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                                                                    EXHIBIT 10.1

                                  $150,000,000

                                 GREY WOLF, INC.

               3.75% Contingent Convertible Senior Notes Due 2023

                               PURCHASE AGREEMENT

                                                                     May 1, 2003

Deutsche Bank Securities Inc.
31 West 52nd Street
New York, New York 10019

Ladies and Gentlemen:

         Grey Wolf, Inc., a Texas corporation (the "Company"), proposes, subject
to the terms and conditions contained herein, to issue and sell to you (the
"Initial Purchaser") $150,000,000 aggregate principal amount of its 3.75%
Contingent Convertible Senior Notes Due 2023 (the "Firm Securities"). The
Company also proposes to issue and sell to the Initial Purchaser at the Initial
Purchaser's option an additional $37,500,000 aggregate principal amount of its
3.75% Contingent Convertible Senior Notes Due 2023 (the "Option Securities" and,
together with the Firm Securities, the "Securities") as set forth below. The
Securities will initially be guaranteed (the "Guarantees") by each of the
subsidiaries of the Company listed on Schedule A (each, a "Guarantor" and
collectively the "Guarantors").

         The Securities and the Guarantees are to be issued pursuant to the
terms of an Indenture (the "Indenture") among the Company, the Guarantors and
JPMorgan Chase Bank, a New York banking corporation, as trustee (the "Trustee").
The Securities are convertible into shares of common stock, $0.10 par value per
share (the "Common Stock"), of the Company together with the rights (the
"Rights") evidenced by such Common Stock to the extent provided in the Rights
Agreement (the "Rights Agreement"), dated as of September 21, 1998 between the
Company and American Stock Transfer & Trust Company, as Rights Agent. The Common
Stock and accompanying Rights into which the Securities may be convertible are
referred to herein as the "Underlying Securities."

         The sale of the Securities and the Guarantees to the Initial Purchaser
will be made without registration under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on exemptions from the registration
requirements of the Securities Act. The Initial Purchaser has advised the
Company that it will offer and sell the Securities and Guarantees purchased by
it hereunder (the "Offering") in accordance with Section 3 hereof as soon as it
deems advisable.

         In connection with the Offering, the Company and the Guarantors will
prepare an offering memorandum (including Appendix A thereto and the information
incorporated by

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reference therein, the "Offering Memorandum"). The Offering Memorandum sets
forth certain information regarding the Company, the Guarantors, the Securities,
the Guarantees and the Underlying Securities. Each of the Company and the
Guarantors hereby confirms that it has authorized the use of the Offering
Memorandum, and any amendment or supplement thereto, in connection with the
Offering by the Initial Purchaser. Unless stated to the contrary, all references
herein to the Offering Memorandum are to the Offering Memorandum and the
information incorporated by reference therein but are not meant to include any
amendment or supplement, or any information incorporated by reference therein
subsequent to the date thereof, and any references herein to the terms "amend,"
"amendment" or "supplement" with respect to the Offering Memorandum shall be
deemed to refer to and include any information filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), subsequent to the date of
the Offering Memorandum which is incorporated by reference therein.

         For purposes of this Agreement, "the Company's knowledge" shall mean
the actual knowledge of any of the executive officers (as defined in Rule 405
under the Securities Act) of the Company and the Guarantors.

         In connection with the Offering, the Company and the Guarantors also
propose to enter into a Registration Rights Agreement, to be dated as of the
Closing Date (as defined below), among the Company, the Guarantors and the
Initial Purchaser (the "Registration Rights Agreement"), for the benefit of the
Initial Purchaser and its direct and indirect transferees.

         In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:

         1.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
GUARANTORS.

                  (a)      Each of the Company and the Guarantors represents and
         warrants to the Initial Purchaser as follows:

                           (i)      the Company has been duly organized and is
                  validly existing as a corporation in good standing under the
                  laws of the State of Texas, with the corporate power and
                  authority to own or lease its properties and conduct its
                  business as described in the Offering Memorandum except where
                  the failure to have such power or to be so authorized would
                  not have a material adverse effect on the Company and its
                  subsidiaries, taken as a whole; each of the Company's
                  subsidiaries has been duly organized and is validly existing
                  as a corporation or other entity in good standing under the
                  laws of the jurisdiction of its incorporation or formation,
                  with the corporate, partnership or company power and authority
                  to own or lease its properties and conduct its business as
                  described in the Offering Memorandum, except where the failure
                  to have such power or to be so authorized would not have a
                  material adverse effect on the Company and its subsidiaries,
                  taken as a whole; the Company and each of its subsidiaries are
                  duly qualified to transact business in all jurisdictions in
                  which the conduct of their business requires such
                  qualification and in which the failure to be qualified would
                  have a material adverse effect upon the Company and its
                  subsidiaries,

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                  taken as a whole; the outstanding equity interests of each of
                  the Company's subsidiaries have been duly authorized and
                  validly issued, are fully paid and non-assessable and are
                  owned by the Company or one of the Company's subsidiaries free
                  and clear of all liens, encumbrances and equities and claims
                  other than those disclosed in the Offering Memorandum; and no
                  options, warrants or other rights to purchase, agreements or
                  other obligations to issue or other rights to convert any
                  obligations into equity interests of the Company's
                  subsidiaries are outstanding;

                           (ii)     the issuance and sale of the Securities have
                  been duly and validly authorized by all necessary corporate
                  action on the part of the Company and, when executed,
                  authenticated and delivered to and paid for by the Initial
                  Purchaser in accordance with the terms of this Agreement and
                  the Indenture, the Securities will be valid and binding
                  obligations of the Company, enforceable in accordance with
                  their terms and will be entitled to the benefits of the
                  Indenture, subject to the effects of applicable bankruptcy,
                  insolvency and similar laws affecting creditors' rights
                  generally and equitable principles of general applicability;

                           (iii)    the issuance and sale of the Guarantees have
                  been duly and validly authorized by all necessary corporate or
                  other entity action on the part of each Guarantor and, when
                  executed, authenticated and delivered to and paid for by the
                  Initial Purchaser in accordance with the terms of this
                  Agreement and the Indenture, the Guarantees will be valid and
                  binding obligations of each Guarantor, enforceable in
                  accordance with their terms and will be entitled to the
                  benefits of the Indenture, subject to the effects of
                  applicable bankruptcy, insolvency and similar laws affecting
                  creditors' rights generally and equitable principles of
                  general applicability;

                           (iv)     the execution and delivery of, and the
                  performance by the Company and each Guarantor of its
                  obligations under, the Indenture have been duly and validly
                  authorized by all necessary corporate or other action on the
                  part of the Company and each Guarantor and, when duly executed
                  and delivered by the Company, the Guarantors and the Trustee,
                  the Indenture will be a valid and binding agreement of the
                  Company and each Guarantor, enforceable against the Company
                  and each Guarantor in accordance with its terms, subject to
                  the effects of applicable bankruptcy, insolvency and similar
                  laws affecting creditors' rights generally and equitable
                  principles of general applicability;

                           (v)      the outstanding shares of Common Stock have
                  been duly authorized and validly issued and are fully paid and
                  non-assessable; the shares of Common Stock to be issued upon
                  conversion of the Securities have been duly authorized and
                  reserved, and when issued upon conversion of the Securities
                  will be validly issued, fully paid and non-assessable; no
                  preemptive rights of stockholders exist with respect to any of
                  the shares of Common Stock to be issued upon conversion of the
                  Securities; the Rights have been duly authorized

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                  and, when and if issued upon conversion in accordance with the
                  terms of the Indenture and the Rights Agreement, will have
                  been validly issued;

                           (vi)     the information set forth under the caption
                  "Capitalization" in the Offering Memorandum is true and
                  correct; all of the shares of Common Stock and the Rights
                  conform to the description thereof contained in the Offering
                  Memorandum; the form of certificate for the shares of Common
                  Stock conforms to the requirements of the Texas Business
                  Corporation Act;

                           (vii)    except as described in or contemplated by
                  the Offering Memorandum, there are no outstanding securities
                  of the Company convertible or exchangeable into or evidencing
                  the right to purchase or subscribe for any shares of capital
                  stock of the Company and there are no outstanding or
                  authorized options, warrants or rights of any character
                  obligating the Company to issue any shares of its capital
                  stock or any securities convertible or exchangeable into or
                  evidencing the right to purchase or subscribe for any shares
                  of such stock;

                           (viii)   all of the Underlying Securities issuable
                  upon conversion of the Securities will be duly accepted for
                  listing on The American Stock Exchange, subject to official
                  notice of issuance in timely compliance with the requirements
                  of The American Stock Exchange but in no event later than the
                  Closing Date;

