable harm which cannot accurately be calculated in monetary damages.
Consequently, the Executive agrees that the Company shall be entitled to
immediate injunctive relief, either by temporary or permanent injunction, to
prevent any such violations. The Executive agrees that this relief shall be in
addition to any other legal or equitable relief to which the Company would be
legally entitled under Texas law.

Executive Employment Agreement
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<PAGE> 12
10. ARBITRATION: The Company and the Executive agree as follows:

a. Any claim or controversy arising out of or relating to this
Agreement, or any breach of this Agreement, shall be settled by final and
binding arbitration in the city of San Antonio, Texas in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the date the claim or controversy arises. The Executive and the Company
agree that either party must request arbitration of any claim or controversy
within sixty (60) days of the date the claim or controversy first arises, by
giving written notice of the party's request for arbitration ("ARBITRATION
NOTICE"). Failure to effectively communicate the Arbitration Notice within the
time limitation set forth in this Section shall constitute a waiver of the
claim or controversy.

c. All claims or controversies subject to arbitration under this
Agreement shall be submitted to an arbitration hearing within thirty (30) days
after the Arbitration Notice is communicated. All claims or controversies
shall be resolved by a panel of three (3) arbitrators selected in accordance
with the applicable Commercial Arbitration Rules. Either party may request
that the arbitration proceeding be stenographically recorded by a Certified
Shorthand Reporter. The arbitrators shall issue a written decision with
respect to all claims or controversies submitted under this Section within
thirty (30) days after the completion of the arbitration hearing. The parties
are entitled to be represented by legal counsel at any arbitration hearing and
each party shall be responsible for its own attorneys' fees. The Company shall
be responsible for paying for all expenses in the event of any arbitration
under this Section.

d. The parties agree that this Section may be specifically
enforced by either party, and submission to arbitration compelled, by any court
of competent jurisdiction. The parties further acknowledge and agree that the
decision of the arbitrators may be specifically enforced by either party in any
court of competent jurisdiction.

11. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:

Executive Employment Agreement
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<PAGE> 13
unenforceable for any reason, the remaining covenants and/or provisions will
remain effective, binding and enforceable.

d. MODIFICATION: The parties acknowledge and agree that this
Agreement constitutes the complete and entire agreement between the parties;
that the parties have executed this Agreement based upon the express terms and
provisions set forth herein; that the parties have not relied on any
representations, oral or written, which are not set forth in this Agreement;
that no previous agreement, either oral or written, shall have any effect on
the terms or provisions of this Agreement; and that all previous agreements,
either oral or written, are expressly superseded and revoked by this Agreement.
In addition, the parties acknowledge and agree that the provisions of this
Agreement may not be modified by any subsequent agreement unless the modifying
agreement (i) is in writing, (ii) contains an express provision referencing
this Agreement, (iii) is signed by the Executive, and (iv) is approved by the
Board of Directors.

e. EXECUTION: The parties agree that this Agreement may be
executed in multiple counterparts, each of which shall be deemed an original
for all purposes.

f. HEADINGS: The parties agree that the subject headings set
forth at the beginning of each Section in this Agreement are provided for ease
of reference only, and shall not be utilized for any purpose in connection with
the construction, interpretation or enforcement of this Agreement.

g. SURVIVAL: Upon termination of this Agreement, all of the
rights and obligations of the parties pursuant to this Agreement shall
terminate, except that those provisions of this Agreement which expressly
provide for enforceability after termination shall continue in full force
effect in accordance with the terms hereof.

12. LEGAL CONSULTATION: The parties acknowledge and agree that both
parties have been accorded a reasonable opportunity to review this Agreement
with legal counsel prior to executing the Agreement.

13. NOTICES: The parties acknowledge and agree that any and all notices
required to be delivered under the terms of this Agreement shall be forwarded
by personal delivery or certified U.S. mail. Notices shall be deemed to be
communicated and effective on the day of receipt. Such notices shall be
addressed to each party as follows:

Executive Employment Agreement
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<PAGE> 14
P. Mark Stark
350 Dresden Wood
Boerne, Texas 78006

Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205

With a copy to:

J. Rowland Cook, Esq.
Jenkens & Gilchrist,
A Professional Corporation
2200 One American Center
600 Congress Avenue
Austin, Texas 78701

EXECUTED to be effective as of the Effective Date set forth above.

/s/ P. MARK STARK
-----------------------------------
P. Mark Stark

DAWSON PRODUCTION SERVICES, INC.

