<PAGE>   1
                                                                   EXHIBIT 10.29


                                                                  CONFORMED COPY




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                            ASSET PURCHASE AGREEMENT

                                  BY AND AMONG

                             BAYARD DRILLING, L.P.,

                       BAYARD DRILLING TECHNOLOGIES, INC.,

                                       AND

                           TRANSTEXAS GAS CORPORATION,



                            DATED AS OF MAY 26, 1998



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<TABLE>
<CAPTION>


                                TABLE OF CONTENTS

                                                                                                    PAGE
<S>                                                                                                   <C>
ARTICLE I -- SALE AND PURCHASE OF ASSETS...............................................................1
         1.1.     Sale of Assets.......................................................................1
         1.2.     Excluded Assets......................................................................3
         1.3.     No Assumption of Liabilities; Allocation of Post-Closing Liabilities.................4
         1.4.     Purchase Price.......................................................................4
         1.5.     Indemnification as to Certain Liabilities............................................5
         1.6.     Instruments of Assignment; Certain Actions...........................................5
         1.7.     Further Assurances...................................................................5
         1.8      Filing and Recordation of Assignments, etc...........................................6

ARTICLE II -- THE CLOSING..............................................................................6
         2.1      Date and Place.......................................................................6
         2.2      Closing Deliveries...................................................................6

ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................8
         3.1      Existence and Qualification..........................................................8
         3.2      Authority; Binding Effect............................................................8
         3.3      No Conflicts.........................................................................9
         3.4      Consents and Filings.................................................................9
         3.5      Litigation...........................................................................9
         3.6      Compliance with Laws................................................................10
         3.7      Financial Statements................................................................10
         3.8      Absence of Undisclosed Liabilities..................................................10
         3.9      Title to Assets.....................................................................10
         3.10     Absence of Certain Events...........................................................11
         3.11     Tax Matters.........................................................................11
         3.12     Employee Benefit Matters............................................................13
         3.13     Employment Matters; Labor Relations.................................................14
         3.14     Environmental Compliance............................................................14
         3.15     Real Property.......................................................................15
         3.16     Intellectual Property...............................................................16
         3.17     Solvency............................................................................17
         3.18     Brokers and Finders.................................................................17

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<TABLE>

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<S>                                                                                                   <C>
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES
         OF THE PURCHASER.............................................................................17
         4.1      Organization........................................................................17
         4.2      Authority; Binding Effect...........................................................17
         4.3      No Conflicts........................................................................18
         4.4      Consents and Filings................................................................18
         4.5      Knowledgeable Investor..............................................................18
         4.6      Brokers and Finders.................................................................18

ARTICLE V -- CERTAIN COVENANTS AND AGREEMENTS.........................................................19
         5.1      Access to Information; Indemnification..............................................19
         5.2      Commercially Reasonable Efforts.....................................................19
         5.3      Conduct of Business Pending Closing.................................................20
         5.4      Exclusivity.........................................................................20
         5.5      Notice..............................................................................20
         5.6      Confidentiality of Information......................................................21
         5.7      HSR Act.............................................................................21
         5.8      Employee Matters....................................................................21
         5.9      Access to and Maintenance of Records; Financial Statements..........................22
         5.10     Publicity...........................................................................23
         5.11     Non-Competition.....................................................................23
         5.12.    Casualty Losses.....................................................................24
         5.13     Environmental Matters...............................................................24
         5.14     Tax Matters.........................................................................26
         5.15     Real Property.......................................................................27

ARTICLE VI -- CONDITIONS TO CLOSING...................................................................28
         6.1.     Conditions to the Obligations of Each of the Parties................................28
         6.2.     Conditions to the Obligations of the Purchaser......................................28
         6.3      Conditions to the Obligations of the Seller.........................................29

ARTICLE VII -- INDEMNIFICATION........................................................................30
         7.1      Survival of Representations and Warranties..........................................30
         7.2      Indemnification by the Seller.......................................................30
         7.3      Indemnification by the Purchaser....................................................31
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<S>                                                                                                   <C>
         7.4      Indemnification for Third Party Claims..............................................32
         7.5      Express Negligence..................................................................33

ARTICLE VIII -- TERMINATION...........................................................................33
         8.1      Termination.........................................................................33
         8.2      Termination Fee.....................................................................34
         8.3      Survival............................................................................35

ARTICLE IX -- DEFINITIONS AND MISCELLANEOUS...........................................................35
         9.1      Definitions.........................................................................35
         9.2      Notices.............................................................................39
         9.3      Binding Effect; Assignability.......................................................40
         9.4      Expenses............................................................................40
         9.5      Amendment; Waivers..................................................................40
         9.6      Specific Performance................................................................40
         9.7      Dispute Resolution..................................................................40
         9.8      Section Headings....................................................................42
         9.9      Entire Agreement....................................................................42
         9.10     Governing Law.......................................................................42
         9.11     Exclusivity of Representations and Warranties.......................................42
         9.12     Waiver of Certain Damages...........................................................43
         9.13     Costs of Enforcement................................................................43
         9.14     Severability........................................................................43
         9.15     Waiver of Deceptive Trade Practices.................................................43
         9.16     Counterparts........................................................................44
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EXHIBITS

Exhibit A     -   Form of Assignment Agreement
Exhibit B     -   Form of Warranty Deed
Exhibit C     -   Form of Drilling Alliance Agreement
Exhibit D     -   Form of Initial Drilling Contracts
Exhibit E     -   Asset Inventory

SCHEDULES

Schedule 1.4               -        Purchase Price Allocation Schedule
Schedule 3.3               -        Conflicts
Schedule 3.5               -        Litigation
Schedule 3.6               -        Compliance with Laws
Schedule 3.9               -        Title to Assets
Schedule 3.11(c)           -        Liens for Taxes
Schedule 3.11(d)           -        Pending Audits, Disputes or Claims
Schedule 3.11(e)           -        State Taxes
Schedule 3.11(k)           -        Tax Sharing Agreements
Schedule 3.12              -        ERISA Matters
Schedule 3.13              -        Labor Matters
Schedule 3.14              -        Environmental Compliance
Schedule 3.15              -        Real Property
Schedule 3.16(a)           -        Intellectual Property Rights
Schedule 3.16(b)           -        Infringement


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                            ASSET PURCHASE AGREEMENT

              This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as
of May 26, 1998, by and among BAYARD DRILLING, L.P., a Delaware limited
partnership (the "Purchaser"), BAYARD DRILLING TECHNOLOGIES, INC., a Delaware
corporation (the "Guarantor") (solely for the purpose of the guarantee of
performance in Section 8.2), and TRANSTEXAS GAS CORPORATION, a Delaware
corporation (the "Seller").