                           (ix)     each document filed, or to be filed prior to
                  the closing of the Offering, by the Company pursuant to the
                  Exchange Act and incorporated, or to be incorporated, by
                  reference in the Offering Memorandum (or any amendment or
                  supplement thereto) at the time filed with the Securities and
                  Exchange Commission (the "Commission") conformed, or will
                  conform, in all material respects with the Exchange Act and
                  the applicable rules and regulations thereunder; the Offering
                  Memorandum as of the date thereof did not, and any amendment
                  or supplement thereto do not contain, and will not contain,
                  any untrue statement of a material fact and do not omit, and
                  will not omit, any material fact necessary in order to make
                  the statements made, in the light of the circumstances under
                  which they were made, not misleading; provided, however, that
                  the Company makes no representation or warranty as to
                  statements or omissions made in the Offering Memorandum or any
                  amendment or supplement thereto in reliance upon and in
                  conformity with written information furnished to the Company
                  by or on behalf of the Initial Purchaser specifically for use
                  therein;

                           (x)      the consolidated financial statements of the
                  Company and its consolidated subsidiaries, together with the
                  related notes and schedules, incorporated by reference in the
                  Offering Memorandum, present fairly in all material respects
                  the financial position and the results of operations and cash
                  flows of the Company and its consolidated subsidiaries, at the
                  indicated dates and for the indicated periods; such financial
                  statements and related schedules have been prepared in
                  accordance with generally accepted principles of accounting,
                  consistently applied throughout the periods involved, except
                  as disclosed therein, and all adjustments necessary for a fair
                  presentation of results for such periods

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                  have been made; the summary financial and statistical data of
                  the Company and its subsidiaries included or incorporated by
                  reference in the Offering Memorandum together with all other
                  information included or incorporated by reference in the
                  Offering Memorandum present fairly in all material respects
                  the information shown therein and such data has been compiled
                  on a basis consistent with the financial statements presented
                  therein and the books and records of the Company;

                           (xi)     KPMG LLP, who has certified the financial
                  statements incorporated by reference in the Offering
                  Memorandum, is an independent public accountant as required by
                  the Securities Act and the applicable rules and regulations
                  thereunder;

                           (xii)    except as set forth in the Offering
                  Memorandum, there is no action, suit, claim or proceeding
                  pending or, to the Company's knowledge, threatened against the
                  Company or any of its subsidiaries before any court or
                  administrative agency or otherwise which, if determined
                  adversely to the Company or any of its subsidiaries, could
                  reasonably be expected to result in any material adverse
                  change in the earnings, business, management, properties,
                  assets, rights, operations, condition (financial or otherwise)
                  or prospects of the Company and its subsidiaries, taken as a
                  whole, or prevent the consummation of the transactions
                  contemplated hereby or in the Indenture, the Securities, the
                  Guarantees or the Registration Rights Agreement;

                           (xiii)   except as set forth in the Offering
                  Memorandum, each of the Company and its subsidiaries have good
                  and indefeasible title to all of the properties and assets
                  reflected in the consolidated financial statements hereinabove
                  described or described in the Offering Memorandum, subject to
                  no lien, mortgage, pledge, charge or encumbrance of any kind
                  except those reflected in such financial statements or
                  described in the Offering Memorandum or which are not material
                  in amount to the Company and its subsidiaries, taken as a
                  whole, and the Company and its subsidiaries occupy their
                  leased properties under valid and binding leases;

                           (xiv)    the Company and its subsidiaries have filed
                  all Federal, State, local and foreign tax returns which have
                  been required to be filed (or have valid extensions for
                  filing) and have paid all taxes indicated by such returns and
                  all assessments received by any of them to the extent that
                  such taxes have become due other than taxes and assessments
                  being contested in good faith, and except to the extent that
                  any such taxes, or the failure so to file or pay, would not be
                  material to the Company and its subsidiaries, taken as a
                  whole; all tax liabilities have been adequately provided for
                  in the financial statements of the Company, and the Company
                  does not know of any actual or proposed additional material
                  tax assessments not recorded, or reserved against, in the
                  financial statements of the Company;

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                           (xv)     since the respective dates as of which
                  information is given in the Offering Memorandum, there has not
                  been any material adverse change or any development involving
                  a prospective material adverse change in or affecting the
                  earnings, business, management, properties, assets, rights,
                  operations, condition (financial or otherwise), or prospects
                  of the Company and its subsidiaries, taken as a whole, whether
                  or not occurring in the ordinary course of business, and there
                  has not been any material transaction entered into or any
                  material transaction that is probable of being entered into by
                  the Company or its subsidiaries, other than transactions in
                  the ordinary course of business and changes and transactions
                  described in the Offering Memorandum; the Company and its
                  consolidated subsidiaries have no material contingent
                  obligations that are not disclosed in the Company's financial
                  statements which are incorporated by reference in the Offering
                  Memorandum;

                           (xvi)    neither the Company nor any Guarantor is, or
                  with the giving of notice or lapse of time or both will be, in
                  violation of or in default under its organizational documents;
                  neither the Company nor any of its subsidiaries is, or with
                  the giving of notice or lapse of time or both, will be, in
                  violation of or in default under any agreement, lease,
                  contract, indenture or other instrument or obligation to which
                  it is a party or by which it, or any of its properties, is
                  bound, which violation or default would have a material
                  adverse effect on the earnings, business, management,
                  properties, assets, rights, operations, condition (financial
                  or otherwise) or prospects of the Company and its
                  subsidiaries, taken as a whole; the execution and delivery of
                  this Agreement, the Indenture, the Securities, the Guarantees
                  and the Registration Rights Agreement, the issuance and sale
                  of the Securities to the Initial Purchaser by the Company
                  pursuant to this Agreement, the issuance and sale of the
                  Guarantees to the Initial Purchaser by the Guarantors pursuant
                  to this Agreement, the issuance by the Company of the
                  Underlying Securities issuable upon conversion of the
                  Securities and the consummation of the transactions herein and
                  therein contemplated and the fulfillment of the terms hereof
                  and thereof (1) will not conflict with or result in a breach
                  of any of the terms or provisions of, or constitute a default
                  under, any indenture, mortgage, deed of trust or other
                  agreement or instrument to which the Company or any of its
                  subsidiaries is a party or by which the Company or any of its
                  subsidiaries or any of their respective properties is bound,
                  other than any such conflict, breach or default which will not
                  have a material adverse effect on the Company and its
                  subsidiaries, taken as a whole, (2) will not result in any
                  violation of the organizational documents of the Company or
                  any Guarantor and (3) will not result in the violation of any
                  law, order, rule or regulation, judgment, order, writ or
                  decree applicable to the Company or any Guarantor of any court
                  or of any government, regulatory body or administrative agency
                  or other governmental body having jurisdiction;

                           (xvii)   the execution and delivery of, and the
                  performance by the Company and each Guarantor of its
                  obligations under, this Agreement have been duly and validly
                  authorized by all necessary corporate or other action on the
                  part

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                  of the Company and each Guarantor, and this Agreement has been
                  duly executed and delivered by the Company and each Guarantor;

                           (xviii)  the execution and delivery of, and the
                  performance by the Company and each Guarantor of its
                  obligations under, the Registration Rights Agreement have been
                  duly and validly authorized by all necessary corporate or
                  other action on the part of the Company and each Guarantor
                  and, when duly executed and delivered by the Company, the
                  Guarantors and the other parties thereto, the Registration
                  Rights Agreement will be a valid and binding agreement of the
                  Company and the Guarantors, enforceable against the Company
                  and each Guarantor in accordance with its terms, subject to
                  applicable bankruptcy, insolvency or similar laws affecting
                  creditors' rights generally and general principles of equity
                  and except as rights to indemnification and contribution set
                  forth therein may be limited under applicable law;

                           (xix)    each approval, consent, order,
                  authorization, designation, declaration or filing by or with
                  any regulatory, administrative or other governmental body
                  necessary in connection with the execution and delivery by the
                  Company and the Guarantors of this Agreement, the Indenture,
                  the Securities, the Guarantees and the Registration Rights
                  Agreement, as applicable, the issuance and sale of the
                  Securities to the Initial Purchaser by the Company pursuant to
                  this Agreement, the issuance and sale of the Guarantees to the
                  Initial Purchaser by the Guarantors pursuant to this
                  Agreement, the issuance of the Underlying Securities issuable
                  upon conversion of the Securities, and the consummation of the
                  transactions herein and therein contemplated has been obtained
                  or made and is in full force and effect, except for (A) the
                  effectiveness of the Shelf Registration Statement (as such
                  term is defined in the Registration Rights Agreement) under
                  the Securities Act, the qualification of the Indenture under
                  the Trust Indenture Act of 1939, as amended (the "Trust
                  Indenture Act") and compliance with state securities or Blue
                  Sky laws, in each case as contemplated by the Registration
                  Rights Agreement, (B) such additional steps as may be
                  necessary to qualify the Securities for public offering by the
                  Initial Purchaser under state securities or Blue Sky laws and
                  (C) such approvals, consents, orders, authorizations,
                  designations, declarations or filings to be obtained or made
                  prior to the Closing Date;

                           (xx)     each of the Company and its subsidiaries
                  hold all material licenses, certificates and permits from
                  governmental authorities which are necessary to the conduct of
                  the business of the Company and its subsidiaries, taken as a
                  whole; except as set forth in the Offering Memorandum, each of
                  the Company and its subsidiaries own or possess the right to
                  use all material patents, patent rights, trademarks, trade
                  names, service marks, service names, copyrights, license
                  rights, know-how (including trade secrets and other unpatented
                  and unpatentable proprietary or confidential information,
                  systems or procedures) and other intellectual property rights
                  ("Intellectual Property") necessary to carry on the business
                  of the Company and its subsidiaries, taken as a whole, in all
                  material respects; to the Company's knowledge, neither the
                  Company nor any of its