By: /s/ MICHAEL E. LITTLE
--------------------------------
Name: Michael E. Little
------------------------------
Title: Chairman, President & CEO
-----------------------------

Executive Employment Agreement
P. Mark Stark - Page 14

<PAGE> 1
EXHIBIT 12

AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT ("Amendment") is made and entered into to be effective
August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and P. MARK STARK ("Executive").

WHEREAS, Executive and the Company entered into an Executive
Employment Agreement, dated April 1, 1998 ("Agreement"); and

WHEREAS, Executive and the Company desire to amend the Agreement; and

NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, Executive and the Company agree as follows:

Section 13 (and all references thereto) shall be redenominated as
Section 14, and a new Section 13 shall be added as follows:

"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that (i)
Executive become entitled to any payments under the provisions
of Section 5 (and related sections to the extent relevant)
("Severance Payments"), and (ii) some or all of the Severance
Payments are subject to the tax imposed by Section 4999 of the
Code (the "Excise Tax"), the Company shall pay to Executive,
at the same time as it pays to Executive all or any portion of
the Severance Payments, an amount in cash (the "Excise Tax
Gross-Up Payment") which will be equal to the sum of (iii) the
Excise Tax on the Severance Payments, and (iv) the federal,
state and local income tax, and the Excise Tax, on the total
Excise Tax Gross-up Payment (which, without limitation, will
require the solving of a quadratic equation). For purposes of
determining the extent to which Severance Payments are subject
to the Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received by
Executive in connection with a Change of Control, or in
connection with Executive's termination of employment (whether
pursuant to the terms of this Executive Agreement or any other
plan (including stock option plans), arrangement, or agreement
with the Company) (collectively, "Other Benefits") shall be
treated in their entirety as (v) "parachute payments" within
the meaning of section 280G(b)(2) of the Code, and (vi)
"excess parachute payments" within the meaning

<PAGE> 2

of section 280G(b)(1) of the Code, and thus shall be
considered as subject to the Excise Tax except to the extent,
as determined in the written opinion of tax counsel selected
by the Company's independent auditors and acceptable to
Executive (who shall not unreasonably withhold approval) such
Other Benefits (vii) do not constitute parachute payments or,
without limitation (viii) do not constitute excess parachute
payments. Without limiting the generality of the foregoing,
the amount required to be taken into account for purposes of
the forgoing determinations, considering the timing, form and
other relevant factors relating to Executive's receipt of
Severance Payments and Other Benefits, shall be determined by
the Company's independent auditors, in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. Without
limitation, for purposes of determining the amount of the
Excise Tax Gross-Up Payment, the Executive shall be deemed to
pay federal, state and local income taxes (as applicable) at
the highest marginal rate in effect for the calendar year in
which the Excise Tax Gross-Up Payment is paid. In the event
that, after the Excise Tax Gross-up Payment is initially
determined and paid, it is finally determined that Executive's
excess parachute payment is more or less than the amount of
excess parachute payment on which the Excise Tax Gross-Up
Payment was based, the Company, or Executive, shall pay, or
repay, to the other the amount which will cause the Excise Tax
Gross-up Payment to equal the amount which would have been
paid had the parties initially used the amount of the finally
determined excess parachute payment in calculating such
amount, plus, in each case, interest on the amount of such
payment, or repayment, at the rate provided in Section
1274(b)(2)(B) of the Code from the date of the original
payment of the Excise Tax Gross-Up Payment through the date of
the payment, or repayment."

All of the provisions of the Agreement which are not amended as set
forth herein shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.

------------------------------------
P. MARK STARK

DAWSON PRODUCTION SERVICES, INC.

By:
---------------------------------
Name: Michael E. Little
Title: Chief Executive Officer
and President

<PAGE> 1
DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN

EFFECTIVE AS OF AUGUST 7, 1998
<PAGE> 2
DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
AS EFFECTIVE AUGUST 7, 1998

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - PURPOSE AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose of Plan; Capitalized Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Plan Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 "Administrator" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 "Claim Form" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 "Change of Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 "Effective Date of a Change of Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 "Eligible Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 "Executive Officer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 "Hourly Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 "Incumbent Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.13 "Independent Contractor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.14 "Office Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.15 "Part-Time Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.16 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.17 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.18 "Plan Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.19 "Purchaser" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.20 "Salaried Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.21 "Severance Benefits" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.22 "Termination Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.23 "Termination for Cause" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.24 "Temporary Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.25 "Years of Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE III - ELIGIBLE EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE IV - SEVERANCE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Requirements for Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Amount of Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>

i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V - PAYMENT OF SEVERANCE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Deductions From Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Severance Benefits Are Not Compensation for Other Benefits . . . . . . . . . . . . . . . . . . 7
5.4 Payment after Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE VI - CLAIMS AND APPEAL PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE VII - PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 Reimbursement and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.3 Rulemaking Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE VIII - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IX - MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 Limitation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.4 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.5 Gender and Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.6 Spendthrift Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.7 Mistaken Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.8 Information Requested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>

ii
<PAGE> 4
DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
AS EFFECTIVE AUGUST 7, 1998

WHEREAS, the Company wishes to establish the Plan effective as of
August 7, 1998 to provide certain severance benefits to eligible persons under
the terms and conditions provided therein; and

NOW, THEREFORE, the Company hereby establishes the Plan effective as
of August 7, 1998 to provide certain severance benefits to eligible persons
under the terms and conditions provided herein.