                              W I T N E S S E T H:

              WHEREAS, the Seller owns the Assets (as hereinafter defined);

              WHEREAS, the Purchaser desires to acquire the Assets, and the
Seller is willing to sell the Assets to the Purchaser, upon the terms and
subject to the conditions set forth herein;

              WHEREAS, the Guarantor owns all of the outstanding partnership
interests of the Purchaser;

              WHEREAS, the Guarantor is willing to undertake the guaranty
obligation in Section 8.2(b) in order to induce the Seller to execute and
deliver this Agreement and consummate the transactions contemplated hereby; and

              WHEREAS, capitalized terms used herein without definition have the
respective meanings assigned to them in Section 9.1;

              NOW, THEREFORE, in consideration of the premises, the terms and
conditions set forth herein and of the mutual covenants of the parties
hereinafter expressed, the parties hereby agree as follows:


                                    ARTICLE I

                           SALE AND PURCHASE OF ASSETS

                  1.1. Sale of Assets. Upon the terms and subject to the
conditions set forth herein, effective as of 10:00 a.m., Central Daylight
Savings Time, on the Closing Date (the "Sale Effective Time"), the Seller shall
sell, transfer, assign and convey to the 




<PAGE>   7



Purchaser the following properties and assets (collectively, the "Assets"),
which constitute all of the properties and assets of the Drilling Services
Division of the Seller (the "Drilling Services Division"), free and clear of all
Liens, except for Permitted Encumbrances:

                  (a) all right, title and interest in and to (i) the 25
drilling rigs identified on the Asset Inventory and (ii) all equipment
associated with such drilling rigs, including, but not limited to, all drill
pipe, handling tools, vehicles and other miscellaneous equipment identified on
the Asset Inventory;

                  (b) all right, title and interest in and to the equipment
rental assets used, or available for use, primarily or exclusively in connection
with the operations of the Drilling Services Division, including but not limited
to, the assets identified on the Asset Inventory;

                  (c) all right, title and interest in and to the rig and
moves/hauls assets used, or available for use, primarily or exclusively in
connection with the operations of the Drilling Services Division, including but
not limited to, the assets identified on the Asset Inventory;

                  (d) all right, title and interest in and to (i) the Laredo
Yard III (the "Yard") owned by the Seller and identified on Schedule 3.15 and
(ii) all of the maintenance and repair shop assets located on the Yard or
dedicated primarily or exclusively to the operations conducted thereon,
including, but not limited to, the assets identified on the Asset Inventory;

                  (e) all right, title and interest in and to certain of the
office equipment, computer equipment and copiers relating to the Assets which
the parties will cooperate to identify prior to Closing;

                  (f) all rights and interests of the Seller in respect of all
permits, licenses, franchises, consents, authorities, special authorities and
other similar acts of any governmental authority or body relating primarily or
exclusively to the Assets;

                  (g) all books and records relating primarily or exclusively to
the Assets or the operations conducted by the Seller utilizing the same,
including, but not limited to, all manuals, prints, designs, specifications and
other documentation pertaining to the Assets; and



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                   (h) to the extent provided in Section 5.12, all rights and
claims in respect of any unpaid Proceeds to be received in respect of any
Casualty Losses.

                  1.2. Excluded Assets. There shall be excluded from the Assets
all of the following properties and assets (the "Excluded Assets"):

                  (a)  all claims or causes of action of the Seller arising at
any time prior to the Sale Effective Time (except to the extent provided in
Section 1.1(h));

                  (b)  all claims of the Seller for refunds of or loss
carryforwards with respect to (i) income or franchise taxes or (ii) any taxes
attributable to the Excluded Assets;

                  (c)  all amounts due and payable to the Seller as adjustments
to insurance premiums related to the Assets with respect to any period prior to
the Sale Effective Time;

                  (d)  all data that cannot be disclosed or assigned to the
Purchaser as a result of confidentiality arrangements or licenses under
agreements with Persons other than Affiliates of the Seller (provided that such
data does not affect in any material respect the use or operation of the Assets
by the Purchaser);

                  (e)  all notes, memoranda, agreements or reports of any
consultant or other professional employed by the Seller in connection with the
sale of the Assets;

                  (f)  all agreements, communications and correspondence between
the Seller and Jefferies & Company, Inc. and their respective employees,
representatives or agents relating to the transactions contemplated by this
Agreement;

                  (g)  all internal correspondence and communications of the
Seller with respect to the sale of the Assets hereunder and the transactions
contemplated herein or in any Related Agreement;

                  (h) all bids submitted by prospective purchasers of the
Assets; and

                  (i) all files and documents pertaining to any items disclosed
on Schedule 3.5 or any other documents of Seller that are subject to an
attorney-client privilege related to litigation.

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<PAGE>   9


                  1.3. No Assumption of Liabilities; Allocation of Post-Closing
Liabilities.

                  (a) The Purchaser shall not assume, pay, perform or discharge
any debts, liabilities or obligations (whether absolute or contingent, known or
unknown, asserted or unasserted) of the Seller or any of its Affiliates arising
at any time prior to or existing at the Sale Effective Time, including, but not
limited to, any debts, liabilities or obligations arising from or as a result of
the use, operation or ownership of the Assets by the Seller, the physical
condition of the tangible personal property included in the Assets or the
conduct by the Seller of its business and operations or any acts or omissions of
the Seller in connection therewith (collectively, the "Seller Pre-Closing
Liabilities"), whether or not the existence of the same is disclosed to the
Purchaser in or pursuant to this Agreement.

                  (b) The Purchaser shall be responsible for, and shall pay,
perform or discharge, all debts, liabilities and obligations arising at any time
after the Sale Effective Time from or as a result of the use, operation or
ownership of the Assets by the Purchaser, the physical condition of the tangible
personal property included in the Assets or the conduct by the Purchaser of its
business and operations or any acts or omissions of the Purchaser in connection
therewith (collectively, the "Purchaser Liabilities"); provided, however, that
it is expressly understood and agreed that (i) this paragraph (b) shall not
limit, reduce or otherwise affect any liabilities of the Seller arising from a
breach by the Seller of its representations, warranties, covenants and
agreements set forth in this Agreement or any Related Agreement (including, but
not limited to, any liabilities under the indemnification provisions set forth
in Article VII) and (ii) the Purchaser expressly does not assume any such
liabilities.

                  (c) The Seller shall be responsible for, and shall pay,
perform or discharge, all debts, liabilities and obligations arising at any time
after the Sale Effective Time from or as a result of the conduct by the Seller
of its business and operations or any acts of the Seller in connection therewith
(such liabilities, together with the Seller Pre-Closing Liabilities, being
hereinafter collectively referred to as the "Seller Liabilities").

                  1.4. Purchase Price. The purchase price to be paid at the
Closing by the Purchaser in consideration of the sale, transfer, assignment and
conveyance of the Assets by the Seller shall be $75,000,000 in cash (the
"Purchase Price"). The Purchase Price shall be allocated to the Assets in the
manner set forth in Schedule 1.4 (the "Purchase Price Allocation Schedule"). The
allocations set forth in the Purchase Price Allocation Schedule shall be
followed by the Purchaser and the Seller in preparing, and 



                                       4

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shall be reflected on, (i) the completed Form 8594 (Asset Acquisition Statement
under Section 1060 of the Code) which is required to be filed pursuant to the
requirements of Section 1060(b) of the Code, (ii) any similar statements and any
tax returns required to be filed with any state or local taxing authority, or
(iii) and any bill of sale, invoice, or other documentation required to be
prepared with respect to Taxes.