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                  subsidiaries has infringed any Intellectual Property of any
                  other person or entity; except as set forth in the Offering
                  Memorandum, neither the Company nor any of its subsidiaries is
                  a party to or bound by any options, licenses or agreements
                  with respect to the Intellectual Property of any other person
                  or entity that are material to the Company and its
                  subsidiaries, taken as a whole; to the Company's knowledge,
                  none of the technology employed by the Company or its
                  subsidiaries has been obtained or is being used by the Company
                  or its subsidiaries in violation of any contractual obligation
                  binding on the Company or any of its subsidiaries or any of
                  its officers, directors or employees or otherwise in violation
                  of the rights of any persons; to the Company's knowledge,
                  neither the Company nor any of its subsidiaries has received
                  any written or oral communications alleging that the Company
                  or any of its subsidiaries has violated, infringed or
                  conflicted with, or, by conducting its business as set forth
                  in the Offering Memorandum, would violate, infringe or
                  conflict with, any of the Intellectual Property of any other
                  person or entity, except any such violation, infringement or
                  conflict that could not reasonably be expected to have a
                  material adverse effect on the Company and its subsidiaries,
                  taken as a whole; the Company knows of no infringement by
                  others of Intellectual Property owned by or licensed to the
                  Company or its subsidiaries;

                           (xxi)    neither the Company or any Guarantor is, and
                  after giving effect to the offering and sale of the Securities
                  and the application of the proceeds as described in the
                  Offering Memorandum neither of them will be, required to
                  register as an "investment company" as such term is defined in
                  the Investment Company Act of 1940, as amended (the
                  "Investment Company Act"), and the applicable rules and
                  regulations thereunder;

                           (xxii)   the Company and its subsidiaries comply in
                  all material respects with all Environmental Laws (as defined
                  below), except to the extent that failure to comply with such
                  Environmental Laws would not, individually or in the
                  aggregate, have a material adverse effect on the Company and
                  its subsidiaries, taken as a whole; neither the Company, nor
                  any of its subsidiaries is the subject of any pending or, to
                  the Company's knowledge, threatened federal, state or local
                  investigation evaluating whether any remedial action by the
                  Company or any of its subsidiaries is needed to respond to a
                  release of any Hazardous Materials (as defined below) into the
                  environment, resulting from the Company's or any of its
                  subsidiaries' business operations or ownership or possession
                  of any of their respective properties or assets or is in
                  contravention of any Environmental Law that could reasonably
                  be expected, individually or in the aggregate, to result in
                  any material adverse effect on the Company and its
                  subsidiaries, taken as a whole; neither the Company nor any of
                  its subsidiaries has received any notice or claim known to
                  management of the Company, nor are there pending or, to the
                  Company's knowledge, threatened lawsuits against them, with
                  respect to violations of an Environmental Law or in connection
                  with any release of any Hazardous Material into the
                  environment that could reasonably be expected in the aggregate
                  to result in a material adverse effect on the Company and its
                  subsidiaries, taken as a whole; as used herein, "Environmental
                  Laws" means any

                                      -8-

<PAGE>

                  federal, state or local law or regulation presently applicable
                  to the Company's or any of its subsidiaries' business
                  operations or ownership or possession of any of their
                  properties or assets relating to environmental matters, and
                  "Hazardous Materials" means those substances that are
                  regulated by or form the basis of liability under any
                  Environmental Laws;

                           (xxiii)  except as set forth in the Offering
                  Memorandum, the Company and each of its subsidiaries carry, or
                  are covered by, insurance in such amounts and covering such
                  risks as is adequate for the conduct of their respective
                  businesses and the value of their respective properties and as
                  is customary for companies engaged in similar businesses;

                           (xxiv)   none of the Company, the Guarantors or any
                  affiliate (as defined in Rule 501(b) of Regulation D under the
                  Securities Act, an "Affiliate") of the Company or the
                  Guarantors has directly, or, to the Company's knowledge,
                  through any agent, (A) sold, offered for sale, solicited
                  offers to buy or otherwise negotiated in respect of, any
                  security (as defined in the Securities Act) which is or will
                  be integrated with the sale of the Securities or the
                  Guarantees in a manner that would require the registration
                  under the Securities Act of the Securities or (B) offered,
                  solicited offers to buy or sold the Securities or the
                  Guarantees by any form of general solicitation or general
                  advertising (as those terms are used in Regulation D under the
                  Securities Act) or in any manner involving a public offering
                  within the meaning of Section 4(2) of the Securities Act;

                           (xxv)    the Securities satisfy the eligibility
                  requirements of Rule 144A(d)(3) under the Securities Act;

                           (xxvi)   the Company has timely filed all reports
                  required pursuant to Section 13 or Section 15(d) of the
                  Exchange Act during the preceding twelve months;

                           (xxvii)  the Securities, the Guarantees, the Common
                  Stock, the Rights, the Indenture, and the Registration Rights
                  Agreement each conform in all material respects to the
                  description thereof contained in the Offering Memorandum; and

                           (xxviii) assuming that (A) the representations and
                  warranties of the Initial Purchaser in Section 3 hereof are
                  true and correct and (B) the Initial Purchaser complies with
                  the covenants set forth in Section 3 hereof, the purchase and
                  sale of the Securities and the Guarantees pursuant hereto
                  (including the Initial Purchaser's proposed offering of the
                  Securities and the Guarantees on the terms and in the manner
                  set forth in the Offering Memorandum and Section 3 hereof) is
                  exempt from the registration requirements of the Securities
                  Act and does not require the qualification of an indenture
                  under the Trust Indenture Act.

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         2.       PURCHASE, SALE AND DELIVERY OF THE SECURITIES.

                  (a)      On the basis of the representations, warranties and
         covenants herein contained, and subject to the conditions herein set
         forth, the Company agrees to issue and sell to the Initial Purchaser
         and the Initial Purchaser agrees to purchase from the Company, at a
         purchase price of 97.75% of the aggregate principal amount thereof (the
         "Purchase Price"), plus accrued interest, if any, from May 7, 2003 to
         the Closing Date, the Firm Securities. Each Security will be
         convertible at the option of the holder into shares of Common Stock at
         the conversion price set forth in the Securities (the "Conversion
         Price"), which Conversion Price is subject to adjustment upon the
         occurrence of certain events as provided in the Securities and the
         Indenture. One or more global securities representing the Firm
         Securities shall be registered by the Trustee in the name of the
         nominee of The Depository Trust Company ("DTC"), Cede & Co., credited
         to the accounts of such of its participants as the Initial Purchaser
         shall request, upon notice to the Company at least 48 hours prior to
         the Closing Date, with any transfer taxes payable in connection with
         the transfer of the Securities to the Initial Purchaser duly paid, and
         deposited with the Trustee as custodian for DTC on the Closing Date,
         against payment by or on behalf of the Initial Purchaser to the account
         of the Company of the aggregate Purchase Price therefor by wire
         transfer in immediately available funds. Delivery of and payment for
         the Firm Securities shall be made at the offices of Akin Gump Strauss
         Hauer & Feld LLP, 1900 Pennzoil Place, South Tower, 711 Louisiana
         Street, Houston, Texas 77002, at 9:30 a.m., New York City time, on May
         7, 2003, or at such other place, time or date not later than five
         business days thereafter as the Initial Purchaser and the Company may
         agree upon. Such time and date of delivery against payment are herein
         referred to as the "Closing Date." (As used herein, "business day"
         means a day on which The American Stock Exchange is open for trading
         and on which banks in New York are open for business and are not
         permitted by law or executive order to be closed.)

                  (b)      In addition, on the basis of the representations,
         warranties, and covenants herein contained, and subject to the terms
         and conditions herein set forth, the Company hereby grants an option,
         exercisable in whole or from time to time to the Initial Purchaser to
         purchase the Option Securities at the Purchase Price set forth in
         Section 2(a), plus accrued interest, if any, from May 7, 2003 to the
         Option Closing Date (as defined below). The Option Securities may be
         purchased in whole or in part (on not more than three occasions) (i) on
         the Closing Date or (ii) within 30 days after the Closing Date by the
         Initial Purchaser by delivering prior written notice to the Company
         setting forth the aggregate principal amount of Option Securities as to
         which the Initial Purchaser is exercising the option and the time and
         date for delivery of and payment for such Option Securities. The time
         and date for delivery of and payment for such Option Securities shall
         be determined by the Initial Purchaser but shall not be earlier than
         three nor later than 10 full business days after delivery of notice of
         the Initial Purchaser's election to exercise the option, nor in any
         event prior to the Closing Date or later than 30 days following the
         Closing Date (each such time and date being herein referred to as an
         "Option Closing Date"). If a date of exercise of the option is two or
         more days before the Closing Date, the notice of exercise shall set the
         Closing Date as the Option Closing Date. The Initial Purchaser may
         cancel such option at any time prior to its expiration by

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         giving written notice of such cancellation to the Company. To the
         extent, if any, that the option is exercised, payment for the Option
         Securities shall be made on the relevant Option Closing Date to the
         account of the Company by wire transfer in immediately available funds.