ARTICLE I - PURPOSE AND SCOPE

1.1 Purpose of Plan; Capitalized Terms. The Company has
established and maintains the Plan as a severance program in connection with a
potential Change of Control of the Company. The purpose of this Plan is to
provide to Eligible Employees certain Severance Benefits under the terms and
conditions specified in Article IV of the Plan and to provide financial
security to Eligible Employees who suffer a permanent job loss due to a Change
of Control. No other employee of the Company or any other person shall have
any right to benefits under this Plan. Capitalized terms used herein are
defined in Article II of the Plan.

1.2 Plan Status. The Company intends for the Plan to qualify as
an "employee welfare benefit plan" within the meaning of section 3(1) of ERISA.
The Plan shall, at all times, be interpreted and administered in accordance
with ERISA and any other pertinent provisions of federal law.

ARTICLE II - DEFINITIONS

Wherever used herein, the following terms have the following meanings
unless the context clearly requires a different meaning:

2.1 "ADMINISTRATOR" means the Company or such other person or
committee as may be appointed from time to time by the Company to supervise the
administration of the Plan. The Administrator will be the named fiduciary for
purposes of section 402(a)(1) of ERISA with respect to all duties and powers
assigned to the Administrator hereunder and will be responsible for complying
with all reporting and disclosure requirements of Part I of Subtitle B of Title
I of ERISA.

2.2 "AFFILIATE" means any of the following, with regard to the
Company or the Purchaser: (i) a member of a controlled group of corporations of
which the Company or the Purchaser, respectively, is a member, or (ii) an
unincorporated trade or business which is under common control with the Company
or the Purchaser, respectively, as determined in accordance with Code Section
414(c) and regulations issued thereunder. Subject to Code Section 415(h), a
<PAGE> 5
"controlled group of corporations" shall mean a controlled group of
corporations as defined in Code Section 414(b).

2.3 "CLAIM FORM" means the claim form attached as Attachment A or
any other form designated by the Administrator in its sole and absolute
discretion to be completed by an Eligible Employee to claim Severance Benefits
under the Plan. The Administrator in its exclusive discretion shall decide the
required content of the Claim Form and may modify such content as its deems
appropriate in its exclusive discretion from time to time.

2.4 "CHANGE OF CONTROL" shall be deemed to have occurred in any
of the following instances:

(a) any Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities & Exchange Act of 1934, as
amended), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power
of the then outstanding voting securities of the Company; or

(b) members of the Incumbent Board cease for any reason
to constitute at least a majority of the Board of Directors; or

(c) a public announcement is made of a tender or exchange
offer by any Person for fifty percent (50%) or more of the
outstanding voting securities of the Company, and the Board of
Directors approves or fails to oppose that tender or exchange offer in
its statements in Schedule 14D-9 under the Securities & Exchange Act
of 1934; or

(d) the shareholders of the Company approve a merger or
consolidation of the Company with any other Person (or, if no such
approval is required, the consummation of such a merger or
consolidation of the Company), other than a merger or consolidation
that would result in the voting securities of the Company outstanding
immediately before the consummation thereof continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or of a parent of the surviving
entity) a majority of the combined voting power of the voting
securities of the surviving entity (or its parent) outstanding
immediately after that merger or consolidation; or

(e) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets (or, if no such approval is required, the consummation of such
a liquidation, sale, or disposition in one transaction or series of
related transactions) other than a liquidation, sale, or disposition
of all or substantially all the Company's assets in one transaction or
a series of related transactions to a corporation owned directly or
indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company.

2.5 "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.

2
<PAGE> 6

2.6 "COMPANY" means Dawson Production Services, Inc.,and its
subsidiaries, or any successor thereto, which elects to continue the Plan.

2.7 "EFFECTIVE DATE OF A CHANGE OF CONTROL" means the effective
date of a Change of Control.