                  1.5. Indemnification as to Certain Liabilities. From and after
the Closing Date, (i) the Purchaser shall indemnify the Seller and hold it
harmless from and against any and all damages, losses, liabilities, demands,
claims, actions, causes of action, proceedings, assessments, settlements,
judgments, fines, penalties, interest, costs or expenses, including legal and
other expenses incurred in investigating and defending the same, which are
asserted against, imposed upon or incurred by the Seller with respect to any
Purchaser Liabilities and (ii) the Seller shall indemnify the Purchaser and hold
it harmless from and against any and all damages, losses, liabilities, demands,
claims, actions, causes of action, proceedings, assessments, settlements,
judgments, fines, penalties, interest, costs or expenses, including legal and
other expenses incurred in investigating and defending the same, which are
asserted against, imposed upon or incurred by the Purchaser with respect to any
Seller Liabilities.

                  1.6. Instruments of Assignment; Certain Actions. On the
Closing Date, the Seller shall execute and deliver, or cause to be executed and
delivered, all necessary and appropriate bills of sale, deeds, general
conveyances, endorsements, assignments and other instruments of sale, transfer,
assignment and conveyance and shall take such actions as are necessary or
appropriate to put the Purchaser in actual possession and operating control of
the Assets as set out in this Agreement.

                  1.7. Further Assurances. The Seller hereby agrees that from
time to time after the Closing Date it shall (i) execute, deliver, acknowledge,
file and record, or cause to be executed, delivered, acknowledged, filed and
recorded, such further bills of sale, deeds, general conveyances, endorsements,
assignments and other good and sufficient instruments of sale, transfer,
assignment or conveyance and such further consents, certifications, affidavits
and assurances as the Purchaser may reasonably request in order to vest in the
Purchaser all right, title and interest in the Assets or otherwise to consummate
and make effective the transactions contemplated by this Agreement upon the
terms and conditions set forth herein and (ii) take, or cause to be taken, all
actions and do, or cause to be done, all such things as the Purchaser may
reasonably request in order to put the Purchaser in actual possession and
operating control of the Assets or otherwise to accomplish the purposes of this
Agreement. All



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<PAGE>   11

costs and expenses incurred under this Section shall be shared equally by the
Seller and the Purchaser.

                  1.8 Filing and Recordation of Assignments, etc. The Purchaser
shall be solely responsible for all filings and recordings of deeds, assignments
and other documents related to the contribution of the Assets and for the
payment of all applicable fees. The Seller will not be responsible for any loss
to the Purchaser because of the Purchaser's failure to file or record documents
correctly or promptly.

                                   ARTICLE II

                                   THE CLOSING

                  2.1 Date and Place. The closing of the transactions
contemplated by this Agreement (the "Closing") shall be held at the offices of
Baker & Botts, L.L.P., One Shell Plaza, Houston, Texas, 77002 (or at such other
place as the parties may mutually agree) on July 20, 1998 or such earlier date
as the parties may mutually agree. The date of the Closing is hereinafter
referred to as the "Closing Date."

                  2.2 Closing Deliveries.

                  (a) At the Closing, the Seller shall deliver, or cause to be
delivered, the following to the Purchaser:

                      (i) a counterpart of the Assignment Agreement (the
         "Assignment Agreement") in the form attached as Exhibit A, duly
         executed by the Seller;

                      (ii) a general warranty deed (the "Warranty Deed")
         sufficient to convey title in fee simple to the real property included
         in the Assets in the form attached as Exhibit B, duly executed by the
         Seller; and

                      (iii) at Seller's expense, an Owner's Policy of Title
         Insurance (the "Title Insurance") (or a final commitment to issue the
         Owner's Title Policy) in the standard Texas T-1 form for the Real
         Property and the improvements thereon, dated as of the Closing Date, in
         the same form and subject only to the same exceptions as the Title
         Commitment;


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<PAGE>   12


                           (iv)   such other bills of sale, deeds, general
         conveyances, endorsements, assignments and other good and sufficient
         instruments of sale, transfer, assignment and conveyance as the
         Purchaser may reasonably request in order more effectively to vest in
         the Purchaser all right, title and interest in and to the Assets, in
         each case duly executed by the Seller.

                           (v)    counterparts of the Drilling Alliance 
         Agreement (the "Drilling Alliance Agreement") in the form attached as
         Exhibit C, duly executed by the Seller;

                           (vi)   counterparts of drilling contracts for each of
         the drilling rigs covered by the Drilling Alliance Agreement which are
         operating on the Closing Date (the "Initial Drilling Contracts") each
         substantially in the form attached as Exhibit D, duly executed by the
         Seller;

                           (vii)  evidence that the Seller has implemented the
         Security Arrangement;

                           (viii) evidence that the Assets are free and clear of
         all Liens (including, but not limited to, the judgment lien recorded in
         favor of Hubert S. Finklestein) other than the Permitted Encumbrances,
         or if the Seller is unable to remove the judgment lien recorded in
         favor of Hubert S. Finklestein, evidence that the Seller has entered
         into the arrangements referred to in Section 6.2(e);

                           (ix)   the officers' certificates referred to in 
         Section 6.2(i); and

                           (x)    the opinion of counsel to the Seller referred
         to in Section 6.2(j).

                  (b)      At the Closing, the Purchaser shall deliver, or cause
to be delivered, the following to the Seller:

                           (i)    a wire transfer of immediately available funds

         in an amount equal to the Purchase Price;

                           (ii)   a counterpart of the Assignment and Assumption
         Agreement, duly executed by the Purchaser;

                           (iii)  a counterpart of the Drilling Alliance
         Agreement, duly executed by the Purchaser;


                                       7
<PAGE>   13

                           (iv)  a counterpart of the Initial Drilling 
         Contracts, duly executed by the Purchaser;

                           (v)   a counterpart of the documents evidencing the
         Security Arrangement, duly executed by the Purchaser;

                           (vi)  the certificates of the Purchaser referred to
         in Section 6.3(d); and

                           (vii) the opinion of counsel to the Purchaser
         referred to in Section 6.3(e).


                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES
                                  OF THE SELLER

                  The Seller represents and warrants to the Purchaser as
follows:

                  3.1 Existence and Qualification. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to do business in each jurisdiction in
which the nature of its activities which relate to the Assets or the character
of the Assets makes such qualification necessary. The Seller has all requisite
corporate power and authority to own or lease the Assets, to own the Interests
to be sold by it pursuant to this Agreement and to conduct its business as now
owned or leased or conducted.

                  3.2 Authority; Binding Effect. The Seller has all necessary
power and authority to enter into and perform its obligations under this
Agreement and the other agreements, documents, or instruments delivered in
connection with the transactions contemplated by this Agreement (collectively,
the "Related Agreements") and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Related
Agreements, the performance by the Seller of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Board of Directors of the
Seller, which constitutes all necessary corporate action in respect thereof. No
vote of the Seller's stockholders is required for the execution and delivery of
this Agreement or any Related Agreement or the consummation of the transactions
contemplated hereby and thereby. This Agreement has been duly executed


                                       8
<PAGE>   14

and delivered by the Seller and constitutes a valid and binding agreement of the
Seller, enforceable against it in accordance with its terms. The Related
Agreements and all other agreements required hereunder to be executed and
delivered by the Seller at the Closing, upon execution and delivery in
accordance with the provisions thereof, will constitute valid and binding
agreements enforceable against the Seller in accordance with their terms.