         3.       OFFERING BY THE INITIAL PURCHASER.

                  (a)      The Initial Purchaser represents and warrants to the
         Company and the Guarantors that it is a qualified institutional buyer
         (a "QIB") within the meaning of Rule 144A and an "accredited investor"
         within the meaning of Rule 501(a) under the Securities Act. It is
         understood that the Initial Purchaser will offer and sell the
         Securities in accordance with this Section as soon as it deems it
         advisable to do so. The Securities are to be initially offered at the
         offering price set forth in the Offering Memorandum. The Initial
         Purchaser may from time to time thereafter change the price and other
         selling terms.

                  (b)      The Initial Purchaser understands and acknowledges
         that the Securities, the Guarantees and the Underlying Securities to be
         issued upon conversion of the Securities have not been and will not be
         registered under the Securities Act (except as contemplated by the
         Registration Rights Agreement) and may not be offered or sold, except
         in compliance with the registration requirements of the Securities Act
         or pursuant to an exemption from, or in a transaction not subject to,
         the registration requirements of the Securities Act; accordingly, the
         Initial Purchaser agrees that it will offer and sell the Securities
         only in accordance with Rule 144A under the Securities Act ("Rule
         144A") to persons it reasonably believes to be QIBs.

                  (c)      The Initial Purchaser represents and agrees that
         neither it nor any person acting on its behalf has engaged or will
         engage in any form of general solicitation or general advertising (as
         those terms are used in Regulation D under the Securities Act).

                  (d)      The Initial Purchaser also represents and agrees that
         it has not entered and will not enter into any contractual arrangement
         with any distributor with respect to the distribution or delivery of
         the Securities, except with its affiliates or with the prior written
         consent of the Company.

         4.       COVENANTS OF THE COMPANY AND THE GUARANTORS.

         Each of the Company and the Guarantors covenants with the Initial
Purchaser that:

                  (a)      The Company and the Guarantors will furnish to the
         Initial Purchaser and counsel for the Initial Purchaser, without
         charge, during the period mentioned in paragraph (d) below, as many
         copies of the Offering Memorandum, any documents incorporated by
         reference therein (other than exhibits thereto) and any supplements or
         amendments thereto as it may reasonably request.

                  (b)      The Company and the Guarantors will furnish to the
         Initial Purchaser a copy of each proposed amendment or supplement to
         the Offering Memorandum, and not use any such proposed amendment or
         supplement to which the Initial Purchaser

                                      -11-

<PAGE>

         reasonably objects in writing; after the date hereof and prior to the
         completion of the distribution of the Securities by the Initial
         Purchaser (as determined by the Initial Purchaser), neither the Company
         nor any Guarantor will file any document under the Exchange Act which
         is incorporated by reference in the Offering Memorandum, in each case
         unless the Initial Purchaser previously has been advised of, and
         furnished with a copy within a reasonable period of time prior to, the
         proposed filing, and if such proposed filing contains material
         non-public information, the Initial Purchaser agrees to enter into a
         confidentiality agreement with respect to such information if
         reasonably requested by the Company. The Company and the Guarantors
         will advise the Initial Purchaser of the time when any amendment or
         supplement to the Offering Memorandum has been made or when any
         document filed under the Exchange Act which is incorporated by
         reference in the Offering Memorandum has been filed with the Commission
         and will provide evidence satisfactory to the Initial Purchaser of each
         such amendment, supplement or filing.

                  (c)      The Company and the Guarantors will cooperate with
         the Initial Purchaser in endeavoring to qualify the Securities and
         Guarantees for sale under the securities laws of such jurisdictions as
         the Initial Purchaser may reasonably have designated in writing and
         will make such applications, file such documents, and furnish such
         information as may be reasonably required for that purpose, provided
         that neither the Company nor the Guarantors shall be required to
         qualify as a foreign corporation or other foreign entity or to file a
         general consent to service of process in any jurisdiction (i) where it
         is not now so qualified or required to file such a consent or (ii)
         where it is not now subject to taxation but would become subject to
         taxation as a result of such qualification or filing. The Company and
         the Guarantors will, from time to time, prepare and file such
         statements, reports, and other documents, as are or may be required to
         continue such qualifications in effect for so long a period as the
         Initial Purchaser may reasonably request for distribution of the
         Securities.

                  (d)      If at any time prior to the date on which all of the
         Securities shall have been sold by the Initial Purchaser, any event
         shall occur as a result of which, in the judgment of the Company or in
         the reasonable opinion of the Initial Purchaser, it becomes necessary
         to amend or supplement the Offering Memorandum in order to make the
         statements therein, in the light of the circumstances under which they
         were made, not misleading, or, if it is necessary at any time to amend
         or supplement the Offering Memorandum to comply with applicable law,
         the Company and the Guarantors will promptly prepare an appropriate
         amendment or supplement to the Offering Memorandum so that the Offering
         Memorandum as so amended or supplemented will not contain statements
         that, in the light of the circumstances under which they were made, are
         misleading, or so that the Offering Memorandum will comply with
         applicable law.

                  (e)      No offering, sale, short sale or other disposition of
         any shares of Common Stock or other securities convertible into or
         exchangeable or exercisable for shares of Common Stock or derivative of
         Common Stock (or agreement for such) will be made for a period of 60
         days after the date of the Offering Memorandum, directly or indirectly,
         by the Company otherwise than hereunder or with the prior written
         consent

                                      -12-

<PAGE>

         of the Initial Purchaser. The foregoing sentence shall not apply to the
         issuance by the Company of any shares of Common Stock upon (A) the
         exercise of outstanding options or warrants or options issued pursuant
         to the Company's existing or former stock option plans, or the
         Company's proposed incentive plan, described in the Offering
         Memorandum, (B) the conversion of the Securities, or (C) the entering
         into of matching transactions pursuant to the Company's 401(k) plan.

                  (f)      The Company shall have caused each executive officer
         and director of the Company to furnish to the Initial Purchaser, dated
         the date of this agreement, a letter or letters, in form and substance
         satisfactory to the Initial Purchaser, pursuant to which each such
         person shall agree not to offer, sell, sell short or otherwise dispose
         of any shares of Common Stock or other capital stock of the Company, or
         any other securities convertible, exchangeable or exercisable for
         Common Stock or derivative of Common Stock owned by such person or
         request the registration for the offer or sale of any of the foregoing
         (or as to which such person has the right to direct the disposition of)
         for a period of 60 days after the date of the Offering Memorandum,
         directly or indirectly, except with the prior written consent of the
         Initial Purchaser ("Lockup Agreements").

                  (g)      Neither the Company nor any Guarantor will, nor will
         it permit any of its Affiliates (as defined in Rule 501(b) under the
         Securities Act) to, during the two-year period following the closing of
         the Offering, resell any Securities that have been acquired by any of
         them.

                  (h)      Except as contemplated by the Registration Rights
         Agreement, none of the Company, the Guarantors, any of their respective
         Affiliates, or any authorized person acting on its or their behalf
         will, directly or indirectly, make offers or sales of any security, or
         solicit offers to buy any security, under circumstances that would
         require the registration of the Securities, the Guarantees or the
         Underlying Securities issuable upon conversion of the Securities under
         the Securities Act.

                  (i)      None of the Company, the Guarantors, any of their
         respective Affiliates, or any person acting on its or their behalf will
         engage in any form of general solicitation or general advertising (as
         those terms are used in Rule 502(c) under the Securities Act) in
         connection with any offer or sale of the Securities or the Guarantees
         in the United States.

                  (j)      So long as any of the Securities, the Guarantees or
         the Underlying Securities issuable upon conversion of the Securities
         are "restricted securities" within the meaning of Rule 144(a)(3) under
         the Securities Act, the Company and the Guarantors will, during any
         period in which it is not subject to and in compliance with Section 13
         or 15(d) of the Exchange Act, provide to each holder of such restricted
         securities and to each prospective purchaser (as designated by such
         holder) of such restricted securities, upon the request of such holder
         or prospective purchaser, any information required to be provided by
         Rule 144A(d)(4) under the Securities Act. This covenant is intended to
         be for the benefit of the holders, and the prospective purchasers
         designated by such holders, from time to time of such restricted
         securities.

                                      -13-

<PAGE>

                  (k)      The Company will cooperate with the Initial Purchaser
         and use all reasonable efforts to (i) permit the Securities to be
         eligible for clearance and settlement through the facilities of DTC and
         such other clearance and settlement systems that the Initial Purchaser
         may designate and (ii) arrange to have the Securities be designated as
         PORTAL-eligible securities in accordance with the rules and regulations
         of the NASD relating to the PORTAL Market.

                  (l)      The Company will use all reasonable efforts to cause
         the Underlying Securities issuable upon conversion of the Securities to
         be duly authorized for listing by The American Stock Exchange on or
         prior to the Closing Date and ensure that the Underlying Securities
         issuable upon conversion of the Securities remain authorized for
         listing following the Closing Date.