2.8 "ELIGIBLE EMPLOYEE" means an individual who is a Full-Time
Office Employee or a Full-Time Salaried Employee, and the Administrator
determines such individual to be qualified as an Eligible Employee under the
terms and conditions specified in Article III of the Plan, as it shall be
amended from time to time. Only Eligible Employees who satisfy all applicable
terms and conditions of the Plan may receive Severance Benefits.

2.9 "EXECUTIVE OFFICER" means the Chief Executive Officer, Chief
Financial Officer, and Chief Operating Officer of the Company.

2.10 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.

2.11 "HOURLY EMPLOYEE" means an employee of the Company who does
not fall within the definition of an Office Employee or a Salaried Employee.

2.12 "INCUMBENT BOARD" means the individuals who constitute the
Board of Directors immediately prior to a Change of Control and any other
individual who becomes a director of the Corporation after that date and whose
election or appointment by the Board of Directors or nomination for election by
the Corporation's shareholders was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board.

2.13 "INDEPENDENT CONTRACTOR" means any individual contracted for a
specific assignment, for a specific duration or who is not treated as an
employee on the payroll of the records of the Company. A verbal or written
contract may be in effect.

2.14 "OFFICE EMPLOYEE" means an individual who is employed by the
Company and who is listed on the Company's regular payroll records under
position codes 59, 60, 69 and 71 and whose work week is regularly scheduled to
be thirty (30) hours a week or more.

2.15 "PART-TIME EMPLOYEE" means a person whose work week is
regularly scheduled to be less than thirty (30) hours a week.

2.16 "PERSON" means any individual, corporation, limited liability
company, partnership, unincorporated association, trust, or any other legally
recognized entity.

2.17 "PLAN" means the Dawson Production Services, Inc. Employee
Severance Pay Plan as set forth herein, together with any amendments and
attachments hereto as shall be adopted from time to time.

3
<PAGE> 7
2.18 "PLAN YEAR" means the twelve-month period that begins on each
January 1, and ends on the following December 31.

2.19 "PURCHASER" means the survivor of any merger, the resulting
company of any consolidation, or the purchaser of stock or assets in a Change
in Control.

2.20 "SALARIED EMPLOYEE" means an individual who is employed by the
Company and who is listed on the Company's regular payroll records under
position codes 57, 58, 59, 60, 61, 63, 64, 72, 73, 74, 75 and 90, and whose
work week is regularly scheduled to be thirty (30) hours a week or more.

2.21 "SEVERANCE BENEFITS" means the benefits provided under the
terms and conditions specified in Article IV of the Plan.

2.22 "TERMINATION DATE" means the date upon which the Company or
the Purchaser designates as the effective date of the Eligible Employee's
termination of employment where such termination of employment with the Company
occurs on or after the Effective Date of a Change of Control.

2.23 "TERMINATION FOR CAUSE" means an involuntary termination of
employment based upon an Employee's commission of any of the following:

(a) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his
employment with the Company;

(b) intentional damage of more than $1,000 worth of
property of the Company;

(d) willful violation of any law, rule or regulation
(other than traffic violations or similar offenses)
or final cease and desist order;

(e) intentional breach of fiduciary duty owed to the
Company involving personal profit; or

(f) gross misconduct.

2.24 "TEMPORARY EMPLOYEE" means a person contracted through a
temporary service company, agency, employee leasing company, staffing company,
or a person individually who supplements the work force temporarily, to perform
services as a temporary employee, or is otherwise hired to perform services for
the Company and is not classified on the Company's books as a regular common
law employee of the Company.

4
<PAGE> 8
2.25 "YEARS OF SERVICE" means the number of complete consecutive
12 month periods of time for which an Eligible Employee has been on the Company
payroll on a full-time or full-time equivalent basis (as determined by the
Company's vacation policy as may be in effect from time to time), or has been
on such basis on the payroll of a company or other entity which has merged into
or has been acquired by the Company, from his last date of hire to his
Termination Date. Any breaks in service shall start a new period of service
for the purpose of determining Years of Service.

ARTICLE III - ELIGIBLE EMPLOYEES

An individual will qualify as an Eligible Employee only if the
individual satisfies each of the following conditions:

(a) The individual was employed by the Company as a
Salaried Employee or Office Employee of the Company
on the date the Company notified the individual that
it was involuntarily terminating his employment;

(b) The individual was involuntarily terminated from
employment by the Company on or within eighteen (18)
months after the Effective Date of a Change of
Control, and for a reason other than: (i) a
Termination for Cause; (ii) termination of employment
with the Company where the individual is immediately
offered a similar or equivalent position, with
similar duties and with no decrease in base pay at a
location within commuting distance of the
individual's principal residence, by an Affiliate of
the Company or the Purchaser; or (iii) termination
due to the sale of the Company where the individual
is immediately offered a similar or equivalent
position, with similar duties and with no decrease in
base pay at a location within commuting distance of
the individual's principal residence, by an Affiliate
of the Company or the Purchaser;