                  3.3  No Conflicts. Except as set forth in Schedule 3.3, the
execution and delivery by the Seller of this Agreement and the Related
Agreements, and the performance by the Seller of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby, will not: (i) conflict with, or result in a violation or breach of, any
provision of the charter documents or by-laws of the Seller, (ii) conflict with,
or result in any violation or breach of, or constitute a default under, any term
or provision of any note, bond, mortgage, indenture, lease, franchise, permit,
license, contract or other instrument or document to which the Seller is a party
or by which its properties or assets are or may be bound, (iii) conflict with,
or result in any violation of, any law, ordinance, statute, rule or regulation
of any Governmental Authority or of any order, writ, injunction, judgment or
decree of any court, arbitrator or Governmental Authority applicable to the
Seller or its properties or assets or (iv) result in the creation of, or impose
on the Seller the obligation to create, any Lien upon the Assets.

                  3.4  Consents and Filings. There is no requirement applicable
to the Seller to obtain any consent, approval or authorization of, or to make or
effect any declaration, filing or registration with, any Governmental Authority
for the valid execution and delivery by the Seller of this Agreement or the
Related Agreements, the due performance by the Seller of its respective
obligations hereunder or thereunder or the lawful consummation of the
transactions contemplated hereby or thereby, except filings required with
respect to the transactions contemplated by this Agreement pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act").

                  3.5  Litigation. Except as set forth on Schedule 3.5, there 
are no actions, suits, inquiries, investigations or other proceedings pending,
or to the knowledge of the Seller, threatened against either the Seller or its
properties or assets which could reasonably be expected to (i) have a Material
Adverse Effect or (ii) question the validity of this Agreement or any Related
Agreement or any action taken or to be taken by the Seller in connection
herewith or therewith or (iii) prevent the Seller from consummating the
transactions contemplated by this Agreement or any Related Agreement.

                                       9

<PAGE>   15

                  3.6 Compliance with Laws. Except as set forth on Schedule 3.6,
the Seller is not in breach or violation of, or default under, (i) any provision
of the Seller's charter documents or bylaws or (ii) any term or provision of any
note, bond, mortgage, indenture, lease, franchise, permit, license, contract or
other instrument or document to which it is a party or by which its assets or
the Assets are or may be bound, except for any breach or violation described in
clause (ii) above which could not reasonably be expected to have a Material
Adverse Effect. The Seller is in substantial compliance with any law, ordinance,
statute, rule or regulation of any Governmental Authority or of any order, writ,
injunction, judgment or decree of any court, arbitrator or Governmental
Authority applicable to it or the Assets.

                  3.7 Financial Statements. The Seller has previously provided
the Purchaser with the audited consolidated financial statements of the Seller
and its consolidated subsidiaries as of and for the years ended January 31, 1997
and 1998, which financial statements consist of a balance sheet as of such dates
and a statement of operations, a statement of stockholders deficit and a
statement of cash flows for the years then ended and are accompanied by a report
of Coopers & Lybrand L.L.P. with respect thereto (the "Financial Statements").
The Financial Statements have been prepared and presented in accordance with
GAAP applied on a consistent basis and the Financial Statements fairly present
the consolidated financial position of the Seller and its consolidated
subsidiaries as of the respective dates thereof and the consolidated results of
operations and changes in cash flows of the Seller for the years then ended.

                  3.8 Absence of Undisclosed Liabilities. As of January 31,
1998, there were no debts, liabilities or obligations (whether absolute,
contingent, known or unknown, asserted or unasserted or otherwise) of the Seller
of a type which need to be reflected on or disclosed in financial statements or
the notes thereto prepared in accordance with GAAP, except as reflected on or
disclosed in the Financial Statements (including the notes thereto). Since
January 31, 1998, the Seller has not incurred any debts, liabilities or
obligations (whether absolute, contingent, known or unknown, asserted or
unasserted or otherwise), except for debts, liabilities and obligations incurred
in the ordinary course of business to which the Assets are not subject at the
Closing and for which the Purchaser will have no liability or responsibility
whatsoever.

                  3.9 Title to Assets. The Seller has (x) good and marketable
title to all of the personal property included in the Assets and (y) good and
indefeasible title to all of the Real Property included in the assets, in each
case, free and clear of all Liens, other than (i) Liens for Taxes and other
governmental charges or levies which are not yet due and payable, (ii)
mechanics', workmen's, warehousemen's, vendors' or carriers' Liens arising under
applicable law in the ordinary course of business and securing sums 



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<PAGE>   16

which are not yet due and payable (or deposits or pledges to obtain the release
of any such Liens), (iii) rights reserved to or vested in any municipality or
other Governmental Authority to control or regulate the Assets, (iv) as to the
Real Property only, the reservation of a one-half interest in mineral rights set
forth on the Seller's warranty deed, (v) as to the Real Property only, Liens
that do not adversely affect the value of the Real Estate or interfere in any
material respect with the use or occupancy thereof as currently used or occupied
and (vi) Liens identified in Schedule 3.9 (any such Liens specified in clauses
(i) through (v) above being hereinafter referred to as "Permitted
Encumbrances"). The Assets constitute all of the assets and properties of the
Drilling Services Division and no other assets or properties are included in, or
constitute part of, the Drilling Services Division. Upon the sale, transfer,
assignment and conveyance of the Assets in accordance with this Agreement, the
Purchaser will acquire (x) good and indefeasible title to the Real Property
included in the Assets and (y) good and marketable title to the personal
property included in the Assets, in each case, free and clear of all Liens
except for Permitted Encumbrances. The decision rendered by the Supreme Court of
Texas on May 21, 1998 with regard to the suit pending between Hubert S.
Finklestein and the Seller constitutes a final and non-appealable disposition of
such matter.

                  3.10   Absence of Certain Events. Since January 31, 1998 or, 
if applicable, the Information Date, there has not been (i) any Material Adverse
Change or any event or occurrence or development that could reasonably be
expected to result in a Material Adverse Change, (ii) any sale, assignment or
disposition of any Assets (provided that, any ordinary wear and tear experienced
in the ordinary course, use or operation of the Assets shall not be deemed to be
a disposition of any of the Assets); (iii) any Lien created on or arising with
respect to any of the Assets, other than Permitted Encumbrances; (iv) any
material damage, destruction or loss to any of the Assets; or (v) any action or
omission on the part of the Seller that, if taken or omitted to be taken after
the date hereof, would cause a breach or violation of the Seller's covenants in
Section 5.3.

                  3.11   Tax Matters.

                  (a)    All Tax Returns reflecting a material amount of Tax 
that are required to be filed on or before the Closing Date by or on behalf of,
or in which is required to be reported a material amount of income, gains,
losses, deductions, or credits of, the Seller have been or will be filed within
the time prescribed by law (including extensions of time permitted by the
appropriate taxing authority).



                                       11
<PAGE>   17


                  (b) All material taxes of Seller which are due on or before
the Closing Date (including, but not limited to, Taxes required to be shown on
the Tax Returns described in the preceding paragraph), to the extent that a
claim for such Taxes could be satisfied from the Assets after the Closing Date,
have been or will be paid by the Seller on a timely basis, except those Taxes
that are being disputed in good faith. Adequate provision has been made in the
Financial Statements for all material Tax liabilities of the Seller described in
this Section 3.11(b) which are attributable to periods or partial periods ending
on or prior to the Closing Date.