                  (m)      The Company shall deposit the net proceeds of its
         sale of the Securities as set forth in the Offering Memorandum.

                  (n)      The Company shall not invest, or otherwise use the
         proceeds received by the Company from its sale of the Securities in
         such a manner as would require the Company to register as an
         "investment company" under the Investment Company Act.

                  (o)      The Company will not take, directly or indirectly,
         any action designed to cause or result in, or that has constituted or
         could reasonably be expected to constitute, the unlawful stabilization
         or manipulation of the price of any securities of the Company.

                  (p)      The Company has issued 8-7/8% Senior Notes due 2007
         (the "EXISTING NOTES"). On or before the Closing Date, the Company will
         deliver to the Trustee a redemption notice in compliance with the terms
         of the indentures governing the Existing Notes (the "EXISTING
         INDENTURES"). The redemption price will be $165 million in principal,
         plus the applicable premium and accrued and unpaid interest through the
         redemption date. On the Closing Date, the Company will deposit with the
         Paying Agent for the Existing Notes a portion of the redemption price
         equal to $150 million in principal, plus the applicable premium and
         accrued and unpaid interest through the redemption date. The Company
         will deposit the remaining balance of the redemption price with the
         Paying Agent for the Existing Notes on or before one business day
         preceding the redemption date. If (i) the Initial Purchaser exercises
         its option to purchase all or any portion of the Option Securities and
         the Company's ability to issue the Option Securities under the Existing
         Indentures is subject to its ability to satisfy the Consolidated
         Interest Coverage Ratio (as defined in the Existing Indentures), and
         (ii) the Company's ability to satisfy the Consolidated Interest
         Coverage Ratio requires it to redeem an additional portion of the
         Existing Notes, then the Company will redeem an additional portion of
         the Existing Notes in an amount sufficient to permit the Company to
         satisfy the Consolidated Interest Coverage Ratio and will, immediately
         upon the issuance of the Option Securities, deposit the proceeds from
         such issuance with the Trustee (together with any additional funds
         needed to deposit the total redemption price).

                                      -14-

<PAGE>

         5.       COSTS AND EXPENSES.

         The Company will pay all costs, expenses and fees incident to the
performance of its obligations under this Agreement, including, without limiting
the generality of the foregoing, the following: accounting fees of the Company;
the fees and disbursements of counsel for the Company; the cost of printing and
delivering to, or as requested by, the Initial Purchaser copies of the Offering
Memorandum and any supplements or amendments thereto and the printing and
production of all other documents connected with the Offering (including this
Agreement, the Indenture, the Registration Rights Agreement and any other
related agreements); the Listing Fee of The American Stock Exchange; the
expenses arising from having the Securities designated as eligible for trading
in the PORTAL Market; the expenses associated with the preparation, issuance and
delivery to the Initial Purchaser of the Securities; the fees and expenses of
the Trustee; lodging expenses of officers and other representatives of the
Company in connection with the "roadshow" and any other meetings with
prospective investors in the Securities; the costs and expenses of advertising
relating to the Offering (other than advertising costs and expenses that the
Initial Purchaser expressly agrees to pay); and the expenses (not to exceed
$5,000), including the fees and disbursements of counsel for the Initial
Purchaser, incurred in connection with the qualification of the Securities under
State securities or Blue Sky laws. Neither the Company nor the Guarantors shall,
however, be required to pay for any of the Initial Purchaser's expenses (other
than those related to qualification under State securities or Blue Sky laws)
except that, if this Agreement shall not be consummated because the conditions
in Section 6 hereof are not satisfied, or because this Agreement is terminated
by the Initial Purchaser pursuant to Section 9 hereof, or by reason of any
failure, refusal or inability on the part of the Company or the Guarantors to
perform any undertaking or satisfy any condition of this Agreement or to comply
with any of the terms hereof on their part to be performed, unless such failure,
refusal or inability is due primarily to the default or omission of the Initial
Purchaser, the Company and the Guarantors shall reimburse the Initial Purchaser
for reasonable out-of-pocket expenses, including fees and disbursements of
counsel, reasonably incurred in connection with the Offering; but neither the
Company nor the Guarantors shall in any event be liable to the Initial Purchaser
for damages on account of loss of anticipated profits from the sale by it of the
Securities.

         6.       CONDITIONS OF OBLIGATIONS OF THE INITIAL PURCHASER.

         The obligation of the Initial Purchaser to purchase the Firm Securities
on the Closing Date and any Option Securities on an Option Closing Date are
subject to the accuracy, as of the Closing Date or the relevant Option Closing
Date, as the case may be, of the representations and warranties of the Company
and the Guarantors contained herein, and to the performance by the Company and
each Guarantor of its covenants and obligations hereunder and to the following
additional conditions (any of which may be waived in writing by the Initial
Purchaser):

                  (a)      The Initial Purchaser shall have received on the
         Closing Date or the relevant Option Closing Date, as the case may be,
         an opinion of Porter & Hedges, L.L.P., outside counsel for the Company,
         dated the Closing Date or the relevant Option Closing Date, as the case
         may be, addressed to the Initial Purchaser (and stating that it may be
         relied upon by counsel to the Initial Purchaser) substantially to the
         effect that:

                                      -15-

<PAGE>

                           (i)      each of the Company and the Guarantors is
                  validly existing as a corporation or other entity in good
                  standing under the laws of the state of its formation, with
                  the power and authority as a corporation or other entity to
                  own or lease its properties and conduct its business as
                  described in the Offering Memorandum; the outstanding shares
                  of capital stock of the Company have been duly authorized and
                  validly issued and are fully paid and non-assessable; to the
                  knowledge of such counsel except as described in or
                  contemplated by the Offering Memorandum, there are no
                  outstanding securities of the Company convertible or
                  exchangeable into or evidencing the right to purchase or
                  subscribe for any shares of capital stock of the Company and
                  there are no outstanding or authorized options, warrants or
                  rights of any character obligating the Company to issue any
                  shares of its capital stock or any securities convertible or
                  exchangeable into or evidencing the right to purchase or
                  subscribe for any shares of such stock;

                           (ii)     the statements under the captions
                  "Description of Notes," "Description of Capital Stock" and
                  "Notice to Investors; Transfer Restrictions" in the Offering
                  Memorandum, insofar as such statements constitute a summary of
                  the documents referred to therein or matters of law, provide a
                  fair and accurate summary in all material respects of the
                  information called for with respect to such documents and
                  matters;

                           (iii)    this Agreement has been duly authorized,
                  executed and delivered by the Company and each Guarantor;

                           (iv)     the Registration Rights Agreement has been
                  duly authorized, executed and delivered by the Company and
                  each Guarantor and, assuming due authorization, execution and
                  delivery by the Initial Purchaser, constitutes a valid and
                  binding obligation of the Company and each Guarantor
                  enforceable in accordance with its terms, subject to
                  applicable bankruptcy, insolvency or similar laws affecting
                  creditors' rights generally and general principles of equity
                  and except as rights to indemnification and contribution set
                  forth therein may be limited under applicable law;

                           (v)      the Indenture has been duly authorized,
                  executed and delivered by the Company and each Guarantor, and,
                  assuming due authorization, execution and delivery by the
                  Trustee, constitutes a valid and binding obligation of the
                  Company and each Guarantor enforceable in accordance with its
                  terms, subject to applicable bankruptcy, insolvency or similar
                  laws affecting creditors' rights generally and general
                  principles of equity; and the Securities and the Guarantees
                  have been duly authorized and, when executed by the Company
                  and each Guarantor, as applicable, and authenticated by the
                  Trustee in accordance with the provisions of the Indenture and
                  delivered to and paid for by the Initial Purchaser pursuant to
                  this Agreement, will constitute valid and binding obligations
                  of the Company and each Guarantor, as applicable, subject to
                  the effects of applicable bankruptcy, insolvency and similar
                  laws affecting creditors' rights generally and equitable
                  principles of general applicability;

                                      -16-

<PAGE>

                           (vi)     assuming (A) the accuracy of the
                  representations and warranties of the Company, the Guarantors
                  and the Initial Purchaser contained herein, (B) the Initial
                  Purchaser complies with the covenants set forth in Section 3
                  hereof and (C) the Company and the Guarantors comply with the
                  covenants set forth in Section 4, the purchase and sale of the
                  Securities and Guarantees pursuant hereto (including the
                  Initial Purchaser's proposed offering of the Securities on the
                  terms and in the manner set forth in the Offering Memorandum
                  and Section 3 hereof) is exempt from the registration
                  requirements of the Securities Act and does not require the
                  qualification of an indenture under the Trust Indenture Act,
                  it being understood that no opinion is expressed as to any
                  subsequent resale of a Security, Guarantee or shares of Common
                  Stock issued upon conversion of the Securities;