(c) Prior to the date that the Company notified the
individual of his employment termination the
individual did not: (1) voluntarily terminate
employment or notify the Company of his intent or
election to terminate employment at some future date
by resignation (either voluntarily or in lieu of
Termination for Cause), failure to appear for work,
or retirement; or (2) terminate employment upon the
expiration of disability leave;

(d) The Employee is an Office Employee or Salaried
Employee for at least thirty (30) calendar days
immediately prior to a Change of Control and on the
effective date of a Change of Control;

(e) The Administrator determines that the individual
satisfies all other conditions under the Plan
required to qualify as an Eligible Employee and that
the individual is not otherwise disqualified or
excluded from eligibility under the terms of the Plan.

5
<PAGE> 9
If an individual does not meet these conditions and all other requirements of
the Plan, he will not be entitled to any Severance Benefits under this Plan.
Hourly Employees, Independent Contractors, Part-Time Employees and Temporary
Employees are not Eligible Employees. This means that Hourly Employees,
Independent Contractors, Temporary Employees, and Part-Time Employees are not
eligible for Severance Benefits.

ARTICLE IV - SEVERANCE BENEFITS

4.1 Requirements for Severance Benefits. The Plan shall pay
Severance Benefits in accordance with this Article IV only to Eligible
Employees.

4.2 Amount of Severance Benefits. The amount of Severance Benefits
will be determined in accordance with this Paragraph.

(a) ELIGIBLE EMPLOYEES WITH THREE YEARS OF SERVICE OR
FEWER. Each Eligible Employee with three (3) Years
of Service or fewer shall be entitled to three
months' salary.

(b) ELIGIBLE EMPLOYEES WITH MORE THAN THREE YEARS OF
SERVICE. Each Eligible Employee with more than three
(3) Years of Service shall be entitled to one months'
salary multiplied by the number of Years of Service
for the Eligible Employee.

(c) EXECUTIVE OFFICERS. The Chief Executive Officer,
Chief Operating Officer, or Chief Financial Officer
shall receive Severance Benefits pursuant to this
Plan unless they are entitled to severance benefits
from the Company through a separate agreement between
such officer and the Company, in which case the
separate agreement will control, and no Severance
Benefits will be provided to such Executive Officer.

ARTICLE V - PAYMENT OF SEVERANCE BENEFITS

Any Severance Benefits payable under the Plan shall be paid as
specified in this Article V of the Plan or in accordance with such other
uniform nondiscriminatory rules as the Administrator, in its exclusive
discretion, deems appropriate.

5.1 Severance Benefits. Severance Benefits, if any, under the
Plan, will be paid to an Eligible Employee on or before the next regularly
scheduled payroll date after the Termination Date of the Eligible Employee.
Severance Benefits shall be paid in a single lump sum cash payment.

5.2 Deductions From Severance Benefits. The following items will
be deducted from any Severance Benefits payable under this Plan:

6
<PAGE> 10
(a) All required federal, state and local taxes;

(b) To the extent permitted by law, any amounts owed to
the Company by an Eligible Employee;

(c) Any compensation or other payments that the Eligible
Employee receives (or may be entitled to receive) on
termination of employment pursuant to any rights or
entitlement that the Eligible Employee possesses or
asserts pursuant to a written or oral employment
agreement with the Company or any successor thereto,
regardless of whether the term of such agreement is
expired or unexpired as of the Eligible Employee's
Termination Date; and

(d) Any compensation or other payments that the Eligible
Employee receives (or may be entitled to receive) on
termination of employment pursuant to any rights
under any severance plan of Purchaser.

By acceptance of any Severance Benefits from the Plan the Eligible
Employee shall be deemed to have agreed to adhere to all terms of the Plan.
The Eligible Employee also shall be deemed to agree that the Eligible Employee
will repay any Severance Benefits that the Administrator determines he has
received from the Plan in excess of the amount provided under the Plan.

5.3 Severance Benefits Are Not Compensation for Other Benefits.
Severance Benefits are not considered as covered compensation for benefit plan
purposes. The number of months of Severance Benefits provided to an Eligible
Employee shall not be considered in calculating the Eligible Employee's
entitlement, if any, to vacation, sick leave, bonus, incentive compensation,
retirement or other benefits except as is specifically provided in the
Company's other employee benefit plans. In addition, except as required by
law, all employee benefits cease as of the Eligible Employee's Termination
Date.