                  (c) Except as set forth on Schedule 3.11(c), there are no
Liens for Taxes upon the Assets, except Liens for Taxes not yet due and payable.

                  (d) Schedule 3.11(d) hereto lists each state in which the
Seller has filed Tax Returns as a result of operations relating to the Assets or
utilizing the same.

                  (e) Except for claims that were resolved more than five years
ago, no written claim has been made by any taxing authority in a state or locale
where the Seller does not file Tax Returns that it is or may be subject to Taxes
in that state or locale as a result of operations relating to the Assets or
utilizing the same.

                  (f) All material Taxes required by law to be withheld or
collected by the Seller (including, but not limited to, Taxes required to be
withheld with respect to amounts paid or owing to any officer, employee,
creditor, stockholder, independent contractor or other person), to the extent
that a claim for such Taxes could be satisfied from the Assets after the Closing
Date, have been timely withheld and collected and, to the extent required by
law, have been timely paid, remitted or deposited to or with the relevant taxing
authority.

                  (g) As of the Closing Date, to the extent that a claim for
such amounts could be satisfied from the Assets after the Closing Date, (i) all
material undisputed assessments or asserted deficiencies made as a result of any
examination of any Tax Returns of or including the Seller or the operations
relating to the Assets have been paid or accrued, (ii) no material adjustments
or assessments for Taxes have been proposed in writing against the Seller or
against any Party with which the Seller files consolidated tax returns, and
(iii) to the knowledge of the Seller, there does not exist any proper basis for
any material assessment or adjustment for Taxes against the Seller or against
any Party with which the Seller files consolidated tax returns which has not yet
been proposed in writing.

                                       12

<PAGE>   18


                  (h)   To the knowledge of the Seller, there are no material
proposed reassessments of the taxable value (for property or ad valorem Tax
purposes) of any of the Assets by any taxing authority.

                  (i)   The Seller is not a foreign person within the meaning of
Section 1445 of the Code.

                  3.12  Employee Benefit Matters.

                  (a)   Schedule 3.12 sets forth each "employee benefit plan," 
as defined in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and all other employee compensation and benefit
arrangements or payroll practices, including, without limitation, all severance
pay, sick leave, vacation pay, salary continuation for disability, consulting or
other compensation agreements, retirement, deferred compensation, bonus,
long-term incentive, stock option, stock purchase, hospitalization, medical
insurance, life insurance, and scholarship plans or programs maintained by,
covering any employee of the Seller or any subsidiary, or to which the Seller or
any subsidiary is or has contributed or is or has been obligated to contribute
within the past six years (all such plans or arrangements being hereinafter
referred to as the "Employee Benefit Plans"). The Seller has no commitment or
obligation to establish or adopt any new or additional Employee Benefit Plans or
to materially increase the benefits under any existing Employee Benefit Plan.

                  (b)   Except as disclosed on Schedule 3.12, the Seller and all
ERISA Affiliates have complied in all material respects with all obligations
imposed by Section 4980B of the Code and Part 6 of Title I of ERISA and no
employee or former employee of the Seller or any ERISA Affiliate is, by reason
of such employee's or former employee's employment, entitled to receive any
benefits, including without limitation, death or medical benefits (whether or
not insured) beyond retirement or other termination of employment, other than
(i) death or retirement benefits under a Pension Plan or (ii) continuation
coverage pursuant to section 4980B of the Code.

                  3.13   Employment Matters; Labor Relations. (a) The Seller is
not a party to any labor union or collective bargaining agreement relating to
the Assets or the operations conducted by the Seller utilizing the same; (b)
there is no labor union or organizing activity pending or, to the knowledge of
the Seller, threatened against the Seller which could reasonably be expected to
have an adverse effect on the Seller or the Assets; (c) the Seller is not
engaged in any unfair labor practice relating to the Assets or the operations
conducted by the Seller utilizing the same; (d) there is no unfair labor
practice complaint pending or, to the knowledge of the Seller, threatened before
the


                                       13
<PAGE>   19

National Labor Relations Board or any other Governmental Authority which could
reasonably be expected to affect the Assets; (e) there is no labor strike,
dispute, slowdown or stoppage pending or, to the knowledge of the Seller,
threatened against the Seller which could reasonably be expected to affect the
Assets; (f) no grievance or other labor dispute or proceeding or any arbitration
proceeding arising out of or under any collective bargaining or other employee
agreement is pending or, to the knowledge of the Seller, threatened against the
Seller which could reasonably be expected to have an adverse effect on the
Assets; (g) except as set forth in Schedule 3.13, the Seller does not know of
any other actual or potential labor problem relating to the Assets or the
operations conducted by the Seller utilizing the same which could reasonably be
expected to have a Material Adverse Effect; and (h) neither the Seller nor any
person with whom the Seller would be treated as an "employer" for purposes of
the Worker Adjustment and Retraining Notification Act or any similar state law
("WARN") has taken any action or failed to take any action which could result in
any liability or obligation under WARN.


                  3.14  Environmental Compliance.

                  (a)   Except as provided in Schedule 3.14, the Seller is and 
has been in substantial compliance in all respects with all applicable
Environmental Laws relating to the Assets or the operations conducted by the
Seller utilizing the Assets which would create a liability for the Purchaser.
The Seller has obtained and is and has been in substantial compliance with all
permits relating to the Assets or the operations conducted by the Seller
utilizing the same required under applicable Environmental Laws. The Seller does
not know that there is any past or present event, condition or circumstance that
is likely to interfere materially with the use of the Assets by the Purchaser in
the manner now used by the Seller or which would materially interfere in any
respect with the Purchaser's compliance with Environmental Laws in connection
with the Assets or constitute a material violation thereof or require a material
expenditure by the Purchaser.

                  (b)    The Assets are not subject to any actual or, to the
knowledge of the Seller, potential action, claim, investigation, review or other
proceeding by any third party or before any Governmental Authority under or
based upon any Environmental Law.

                  (c)    The facilities and property included in the Assets have
been operated in substantial compliance with all applicable Environmental Laws
and are not (and would not be, if all relevant facts were known to the
applicable Governmental Authorities) subject to any removal, clean-up,
remediation, restoration or recordation



                                       14
<PAGE>   20

obligations under such laws. Except as set forth on Schedule 3.14, there are no
underground or above-ground storage tanks or pits on the real property included
in the Assets that require (or that would require, if all relevant facts were
known to the applicable governmental authorities) removal, clean-up,
remediation, restoration, reporting, notification, recordation or any other
action.

                  (d)   No hazardous substances, solid wastes or other wastes
generated by the Seller have been sent to a site which, pursuant to any
applicable Environmental Law, has been placed, or is proposed to be placed, on
the "National Priority List" or any similar state list of hazardous waste sites
or which is subject to a claim, administrative order or other request to take
any cleanup, removal or remedial action or to pay for any costs relating to such
site. All hazardous substances, solid wastes and other wastes generated by the
Seller and requiring disposal have, to the extent required by any Environmental
Law, been transported only by authorized carriers and been treated, stored and
disposed of only at permitted facilities.