                           (vii)    the shares of Common Stock initially
                  issuable upon conversion of the Securities have been duly
                  authorized and reserved for issuance upon conversion of the
                  Securities by all necessary corporate action of the Company
                  and when issued will be validly issued, fully paid and
                  non-assessable; and no preemptive rights of stockholders exist
                  under the statutory laws of Texas, under the articles of
                  incorporation or bylaws of the Company or, to such counsel's
                  knowledge, under any contractual arrangement binding upon the
                  Company with respect to any of the shares of Common Stock to
                  be issued upon conversion of the Securities; the Rights, if
                  any, issuable upon conversion of the Securities in accordance
                  with the terms of the Indenture and the Rights Agreement, will
                  have been validly issued;

                           (viii)   the execution and delivery of this
                  Agreement, the Indenture, the Securities, the Guarantees and
                  the Registration Rights Agreement, and the issuance and sale
                  of the Securities to the Initial Purchaser by the Company
                  pursuant to this Agreement, the issuance and sale of the
                  Guarantees to the Initial Purchaser by the Guarantors pursuant
                  to this Agreement, the issuance of the Underlying Securities
                  issuable upon conversion of the Securities, and the
                  consummation of the transactions herein and therein
                  contemplated do not and will not conflict with or result in a
                  breach of any of the terms or provisions of, or constitute a
                  default under, the organizational documents of the Company or
                  the Guarantors, or any indenture, mortgage, deed of trust or
                  other agreement or instrument known to such counsel that is
                  material to the Company and its subsidiaries, taken as a
                  whole, or filed as an exhibit to the Company's most recent
                  annual report on Form 10-K or any subsequent quarterly report
                  on Form 10-Q or any law, order, rule or regulation, judgment,
                  order, writ or decree known to such counsel to be applicable
                  to the Company or any of its subsidiaries of any court or of
                  any government, regulatory body or administrative agency or
                  other governmental body having jurisdiction;

                           (ix)     no approval, consent, order, authorization,
                  designation, declaration or filing by or with any New York or
                  Federal regulatory, administrative or other governmental body
                  is necessary in connection with the execution and delivery of
                  this Agreement, the Indenture, the Guarantees, the Securities
                  and the Registration Rights Agreement, the issuance and sale
                  of the

                                      -17-

<PAGE>

                  Securities to the Initial Purchaser by the Company pursuant to
                  this Agreement, the issuance and sale of the Guarantees to the
                  Initial Purchaser by the Guarantors pursuant to this
                  Agreement, the issuance of the Underlying Securities upon
                  conversion of the Securities, or the consummation of the
                  transactions herein and therein contemplated, except (A) such
                  as have been obtained or made, (B) as may be required by State
                  securities or Blue Sky laws, the National Association of
                  Securities Dealers, Inc., The American Stock Exchange and the
                  PORTAL Market (as to which such counsel need express no
                  opinion) and (C) the effectiveness of the Shelf Registration
                  Statement (as such term is defined in the Registration Rights
                  Agreement) under the Securities Act and the qualification of
                  the Indenture under the Trust Indenture Act, in each case as
                  contemplated by the Registration Rights Agreement;

                           (x)      each document filed, or to be filed prior to
                  the closing of the Offering, by the Company pursuant to the
                  Exchange Act and incorporated, or to be incorporated, by
                  reference in the Offering Memorandum (or any amendment or
                  supplement thereto) at the time filed with the Commission
                  complied, or will comply, in all material respects with the
                  Exchange Act and the applicable rules and regulations
                  thereunder as to form;

                           (xi)     neither the Company nor any Guarantor is,
                  and after giving effect to the offering and sale of the
                  Securities and the application of the net proceeds as
                  described in the Offering Memorandum none of them will be,
                  required to register as an "investment company" under the
                  Investment Company Act and the applicable rules and
                  regulations thereunder;

                           (xii)    the statements under the caption "Certain
                  U.S. Federal Income Tax Considerations" in the Offering
                  Memorandum, insofar as such statements constitute a summary of
                  matters of U.S. Federal tax laws referred to therein, provide
                  a fair and accurate summary in all material respects of such
                  matters under current law;

                           (xiii)   such counsel knows of no legal or
                  governmental proceedings pending or threatened against the
                  Company or any of its subsidiaries that are required to be set
                  forth in the Offering Memorandum and that are not so set forth
                  therein; and

                           (xiv)    nothing has come to the attention of such
                  counsel which leads them to believe that (A) the Company's
                  Annual Report on Form 10-K filed with the Commission on March
                  6, 2003 (including the information contained in the Company's
                  definitive Proxy Statement incorporated by reference in the
                  Annual Report (the "Incorporated Proxy Information")), as of
                  March 6, 2003 (and with respect to the Incorporated Proxy
                  Information, as of March 28, 2003), contained an untrue
                  statement of a material fact or omitted to state a material
                  fact necessary in order to make the statements therein, in the
                  light of the circumstances under which they were made as of
                  March 6, 2003 (and as of March 28, 2003 with respect to the
                  Incorporated Proxy Information), not misleading (except that
                  such

                                      -18-

<PAGE>

                  counsel need express no view as to financial statements,
                  schedules and statistical information therein) and (B) the
                  Offering Memorandum (excluding the information incorporated by
                  reference therein) as of its date or as of the Closing Date or
                  the relevant Option Closing Date, as the case may be,
                  contained or contains an untrue statement of a material fact
                  or omitted or omits to state a material fact necessary in
                  order to make the statements therein, in the light of the
                  circumstances under which they were made, not misleading
                  (except that such counsel need express no view as to financial
                  statements, schedules and statistical information therein).
                  With respect to such statement, such counsel may state that
                  they are not passing upon and are not assuming responsibility
                  for or the accuracy, completeness or fairness of the
                  statements in the Offering Memorandum (except as stated in
                  Section 6(a)(iii)) and that their belief is based upon the
                  procedures set forth therein (relying as to materiality on
                  statements of officers and directors of the Company), but is
                  without independent check and verification.

                  (b)      The Initial Purchaser shall have received from its
         counsel, Akin Gump Strauss Hauer & Feld LLP, on the Closing Date or the
         relevant Option Closing Date, as the case may be, an opinion dated the
         Closing Date or the relevant Option Closing Date, as the case may be,
         substantially to the effect specified in subparagraphs (iii), (iv),
         (v), (vi) and (vii) of paragraph (a) of this Section 6. In addition to
         the matters set forth above, such opinion shall also include a
         statement to the effect that nothing has come to the attention of such
         counsel which leads them to believe that the Offering Memorandum, as of
         its date or as of the Closing Date or the relevant Option Closing Date,
         as the case may be, contained or contains an untrue statement of a
         material fact or omitted or omits to state a material fact necessary in
         order to make the statements therein, in the light of the circumstances
         under which they were made, not misleading (except that such counsel
         need express no view as to financial statements, schedules and
         statistical information therein). With respect to such statement, Akin
         Gump Strauss Hauer & Feld LLP may state that their belief is based upon
         the procedures set forth therein, but is without independent check and
         verification.

                  (c)      The Initial Purchaser shall have received, on each of
         the date hereof, the Closing Date and, if applicable, any Option
         Closing Date, letters dated the date hereof, the Closing Date or the
         relevant Option Closing Date, as the case may be, in form and substance
         satisfactory to the Initial Purchaser, of KPMG LLP confirming that it
         is an independent public accountant within the meaning of the Exchange
         Act and the applicable published rules and regulations thereunder and
         stating that in its opinion the historical and pro forma financial
         statements and schedules of the Company examined by it and incorporated
         by reference in the Offering Memorandum comply as to form in all
         material respects with the applicable accounting requirements of the
         Exchange Act and the related published rules and regulations; and
         containing such other statements and information as is ordinarily
         included in accountants' "comfort letters" to underwriters with respect
         to the financial statements and certain financial and statistical
         information contained or incorporated by reference in the Offering
         Memorandum.

                  (d)      The Initial Purchaser shall have received on the
         Closing Date and, if applicable, any Option Closing Date, as the case
         may be, a certificate or certificates of

                                      -19-

<PAGE>

         the Chief Executive Officer and Chief Financial Officer of the Company
         and each Guarantor (or its general partner) to the effect that, as of
         the Closing Date or the relevant Option Closing Date, as the case may
         be, each of them severally represents as follows:

                           (i)      the representations and warranties of the
                  Company and the Guarantors contained in Section 1 hereof are
                  true and correct as of the Closing Date or the relevant Option
                  Closing Date, as the case may be;

                           (ii)     since the respective dates as of which
                  information is given in the Offering Memorandum, there has not
                  been any material adverse change or any development known to
                  him involving a prospective material adverse change in or
                  affecting the business, management, properties, assets,
                  rights, operations, condition (financial or otherwise) or
                  prospects of the Company and its subsidiaries, taken as a
                  whole, whether or not arising in the ordinary course of
                  business; and

                           (iii)    the Company and each Guarantor has performed
                  all covenants and agreements and satisfied all conditions on
                  its part to be performed or satisfied at or prior to the
                  Closing Date or the relevant Option Closing Date, as the case
                  may be.

                  (e)      The Company and the Guarantors shall have furnished
         to the Initial Purchaser such further certificates and documents
         confirming the representations and warranties, covenants and conditions
         contained herein and related matters as the Initial Purchaser may
         reasonably have requested.

                 (f)      The Underlying Securities issuable upon conversion of
         the Securities shall have been duly listed, subject to notice of
         issuance, on The American Stock Exchange and the Securities shall have
         been designated as PORTAL-eligible securities.