5.4 Payment after Death. If an Eligible Employee dies before
Severance Benefits have been paid in full, the remaining Severance Benefits
will be paid to the Eligible Employee's estate. The Plan shall be discharged
fully and completely to the extent of any payment made to any such estate.

5.5 Release. The Administrator, in his sole and absolute
discretion, may require an Eligible Employee to sign a release, in a form
prescribed by the Company, that releases all claims that the Eligible Employee
may have, whether known or unknown, arising out of or related to his employment
with the Company or the Purchaser, including claims arising out of Title VII of
the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, the Equal Pay Act, and any and all
State and Federal statutes concerning employment. If an Eligible Employee does
not execute such a release if requested, the Administrator shall not pay any
Severance Benefits to the otherwise Eligible Employee, and the Administrator
shall withhold any Severance Benefits until such release has been executed.

7
<PAGE> 11
ARTICLE VI - CLAIMS AND APPEAL PROCEDURES

In the event an employee fails to receive a Severance Benefit to which
he believes he is entitled, he must make a claim for Severance Benefits in
writing to the Administrator describing the claim and asking the Administrator
to rule on the claim's validity under the terms of the Plan. With respect to
any claim for the requested Severance Benefits, the Administrator will then
issue a decision on whether the claim is denied or granted within thirty (30)
days after receiving the claim. If the claim is denied in whole or in part, the
decision in writing by the Administrator must include the specific reasons for
the denial and reference to the Plan provisions on which the denial is based.
The decision must also include a description of any additional information
which the employee needs to submit in order to refile the claim, along with an
explanation of why such additional information is necessary and how the
procedure for reviewing claims works. If the notice of denial is not furnished
in accordance with the above procedure, the claim shall be deemed denied and
the employee is permitted to proceed with the review procedure.

If his claim is denied in whole or in part, an employee may appeal in
writing a denial of the claim, in part or in whole, and request a review by the
Administrator. The appeal must be submitted within sixty (60) days after
notice of the denial of the claim. The employee may request in writing to
review copies of pertinent Plan documents in connection with the appeal. The
Administrator will review the appeal and notify the employee of the final
decision within thirty (30) days after receiving the request for review. The
notice of the final decision must include the specific reasons for the decision
and specific references to the pertinent Plan provisions on which the
Administrator's decision is based. If the employee is dissatisfied with the
Administrator's review decision, the employee has the right to file suit.

A deceased employee's beneficiary should follow the same claims
procedure in the event of the employee's death.

ARTICLE VII - PLAN ADMINISTRATION

7.1 In General. The general administration of the Plan and the
duty to carry out its provisions shall be vested in the Administrator, which
shall be the named fiduciary of the Plan for purposes of ERISA. The Plan and
Severance Benefits under the Plan shall be administered by the Administrator
appointed from time to time by the Company. The Administrator may, in its
discretion, secure the services of other parties, including agents and/or
employees to carry out the day-to-day functions necessary to an efficient
operation of the Plan. The Administrator shall have the exclusive right to
interpret the terms of the Plan, to determine eligibility for coverage and
benefits, and to make such other determinations and to exercise such other
powers and responsibilities as shall be provided for in the Plan or shall be
necessary or helpful with respect thereto and its good faith interpretation
shall be binding and conclusive upon all persons.

7.2 Reimbursement and Compensation. The Administrator shall
receive no compensation for its services as Administrator, but it shall be
entitled to reimbursement for all sums reasonably and necessarily expended by
it in the performance of such duties.

8
<PAGE> 12
7.3 Rulemaking Powers. The Administrator shall have the power to
make reasonable rules and regulations required in the administration of the
Plan, to make all determinations necessary for the Plan's administration,
except those determinations which the Plan requires others to make, and to
construe and interpret the Plan wherever necessary to carry out its intent and
purpose and to facilitate its administration. The Administrator and the
Company, with respect to all duties assigned to such entities hereunder, shall
have the exclusive right to interpret the terms of the Plan and determine
eligibility for coverage and benefits under the Plan and its good faith
interpretation shall be binding and conclusive on all persons. In the exercise
of such discretionary powers, the Administrator shall treat all
similarly-situated Eligible Employees uniformly and equitably under the Plan.
No action may be brought for benefits under the Plan until a claim has been
submitted and the appeal rights under the Plan have been exhausted.

ARTICLE VIII - AMENDMENT AND TERMINATION

This Plan will terminate automatically, and without any action by the
Board of Directors of the Company or the Administrator, if there has been no
Change of Control of the Company within five (5) years after the effective date
of this Plan. After such five (5) year period, the Company, acting through its
Chief Executive Officer or such other person or committee appointed by its
Board of Directors, reserves the right to amend or terminate the Plan at any
time, without the consent of any person or entity. Such amendment or
termination shall not affect benefits to which an Eligible Employee who has
already been terminated may be entitled to under the Plan prior to such
amendments or termination.