                  (e)   The Seller has provided to the Purchaser true and 
correct copies of all environmental audits, assessments or other reports
relating to (i) the Assets or the operations conducted by the Seller utilizing
the same or (ii) the compliance by the Seller with, or liability of the Seller
under, Environmental Laws in connection with the Assets or the operations
conducted by the Seller utilizing the same.

                  3.15  Real Property.

                  (a)   Schedule 3.15 contains a complete and correct list of 
all real property owned or leased by the Seller and included in the Assets (the
"Real Property") setting forth the address of each parcel of Real Property. The
Seller has good, valid and indefeasible fee simple title to the Real Property
indicated on Schedule 3.15 as being owned by it, free and clear of all Liens
(except for the Permitted Encumbrances). There are no outstanding options or
rights of first refusal to purchase the Real Property, or any portion thereof or
interest therein.

                  (b)   Except as set forth on Schedule 3.15(b), there are no
eminent domain or other similar proceedings pending or threatened affecting any
portion of the Real Property. There is no writ, injunction, decree, order or
judgment outstanding, nor any action, claim, suit or proceeding, pending or
threatened, relating to the ownership, lease, use, occupance or operation by any
Person of any Real Property.

                  (c)   The use and operation of the Real Property by the Seller
does not violate in any material respect any instrument of record or agreement
affecting the Real 



                                       15
<PAGE>   21

Property. There is no violation of any covenant, condition, restriction,
easement or order of any Governmental Authority having jurisdiction over such
property or of any other Person entitled to enforce the same affecting the Real
Property or the use or occupancy thereof. No material loss, damage or
destruction has occurred with respect to any of the material Real Property since
January 31, 1998.

                  (d)  The Real Property is in substantial compliance with all
applicable building, zoning, subdivision and other land use and similar laws
affecting the Real Property (collectively, the "Real Property Laws"), and the
Seller have not received any notice of violation or claimed violation of any
Real Property Law. No current use by the Seller of the Real Property is
dependent on a nonconforming use or other Governmental Approval the absence of
which would materially limit the use of such properties or assets in the manner
they are currently being used.

                  (e)  Each parcel included in the Real Property is assessed for
real property tax purposes as a wholly independent tax lot, separate from
adjoining land or improvements not constituting a part of that parcel.

                  3.16 Intellectual Property.

                   (a) Schedule 3.16(a) contains a true, correct and complete
list of all Intellectual Property Rights owned or used by the Seller relating to
the Assets or the operations conducted by the Seller utilizing the same and all
applications for registrations of Intellectual Property Rights filed by the
Seller relating to the Assets or the operations conducted by the Seller
utilizing the same. Schedule 3.16(a) also contains a true, correct and complete
list of all licenses granted by the Seller to any third party with respect to
any Intellectual Property Rights relating to the Assets or the operations
conducted by the Seller utilizing the same and all licenses granted by any third
party to the Seller with respect to any such Intellectual Property Rights (other
than standard form licenses with respect to commercial software that is
generally available from third parties).

                  (b)  Except as set forth on Schedule 3.16(b), the Seller has
not received any notices of any infringement or misappropriation by, or conflict
with, any third party with respect to the Intellectual Property (including, but
not limited to, any demand or request that the Seller license any rights from a
third party).

                  3.17 Solvency. The Seller is solvent, is able to pay its debts
as they become due, has capital sufficient to carry on its business as presently
conducted and proposed to be conducted, and


                                       16
<PAGE>   22

 owns property which has both a fair
value and a fair saleable value in excess of the amount required to pay its
debts as they become due. The Seller will not be rendered insolvent by the
transactions contemplated by this Agreement or any of the Related Agreements,
and following the consummation of such transactions, the Seller will be able to
pay its debts as they become due, will have capital sufficient to carry on its
business as then conducted and proposed to be conducted, and will own property
which has a fair value and a fair saleable value in excess of the amount
required to pay its debts as they become due.

                  3.18 Brokers and Finders. The Seller has not incurred any
liability, contingent or otherwise, for brokers' or finders' fees in respect of
this transaction for which the Purchaser shall have any responsibility
whatsoever.


                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES
                                OF THE PURCHASER

                  The Purchaser represents and warrants to the Seller as
follows:

                  4.1 Organization. The Purchaser is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business in each jurisdiction where it
conducts business. The Purchaser has all requisite power and authority to
conduct its business and to own or lease its properties, as now conducted, owned
or leased.

                  4.2 Authority; Binding Effect. The Purchaser has all necessary
partnership power and authority to enter into and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement have been duly and validly authorized
by all necessary partnership action on the part of the Purchaser for such
authorization. This Agreement has been duly executed and delivered by the
Purchaser and constitutes a valid and binding agreement of the Purchaser,
enforceable against the Purchaser in accordance with its terms.

                  4.3 No Conflicts. The execution and delivery by the Purchaser
of this Agreement and the performance by the Purchaser of the transactions
contemplated hereby, will not: (i) conflict with, or result in a violation or
breach of, any provision of the partnership agreement of the Purchaser, (ii)
conflict with, or result in any violation or breach of, or constitute a default
under, any term or provision of any mortgage, 



                                       17
<PAGE>   23

indenture, deed of trust, note, bond, lease, permit, license or other
instrument, contract or agreement to which the Purchaser is a party or by which
its properties or assets are bound, (iii) conflict with, or result in any
violation of, any law, ordinance, statute, rule or regulation of any
Governmental Authority or of any order, writ, injunction, judgment or decree of
any court, arbitrator or Governmental Authority applicable to the Purchaser.

                  4.4   Consents and Filings. There is no requirement applicable
to the Purchaser to obtain any consent, approval or authorization of, or to make
or effect any declaration, filing or registration with, any Governmental
Authority for the valid execution and delivery by the Purchaser of this
Agreement, the due performance by the Purchaser of its obligations hereunder or
the lawful consummation of the transactions contemplated hereby, except filings
required with respect to the transactions contemplated by this Agreement
pursuant to the HSR Act.

                  4.5   Knowledgeable Investor. The Purchaser is primarily 
engaged in the business of providing contract land drilling services to oil and
gas companies. The Purchaser has been advised by, and has relied on, their own
technical, scientific, legal, tax and other professional counselors in entering
into this Agreement.

                  4.6   Brokers and Finders. The Purchaser has incurred no
liability, contingent or otherwise, for brokers' or finders' fees in respect of
this transaction for which the Seller will have any responsibility whatsoever.


                                    ARTICLE V

                        CERTAIN COVENANTS AND AGREEMENTS

                  5.1   Access to Information; Indemnification.

                  (a)   From the date hereof until the Closing Date, the Seller
shall grant to the Purchaser and its agents and other representatives, upon
reasonable notice and during normal business hours, access to the books and
records, facilities, tangible assets and personnel of the Seller to the extent
reasonably required to enable the Purchaser to conduct its due diligence review
for purposes of the transactions contemplated by this Agreement. All such
information obtained by the Purchaser and its agents and representatives shall
be subject to the terms of the Confidentiality Agreement until the Closing Date.