                  (g)      Each of the Indenture and the Registration Rights
         Agreement shall have been executed and delivered by all the parties
         thereto.

                  (h)      The Lockup Agreements described in Section 4(f) shall
         be in full force and effect.

                  (i)      The Company shall have given the initial redemption
         notice and deposited the portion of the redemption price described in
         Section 4(p) above.

         The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Initial Purchaser.

         If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the Initial Purchaser may terminate its obligations hereunder by
notifying the Company of such termination in writing or by telegram at or prior
to the Closing Date or the relevant Option Closing Date, as the case may be. In
such event, the Company and the Guarantors, on the one hand, and the Initial
Purchaser

                                      -20-

<PAGE>

on the other hand, shall not be under any obligation to each other (except to
the extent provided in Sections 5 and 7 hereof).

         7.       INDEMNIFICATION.

                   (a)      Each of the Company and the Guarantors jointly and
         severally agrees:

                  (i)      to indemnify and hold harmless the Initial Purchaser
         and each person, if any, who controls the Initial Purchaser within the
         meaning of either Section 15 of the Securities Act or Section 20 of the
         Exchange Act, against any losses, claims, damages or liabilities to
         which the Initial Purchaser or any such controlling person may become
         subject under the Securities Act or otherwise, insofar as such losses,
         claims, damages or liabilities (or actions or proceedings in respect
         thereof) arise out of or are based upon (A) any untrue statement or
         alleged untrue statement of any material fact contained in the Offering
         Memorandum or any amendment or supplement thereto or (B) the omission
         or alleged omission to state therein a material fact required to be
         stated therein or necessary to make the statements therein not
         misleading in the light of the circumstances under which they were
         made; provided, however, that neither the Company nor any Guarantor
         will be liable under this subsection (a), to the extent that any such
         loss, claim, damage or liability arises out of or is based upon an
         untrue statement or alleged untrue statement, or omission or alleged
         omission made in the Offering Memorandum, or such amendment or
         supplement, in reliance upon and in conformity with written information
         furnished to the Company by or on behalf of the Initial Purchaser
         specifically for use therein; and

                  (ii)     to reimburse the Initial Purchaser and each such
         controlling person upon demand for any legal or other out-of-pocket
         expenses reasonably incurred by the Initial Purchaser or such
         controlling person in connection with investigating or defending any
         such loss, claim, damage or liability, action or proceeding or in
         responding to a subpoena or governmental inquiry related to the
         offering of the Securities, whether or not the Initial Purchaser or
         controlling person is a party to any action or proceeding. In the event
         that it is finally judicially determined that the Initial Purchaser was
         not entitled to receive payments for legal and other expenses pursuant
         to this subparagraph, the Initial Purchaser will promptly return all
         sums that had been advanced pursuant hereto.

                  (b)      The Initial Purchaser will indemnify and hold
         harmless the Company, the Guarantors, their respective directors and
         officers and each person, if any, who controls the Company or the
         Guarantors within the meaning of the Securities Act or the Exchange
         Act, against any losses, claims, damages or liabilities to which the
         Company, the Guarantors or any such director, officer or controlling
         person may become subject under the Securities Act or the Exchange Act
         or otherwise, insofar as such losses, claims, damages or liabilities
         (or actions or proceedings in respect thereof) arise out of or are
         based upon (i) any untrue statement or alleged untrue statement of any
         material fact contained in the Offering Memorandum or any amendment or
         supplement thereto, or (ii) the omission or the alleged omission to
         state therein a material fact required to be stated therein or
         necessary to make the statements therein not misleading in the light of
         the circumstances under which they were made; and will reimburse upon
         demand any legal or other expenses reasonably incurred by the Company
         or any such director,

                                      -21-

<PAGE>

         officer or controlling person in connection with investigating or
         defending any such loss, claim, damage, liability, action or proceeding
         or in responding to a subpoena or governmental inquiry related to the
         offering of the Securities, whether or not the Company, a Guarantor or
         any such director, officer or controlling person is a party to any
         action or proceeding; provided, however, that the Initial Purchaser
         will be liable in each case to the extent, but only to the extent, in
         the case of clauses (i) and (ii), that such untrue statement or alleged
         untrue statement or omission or alleged omission has been made in the
         Offering Memorandum or such amendment or supplement, in reliance upon
         and in conformity with written information furnished to the Company by
         or on behalf of the Initial Purchaser specifically for use therein.
         This indemnity agreement will be in addition to any liability which the
         Initial Purchaser may otherwise have.

                  (c)      In case any proceeding (including any governmental
         investigation) shall be instituted involving any person in respect of
         which indemnity may be sought pursuant to this Section 7, such person
         (the "indemnified party") shall promptly notify the person against whom
         such indemnity may be sought (the "indemnifying party") in writing. No
         indemnification provided for in Section 7(a) or (b) shall be available
         to any party who shall fail to give notice as provided in this Section
         7(c) if the party to whom notice was not given was unaware of the
         proceeding to which such notice would have related and was materially
         prejudiced by the failure to give such notice, but the failure to give
         such notice shall not relieve the indemnifying party or parties from
         any liability which it or they may have to the indemnified party for
         contribution or otherwise than on account of the provisions of Section
         7(a) or (b). In case any such proceeding shall be brought against any
         indemnified party and it shall notify the indemnifying party of the
         commencement thereof, the indemnifying party shall be entitled to
         participate therein and, to the extent that it shall wish, jointly with
         any other indemnifying party similarly notified, to assume the defense
         thereof, with counsel reasonably satisfactory to such indemnified party
         and shall pay as incurred (or within 30 days of presentation) the fees
         and disbursements of such counsel related to such proceeding. In any
         such proceeding, any indemnified party shall have the right to retain
         its own counsel at its own expense. Notwithstanding the foregoing, the
         indemnifying party shall pay as incurred (or within 30 days of
         presentation) the fees and expenses of the counsel retained by the
         indemnified party in the event (i) the indemnifying party and the
         indemnified party shall have mutually agreed to the retention of such
         counsel, (ii) the named parties to any such proceeding (including any
         impleaded parties) include both the indemnifying party and the
         indemnified party and representation of both parties by the same
         counsel would be inappropriate due to actual or potential differing
         interests between them or (iii) the indemnifying party shall have
         failed to assume the defense and employ counsel reasonably acceptable
         to the indemnified party within a reasonable period of time after
         notice of commencement of the action. It is understood that the
         indemnifying party shall not, in connection with any proceeding or
         related proceedings in the same jurisdiction, be liable for the
         reasonable fees and expenses of more than one separate firm for all
         such indemnified parties. Such firm shall be designated in writing by
         the Initial Purchaser in the case of parties indemnified pursuant to
         Section 7(a) and by the Company in the case of parties indemnified
         pursuant to Section 7(b). The indemnifying party shall not be liable
         for any settlement of any proceeding effected without its written
         consent but if settled with such consent or if there be a final
         judgment for the plaintiff,

                                      -22-

<PAGE>

         the indemnifying party agrees to indemnify the indemnified party from
         and against any loss or liability by reason of such settlement or
         judgment. In addition, the indemnifying party will not, without the
         prior written consent of the indemnified party, settle or compromise or
         consent to the entry of any judgment in any pending or threatened
         claim, action or proceeding of which indemnification may be sought
         hereunder (whether or not any indemnified party is an actual or
         potential party to such claim, action or proceeding) unless such
         settlement, compromise or consent includes an unconditional release of
         each indemnified party from all liability arising out of such claim,
         action or proceeding.

                  (d)      To the extent the indemnification provided for in
         this Section 7 is unavailable to or insufficient to hold harmless an
         indemnified party under Section 7(a) or (b) above in respect of any
         losses, claims, damages or liabilities (or actions or proceedings in
         respect thereof) referred to therein, except by reason of the
         exceptions set forth in Section 7(a) or 7(b) the failure of the
         indemnified party to give notice as required in Section 7(c), then each
         indemnifying party shall contribute to the amount paid or payable by
         such indemnified party as a result of such losses, claims, damages or
         liabilities (or actions or proceedings in respect thereof) in such
         proportion as is appropriate to reflect the relative benefits received
         by the Company and the Guarantors on the one hand and the Initial
         Purchaser on the other from the offering of the Securities. If,
         however, the allocation provided by the immediately preceding sentence
         is not permitted by applicable law then each indemnifying party shall
         contribute to such amount paid or payable by such indemnified party in
         such proportion as is appropriate to reflect not only such relative
         benefits but also the relative fault of the Company and the Guarantors
         on the one hand and the Initial Purchaser on the other in connection
         with the statements or omissions which resulted in such losses, claims,
         damages or liabilities (or actions or proceedings in respect thereof),
         as well as any other relevant equitable considerations. The relative
         benefits received by the Company and the Guarantors on the one hand and
         the Initial Purchaser on the other shall be deemed to be in the same
         proportion as the total net proceeds from the Offering (before
         deducting expenses) received by the Company bear to the total discounts
         and commissions received by the Initial Purchaser. The relative fault
         shall be determined by reference to, among other things, whether the
         untrue or alleged untrue statement of a material fact or the omission
         or alleged omission to state a material fact relates to information
         supplied by the Company and the Guarantors on the one hand or the
         Initial Purchaser on the other and the parties' relative intent,
         knowledge, access to information and opportunity to correct or prevent
         such statement or omission.