In the event of a Change of Control, this Plan may not be amended for
a period of eighteen (18) months after the Change of Control. After such
eighteen (18) month period, the Company, acting through its Chief Executive
Officer or such other person or committee appointed by its Board of Directors,
reserves the right to amend or terminate the Plan at any time, without the
consent of any person or entity. Such amendment or termination shall not
affect benefits to which an Eligible Employee who has already been terminated
may be entitled to under the Plan prior to such amendments or termination.

ARTICLE IX - MISCELLANEOUS INFORMATION

9.1 Limitation of Rights. Neither the establishment of the Plan
nor any amendment thereof, nor the payment of any benefits, will be construed
as giving to any Eligible Employee, or other person any legal or equitable
right against the Company or any person acting on behalf of the Company, except
as expressly provided herein. Likewise, nothing appearing in or done pursuant
to the Plan shall be held or construed to create a contract of employment with
any Eligible Employee, to obligate the Company to continue the service of the
Eligible Employee or to affect or modify his or her terms of employment in any
way.

9.2 Governing Law. The provisions of the Plan shall be construed,
enforced and administered according to ERISA and any otherwise applicable
Federal law and, to the extent not preempted by federal law, the laws of the
State of Texas.

9
<PAGE> 13
9.3 Severability. If any provision of the Plan is held invalid or
unenforceable, its validity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included herein.

9.4 Captions. The captions contained herein are inserted only as
a matter of convenience and for reference and in no way define, limit, enlarge
or describe the scope or intent of the Plan, nor in any way shall affect the
Plan or the construction of any provision thereof.

9.5 Gender and Numbers. A pronoun or adjective in the masculine
or feminine gender include both genders, and the singular includes the plural,
and vice versa, unless the context clearly indicates otherwise.

9.6 Spendthrift Provision. No benefit, right or interest of any
person hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, seizure, attachment or legal,
equitable or other process or be liable for, or subject to, the debts,
liabilities or other obligations of such persons, except as otherwise required
by law.

9.7 Mistaken Payments. Any amounts paid to an Eligible Employee
or other person in excess of the amount to which he is entitled hereunder shall
be repaid by the Eligible Employee or other person promptly following receipt
by the Eligible Employee or other person of a notice of such excess payments.
In the event such repayment is not made by the Eligible Employee or other
person, the Administrator shall have right to offset such repayment amounts
against any amounts owed to the Eligible Employee or other person by the
Company, unless otherwise prohibited by law, until the entire amount of such
excess payments are recovered by the Administrator.

9.8 Information Requested. Eligible Employee or other persons
shall provide the Company, the Administrator, and their authorized
representatives with such information and evidence, and shall sign such
documents, as may reasonably be requested from time to time for the purpose of
administration of the Plan.

DAWSON PRODUCTION SERVICES, INC.

By:
--------------------------------
Its:
---------------------------------

10
<PAGE> 14
Attachment A to the Dawson Production Services, Inc.
Employee Severance Pay Plan

DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
CLAIM FORM

Name of Plan: Dawson Production Services, Inc. Employee Severance Pay Plan

THIS CLAIM FORM MUST BE RETURNED
WITHIN THIRTY (30) WORKING DAYS OF YOUR DATE OF TERMINATION

As explained in the Dawson Production Services, Inc., Employee
Severance Pay Plan and Summary Plan Description, you may make a claim for
Severance Benefits by completing and signing this form. If you apply for
Severance Benefits and the Administrator determines that you otherwise satisfy
the requirements to qualify for those benefits and approves your application,
you will receive Severance Benefits pursuant to the terms of the Dawson
Production Services, Inc. Severance Pay Plan. To make a claim for Severance
Benefits, return the completed form to the Administrator, c/o Human Resources
Department of Dawson Production Services, Inc.,112 East Pecan Street, Suite
1000, San Antonio, Texas 78205 within thirty (30) days of your Termination
Date.

I have read the Dawson Production Services, Inc. Employee Severance
Pay Plan Summary Plan Description, and I understand my rights under it. I
understand that my claim for Severance Benefits under the Plan will be reviewed
by the Administrator and that approval of my application for Severance Benefits
will be granted or denied based on the terms of the Dawson Production Services,
Inc. Employee Severance Pay Plan.