                                       18

<PAGE>   24

                  (b)   The Purchaser agrees to indemnify the Seller and hold 
them harmless from and against any and all damages, losses, liabilities,
demands, claims, actions, causes of action, proceedings, assessments,
settlements, judgments, fines, penalties, interest, costs or expenses, including
legal and other expenses incurred in investigating and defending the same
(collectively, "Damages") which arise from any personal injury, death or
property damage resulting from any actions of the Purchaser in the course of the
Purchaser's inspection of the Assets pursuant to paragraph (a) of this Section.

                  5.2   Commercially Reasonable Efforts. Subject to the terms 
and conditions hereof, each of the parties hereto shall use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things which are necessary, proper or advisable under
applicable laws and regulations or otherwise in order to consummate and make
effective the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, each of the parties hereto shall execute and
deliver, or cause to be executed and delivered, all agreements, certificates and
other instruments and shall use its reasonable best efforts promptly to obtain
all waivers, permits, consents, approvals and other authorizations from, and to
effect all registrations, filings and notices with or to, any Governmental
Authorities or other Persons which are necessary or appropriate in connection
with said transactions or in order to fulfill all conditions to obligations of
the parties under this Agreement.

                  5.3   Conduct of Business Pending Closing. From the date 
hereof until the Closing, except as contemplated by this Agreement or as
otherwise consented to by the Purchaser in writing, the Seller shall (a) use and
operate the Assets in the ordinary course and in a manner consistent with past
practice, (b) maintain its books, accounts and records relating to the Assets or
the operations conducted by the Seller utilizing the same in the usual, regular
and ordinary manner, consistent with past practice, (c) maintain the Assets in
the usual, regular and ordinary manner, consistent with past practice, (d)
perform in all material respects all of the obligations under all Contracts and
other agreements and instruments relating to or affecting the Assets, (e) comply
in all material respects with all applicable laws and regulations relating or
applicable to the Assets. Without limiting the generality of the foregoing, from
the date hereof until the Closing Date, except as permitted by this Agreement or
as otherwise consented to by the Purchaser in writing, the Seller shall not (A)
consolidate or merge with any person; (B) change any accounting principles or
methods, except as required by law or as a result of any mandatory change in
accounting standards; (C) mortgage, pledge or subject to any lien, claim or
encumbrance any of the Assets, (D) incur any debt to which the Assets may be
subject after the Sale Effective Date, (E) sell, assign, lease, transfer or
dispose of any of the Assets (provided that, any ordinary wear and tear
experienced in


                                       19
<PAGE>   25

the ordinary course, use or operation of the Assets shall not be deemed to be a
disposition of any of the Assets) or (F) take any action or omit to take any
action which would result in a breach of any of the Seller's representations and
warranties.

                  5.4 Exclusivity. From the date hereof until the Closing or, if
earlier, the date of termination of this Agreement, (i) neither the Seller nor
any of its respective Affiliates, agents or representatives shall, directly or
indirectly, solicit, encourage or accept any offer from, or negotiate or engage
in discussions with, any party with respect any offer or proposal, inquiry or
indication of interest from any Person relating to any direct or indirect
acquisition or purchase of all or any substantial portion of the Assets or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction which is or may be inconsistent with or an
impediment to the transactions contemplated by this Agreement. The Seller shall
promptly notify the Purchaser of any inquiry (including the terms thereof and
the identity of the Person making such inquiry) which it may receive in respect
of any such transaction.

                  5.5 Notice. The Seller shall give written notice to the
Purchaser promptly after the Seller obtains knowledge of the occurrence, or the
alleged occurrence, of any event or omission which would result in (i) any of
the Seller's representations or warranties being or becoming inaccurate or
misleading or (ii) any breach by the Seller of this Agreement.

                  5.6 Confidentiality of Information. Prior to the Closing Date,
the provisions of the Confidentiality Agreement shall apply to any information
provided to the Purchaser and any of their Affiliates, partners, managers,
officers, agents or representatives. If this Agreement is terminated, the
Confidentiality Agreement shall remain in effect in accordance with its terms.
After the Closing Date, the Confidentiality Agreement shall terminate and be of
no further force or effect.

                  5.7 HSR Act. No later than May 29, 1998, each party hereto
will file or cause to be filed with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust Division")
notification and report forms pursuant to the HSR Act relating to the sale and
purchase of the Assets. The parties will promptly respond to any request for
additional information or documentary material by the FTC or the Antitrust
Division and shall cooperate with each other in order to ensure that all waiting
periods (and any extension thereof) applicable to the consummation of the sale
and purchase of the Assets under the HSR Act expire or are terminated as
promptly as practicable.


                                       20

<PAGE>   26


                  5.8  Employee Matters.

                  (a)  From the date hereof until the Closing, the Seller shall
make available to the Purchaser all employees of the Seller employed with or in
connection with the Assets (the "Target Employees") for the purpose of allowing
the Purchaser to offer employment to such Target Employees at or after the Sale
Effective Time, if the Purchaser, in its sole discretion, elects to do so. The
Seller shall cooperate with the Purchaser in connection with the making of such
offers of employment, if any, to the Target Employees, and the distribution of
information to such Target Employees. The Seller shall use all reasonable
efforts to cause the Target Employees offered employment to make available their
employment services to the Purchaser. The Seller has not and will not make any
representation, promise or other communication, whether written or oral, to the
Target Employees regarding employment with the Purchaser or the employment
benefits, plans or practices of the Purchaser without obtaining the prior
written consent of the Purchaser. The Seller has not taken and will not take any
action that diminishes the right of the Purchaser to hire or dismiss, subject to
applicable law, any Target Employee, with or without cause.

                  (b)  The parties hereby acknowledge and agree that the
Purchaser is under no obligation to employ any individual employed by the Seller
and, to the extent the Purchaser does employ any such individual, such
employment shall be at-will and the Purchaser shall be under no obligation to
provide compensation or benefits comparable to those provided to such individual
by the Seller. The Seller shall indemnify and hold the Purchaser harmless from
and against any and all claims, expenses (including attorneys' fees), losses and
liabilities arising with respect to (i) the employment by the Seller of any of
its employees prior to the Closing Date and (ii) the application of any employee
benefit plan, severance plan, policy or practice of the Seller to any employee
involved in the conduct of the Seller's business.

                  (c)  Purchaser will permit Target Employees who are hired by
Purchaser and who are eligible to participate in Purchaser's 401(k) plan to
effect a direct rollover of any eligible rollover distribution from Seller's
Long Term Savings Plan to Purchaser's 401(k) plan; provided that such direct
rollover is permissible under the terms of Purchaser's 401(k) plan and the Code
and provided further that Seller shall have provided to Purchaser such written
representations and other evidence reasonably satisfactory to Purchaser to
permit Purchaser to conclude that the distribution is an eligible rollover
distribution and that the direct rollover of such distribution is permissible.




                                       21
<PAGE>   27

                  5.9  Access to and Maintenance of Records; Financial
Statements.

                  (a)  From and after the Closing Date, each of the Purchaser 
and the Seller will preserve and maintain the corporate, accounting, auditing,
tax and other books and records related to the Assets that are held by it or
transferred pursuant to this Agreement and will make such books and records
available to each other upon reasonable notice and at reasonable times. The
Purchaser and the Seller shall be entitled to make copies of any such books and
records as they shall deem reasonably necessary for purposes of making the same
available to appropriate tax or other governmental authorities.