         The Company, the Guarantors and the Initial Purchaser agree that it
would not be just and equitable if contributions pursuant to this Section 7(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 7(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim or
enforcing any rights hereunder. Notwithstanding the provisions of this
subsection (d), (i) the Initial Purchaser shall not be required to contribute
any amount in excess of the discounts and commissions applicable to the
Securities purchased by it and (ii) no person

                                      -23-

<PAGE>

guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.

                  (e)      In any proceeding relating to the Offering Memorandum
         or any supplement or amendment thereto, each party against whom
         contribution may be sought under this Section 7 hereby consents to the
         jurisdiction of any court having jurisdiction over any other
         contributing party, agrees that process issuing from such court may be
         served upon it by any other contributing party and consents to the
         service of such process and agrees that any other contributing party
         may join it as an additional defendant in any such proceeding in which
         such other contributing party is a party.

                  (f)      Except as otherwise provided in this Section 7, any
         losses, claims, damages, liabilities or expenses for which an
         indemnified party is entitled to indemnification or contribution under
         this Section 7 shall be paid by the indemnifying party to the
         indemnified party as such losses, claims, damages, liabilities or
         expenses are incurred (or within 30 days of presentation). The
         indemnity and contribution agreements contained in this Section 7 and
         the representations and warranties of the Company and the Initial
         Purchasers set forth in this Agreement shall remain operative and in
         full force and effect, regardless of (i) any investigation made by or
         on behalf of the Initial Purchaser or any person controlling the
         Initial Purchaser, the Company, the Guarantors, their respective
         directors or officers or any persons controlling the Company or the
         Guarantors, (ii) acceptance of any Securities and payment therefor
         hereunder, and (iii) any termination of this Agreement. A successor to
         the Initial Purchaser, or any person controlling the Initial Purchaser,
         or to the Company, the Guarantors, their respective directors or
         officers, or any person controlling the Company or the Guarantors,
         shall be entitled to the benefits of the indemnity, contribution and
         reimbursement agreements contained in this Section 7.

         8.       NOTICES.

         All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Initial Purchaser, to Deutsche Bank
Securities Inc., 31 West 52nd Street, New York, New York 10019, Attention:
General Counsel; if to the Company, to Grey Wolf, Inc., 10370 Richmond Avenue,
Suite 600, Houston, Texas 77042, Attention: David W. Wehlmann, Executive Vice
President and Chief Financial Officer.

         9.       TERMINATION.

                  (a)      This Agreement may be terminated by the Initial
         Purchaser by notice to the Company at any time prior to the Closing
         Date or any Option Closing Date (if different from the Closing Date and
         then only as to the Option Securities to be purchased on such Option
         Closing Date) if any of the following has occurred: (i) since the date
         as of which information is given in the Offering Memorandum, any
         material adverse change or any development involving a prospective
         material adverse change in or affecting the earnings, business,
         management, properties, assets, rights, operations, condition
         (financial or otherwise) or prospects of the Company and its
         subsidiaries,

                                      -24-

<PAGE>

         taken as a whole, whether or not arising in the ordinary course of
         business, (ii) any outbreak or escalation of hostilities or declaration
         of war or national emergency or other national or international
         calamity or crisis or change in economic or political conditions if the
         effect of such outbreak, escalation, declaration, emergency, calamity,
         crisis or change on the financial markets of the United States would,
         in the Initial Purchaser's reasonable judgment, make it impracticable
         or inadvisable to market the Securities or to enforce contracts for the
         sale of the Securities, or (iii) suspension of trading in securities
         generally on The New York Stock Exchange, the American Stock Exchange
         or the Nasdaq National Market or limitation on prices (other than
         limitations on hours or numbers of days of trading) for securities on
         either such Exchange, (iv) the enactment, publication, decree or other
         promulgation of any statute, regulation, rule or order of any court or
         other governmental authority which in the Initial Purchaser's opinion
         materially and adversely affects or could reasonably be expected to
         materially and adversely affect the business or operations of the
         Company or the Guarantors, (v) the declaration of a banking moratorium
         by United States or New York State authorities, (vi) any downgrading,
         or placement on any watch list for possible downgrading, in the rating
         of any of the Company's or any Guarantor's debt securities by any
         "nationally recognized statistical rating organization" (as defined for
         purposes of Rule 436(g) under the Exchange Act); (vii) the suspension
         of trading of the Company's common stock by The American Stock
         Exchange, the Commission or any other governmental authority or, (viii)
         the taking of any action by any governmental body or agency in respect
         of its monetary or fiscal affairs which in the Initial Purchaser's
         reasonable opinion has a material adverse effect on the securities
         markets in the United States and would make it impracticable or
         inadvisable to market the Securities or to enforce contracts for the
         sale of the Securities; or

                  (b)      as provided in Section 6 of this Agreement.

         10.      SUCCESSORS.

         This Agreement has been and is made solely for the benefit of the
Initial Purchaser, the Company and the Guarantors and their respective
successors and assigns, and the officers, directors and controlling persons
referred to herein, and no other person will have any right or obligation
hereunder. No purchaser of any of the Securities from the Initial Purchaser
shall be deemed a successor or assign merely because of such purchase.

         11.      INFORMATION PROVIDED BY THE INITIAL PURCHASER.

         The Company, the Guarantors and the Initial Purchaser acknowledge and
agree that the only information furnished or to be furnished by the Initial
Purchaser to the Company and the Guarantors for inclusion in the Offering
Memorandum consists of the name of the Initial Purchaser on the front and back
covers of the Offering Memorandum and the information set forth in the second
sentence of the second paragraph, and the eighth and ninth paragraphs, in each
case under the heading "Plan of Distribution" (insofar as such information
relates to the Initial Purchaser).

                                      -25-

<PAGE>

         12.      MISCELLANEOUS.

         The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of the
Initial Purchaser or any controlling person thereof, or by or on behalf of the
Company, the Guarantors or their respective directors or officers or any
controlling person of the Company or the Guarantors, and (c) delivery of and
payment for the Securities under this Agreement

         This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

         This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without regard to conflicts
of laws principles thereof.

                                      -26-

<PAGE>

         If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Guarantors
and the Initial Purchaser in accordance with its terms.

                           Very truly yours,

                           GREY WOLF, INC.

                           By:  /s/ DAVID W. WEHLMANN
                               _____________________________________
                               David W. Wehlmann, Executive Vice
                               President and Chief Financial Officer

                           GREY WOLF DRILLING COMPANY L.P.

                               By: GREY WOLF HOLDINGS COMPANY,
                                   ITS SOLE GENERAL PARTNER

                           By: /s/ DAVID W. WEHLMANN
                               --------------------------------------
                               Name:  David W. Wehlmann
                               Title: Executive Vice President and
                                      Chief Financial Officer

                           GREY WOLF LLC

                           By: /s/ DAVID W. WEHLMANN
                               --------------------------------------
                               Name:  David W. Wehlmann
                               Title: Executive Vice President and
                                      Chief Financial Officer

                           GREY WOLF HOLDINGS COMPANY

                           By: /s/ DAVID W. WEHLMANN
                               --------------------------------------
                               Name:  David W. Wehlmann
                               Title: Executive Vice President and
                                      Chief Financial Officer

                                      S-1

<PAGE>

                           MURCO DRILLING CORP.

                           By: /s/ DAVID W. WEHLMANN
                               -----------------------------------
                               David W. Wehlmann, Executive
                               Vice President and Chief
                               Financial Officer


                           GREY WOLF INTERNATIONAL, INC.

                           By: /s/ DAVID W. WEHLMANN
                               -----------------------------------
                               David W. Wehlmann, Executive
                               Vice President and Chief
                               Financial Officer

                           DI/PERFENSA, INC.

                           By: /s/ DAVID W. WEHLMANN
                               -----------------------------------
                               David W. Wehlmann, Executive
                               Vice President and Chief
                               Financial Officer

                           DI ENERGY, INC.

                           By: /s/ DAVID W. WEHLMANN
                               -----------------------------------
                               David W. Wehlmann, Executive
                               Vice President and Chief
                               Financial Officer

The foregoing Purchase Agreement
is hereby confirmed and accepted as
of the date first above written.

DEUTSCHE BANK SECURITIES INC.

By:      C. MITCHELL COX
    --------------------------
        Authorized Officer

                                      S-2

<PAGE>

                                   SCHEDULE A

                               INITIAL GUARANTORS

       NAME OF GUARANTOR                           STATE OF INCORPORATION
Grey Wolf Drilling Company L.P.                            Texas
         Grey Wolf LLC                                   Louisiana
  Grey Wolf Holdings Company                               Nevada
     Murco Drilling Corp.                                 Delaware
 Grey Wolf International, Inc.                             Texas
       DI/Perfensa, Inc.                                   Texas
        DI Energy, Inc.                                    Texas