Your signature:
--------------------------------
Your Printed Name:
--------------------------------
Date:
--------------------------------
Address:
--------------------------------
Telephone:
--------------------------------

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

Received by Administrator:___________________________Date:__________Time:______

Severance Claim, check only ONE:_____________Approved _____________Disapproved

By:
----------------------------------------------
Manager Human Resources

Severance Date:
-----------------------------------

Reason for Disapproval (if applicable):
--------------------------------------

<PAGE> 1
CONSULTING AGREEMENT
TERM SHEET

Parties: Key Energy Group, Inc. ("Key"), Midland
Acquisition Corp. ("Midland") and Michael E.
Little

Consulting Services: In connection with the Agreement and Plan of
Merger by and among Key, Midland and Dawson
Production Services, Inc., Mr. Little will provide
consulting services to Key and Midland (and the
Surviving Corporation in the Merger) to the extent
reasonably requested with proper Notice
___________ less than 40 hours per month.

Term: 3 years

Consulting Fees: $250,000 per year paid on a monthly basis (net of
withholding taxes) and normal accruing expenses in
the normal course of business.

Non-Compete Provision: During the term of this Agreement, Mr. Little
shall not, in the Continental United States,
directly or indirectly engage in the following
businesses: (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/or (iii) production services,
including well test analysis, pipe testing,
slickline wireline services and fishing and rental
tool services. Additionally, Mr. Little shall not
own an interest in any company that is not
publicly traded and engages in the foregoing
businesses except that he may own or invest in a
Company that engages in, and he may himself engage
in, the fishing and rental tools services business
operating only in that portion of the state of
Texas bounded by Interstate Highway 10 on the
south and Interstate 37 on the west.

Definitive Agreement: The definitive agreement shall contain usual and
customary terms, including terms relating to the
confidentiality of information and the
non-solicitation of employees.

<PAGE> 1
CONSULTING AGREEMENT
TERM SHEET

Parties: Key Energy Group, Inc. ("Key"), Midland Acquisition
Corp. ("Midland") and James J. Byerlotzer

Consulting Services: In connection with the Agreement and Plan of Merger by
and among Key, Midland and Dawson Production Services,
Inc., Mr. Byerlotzer will provide consulting services
to Key and Midland (and the Surviving Corporation in
the Merger) to the extent reasonably requested.

Term: 3 years

Consulting Fees: $100,000 per year paid on a monthly basis (net of
withholding taxes).

Non-Compete Provision: During the term of this Agreement, Mr. Byerlotzer shall
not, in the Continental United States, directly or
indirectly engage in the following businesses: (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/or (iii)
production services, including well test analysis, pipe
testing, slickline wireline services and fishing and
rental tool services.

Definitive Agreement: The definitive agreement shall contain usual and
customary terms, including terms relating to the
confidentiality of information and the non-solicitation
of employees.

Acknowledged and Agreed
to the 11th day of August, 1998: KEY ENERGY GROUP, INC.

By: /s/ Francis John
--------------------------------
Name:
-----------------
Title:
-----------------

<PAGE> 2

MIDLAND ACQUISITION CORP.

By: /s/ Stephen E. McGregor
-------------------------------
Name:
-----------------
Title:
-----------------

/s/ James J. Byerlotzer
--------------------------------
James J. Byerlotzer

<PAGE> 1
CONSULTING AGREEMENT
TERM SHEET

Parties: Key Energy Group, Inc. ("Key"), Midland Acquisition
Corp. ("Midland") and Joseph B. Eustace

Consulting Services: In connection with the Agreement and Plan of Merger
by and among Key, Midland and Dawson Production
Services, Inc., Mr. Eustace will provide consulting
services to Key and Midland (and the Surviving
Corporation in the Merger) to the extent reasonably
requested.

Term: 3 years

Consulting Fees: $75,000 per year paid on a monthly basis (net of
withholding taxes).

Non-Compete Provision: During the term of this Agreement, Mr. Eustace shall
not, in the Continental United States, directly or
indirectly engage in the following businesses: (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/or (iii) production services, including well test
analysis, pipe testing, slickline wireline services
and fishing and rental tool services.

Definitive Agreement: The definitive agreement shall contain usual and
customary terms, including terms relating to the
confidentiality of information and the
non-solicitation of employees.

Acknowledged and Agreed
to the 11th day of August, 1998: KEY ENERGY GROUP, INC.

By: /s/ Francis John
-------------------------------------
Name:
------------------------
Title:
----------------------

<PAGE> 2
MIDLAND ACQUISITION CORP.

By: /s/Stephen E. McGregor
-------------------------------------
Name:
----------------------
Title:
----------------------

/s/ Joseph B. Eustace
-------------------------------------
Joseph B. Eustace