                  (b)  If requested by the Purchaser, the Seller shall, as
promptly as practicable, prepare and deliver to the Purchaser audited financial
statements which relate to the business and operations conducted through the
Assets (excluding all other businesses and operations of the Seller) for the
three most recent fiscal years preceding the Closing Date. Such financial
statements shall consist of a balance sheet as of the appropriate date and a
statement of operations and a statement of cash flows for the year then ended
and shall be accompanied by a report of Coopers & Lybrand L.L.P. (or other
nationally recognized firm of independent accountants) with respect thereto.
Such financial statements shall be prepared and presented in accordance with
GAAP applied on a consistent basis and shall present fairly the financial
position and results of operations and changes in cash flows of such business
and operations as of the dates and for the periods indicated.

                  5.10 Publicity. From the date hereof until the Closing Date,
each of the parties hereto agrees that it shall not and shall not permit its
respective Affiliates to make any public statement (whether written or oral)
with respect to this Agreement or the transactions contemplated herein without
the prior written consent of the other party hereto, unless such public
statement (i) is required by law, stock exchange requirements or legal process
or (ii) in the case of the Purchaser, is related to the Financing.

                  5.11 Non-Competition.

                  (a)  The Seller hereby agrees that, for a period of thirty
months from and after the Closing Date (such period being hereinafter referred
to as the "Non-Competition Period"), it will not, directly or indirectly
(whether acting alone or through any of its Affiliates, as a member of a
partnership or a joint venture or an investor in, or a holder of securities of,
any corporation or other entity or otherwise), (i) engage in the Covered
Drilling Activities (as defined in the Drilling Alliance Agreement) in the area
comprising the States of Alabama, Louisiana, Mississippi, New Mexico, Oklahoma
and



                                       22
<PAGE>   28

Texas (such area being hereinafter referred to as the "Non-Competition Area")
for hire to any other Person or (ii) hire, attempt to hire, or assist any Person
in hiring or attempting to hire any employee of the Purchaser or its Affiliates.
Notwithstanding anything to the contrary in this Section 5.11, the Seller may
own, for investment purposes only, up to five percent of the stock of any
publicly-held corporation whose stock is listed on a national securities
exchange or on the NASDAQ National Market System if the Seller is not otherwise
affiliated with such corporation. The parties hereto expressly acknowledge and
agree that (i) the agreements set forth in this Section 5.11 contain reasonable
limitations as to time, geographical area and scope of activity, and (ii) in
light of the operations heretofore conducted by the Seller, the interests of the
parties hereto and the nature of the transactions contemplated by this
Agreement, the agreements contained in this Section 5.11 are reasonable and do
not impose a greater restraint than is necessary to protect the goodwill and
other business interests associated with the Assets.

                  (b)   It is expressly understood and agreed that if any of the
agreements set forth in this Section 5.11 is found to be unreasonably broad,
oppressive or unenforceable in an action, suit or proceeding before any federal
or state court or other Governmental Authority, such court or Governmental
Authority (i) shall narrow the Non-Competition Period or the Non-Competition
Area or shall otherwise endeavor to reform the scope of such agreements in order
to ensure that the application thereof is not unreasonably broad, oppressive or
unenforceable and (ii) to the fullest extent permitted by law, shall enforce
such agreements as so reformed.

                  5.12. Casualty Losses.

                  (a)   If after the date hereof and prior to the Closing, the
Seller experience a Casualty Loss and such Casualty Loss does not or could not
be reasonably be expected to result in a Material Adverse Effect (each a
"Non-Material Casualty Loss"), this Agreement shall remain in full force and
effect and the provisions of this Section 5.12 shall govern. Upon experiencing
any Casualty Loss, the Seller shall promptly notify the Purchaser of the facts
and circumstances of such Casualty Loss, including an estimate of the dollar
amount of such damage or condemnation and the existence of insurance coverage or
condemnation proceeds therefor.

                  (b)   If any such Non-Material Casualty Loss is covered by
insurance or results in condemnation proceeds, the Seller shall not, without the
Purchaser's consent, apply any insurance or condemnation proceeds (the
"Proceeds") to the repair, restoration or replacement of the Assets. If the
Proceeds are not committed or applied by the Seller to the repair, restoration
or replacement of the Assets prior to the Closing



                                       23
<PAGE>   29

Date (either due to the withholding of the Purchaser's consent or for any other
reason), the Seller shall pay at the Closing to the Purchaser all Proceeds
received in cash. If the Proceeds have not been received by the Seller prior to
the Closing Date, the Seller shall transfer to the Purchaser at the Closing all
right, title and interest of the Seller in and to any unpaid Proceeds. The
Proceeds applied by the Seller at the Purchaser's request, transferred to the
Purchaser at the Closing Date, or the rights to such Proceeds transferred to the
Purchaser, shall be the Purchaser's sole remedy for any Non-Material Casualty
Loss which is covered by insurance or results in condemnation proceeds.

                  (c)   If any such Non-Material Casualty Loss is not covered by
insurance or will not result in condemnation proceeds, the parties hereto will
negotiate in good faith to determine the dollar amount of the damage caused by
such Non-Material Casualty Loss (the "Damage Amount"), during the five business
days following the Purchaser's receipt of notice of such Non-Material Casualty
Loss. At the Closing, the Seller shall pay the Purchaser the Damage Amount in
cash. If the parties are unable to agree on the Damage Amount, such amount shall
be determined in accordance with the arbitration provisions of Section 9.7.

                  5.13  Environmental Matters.

                  (a)   The Seller and the Purchaser have jointly retained 
Applied Earth Sciences (the "Environmental Consultant") to undertake an
environmental assessment of the Yard (the "Environmental Assessment"). The
Seller and the Purchaser shall cooperate to jointly develop a statement of the
scope of work to be undertaken by such Environmental Consultant. The results of
the work of the Environmental Consultant shall be reported to the Seller and to
the Purchaser jointly as such work is performed. The fees and expenses of the
Environmental Consultant shall be shared equally by the Seller and the
Purchaser.

                  (b)   If the Environmental Assessment recommends that any
removal, clean-up, remediation or restoration or other remedial action (each, a
"Remedial Action") be undertaken with respect to any condition or circumstance
at the Yard ("Environmental Condition"), the Seller shall, at its sole cost and
expense, promptly undertake such Remedial Action in compliance with all
applicable Environmental Laws and in a manner reasonably acceptable to both
parties. The Purchaser shall have the right to review and discuss with
representatives of the Seller (and the Seller shall provide to the Purchaser
such information as Purchaser shall reasonably request relating to) the nature
of any Environmental Condition and the conduct and results of any Remedial
Action with respect thereto. If and to the extent that the Seller completes any
Remedial Action in compliance with applicable Environmental Laws and in a manner




                                       24

<PAGE>   30

reasonably acceptable to the Purchaser (it being understood that it shall be
reasonable for the Purchaser to object to the Remedial Action or the results
thereof if Purchaser concludes that the Environmental Condition (as remedied by
the Seller) is likely to interfere in any material respect with the Purchaser's
compliance with Environmental Laws in connection with the Assets or constitute a
material violation thereof or require a material expenditure by the Purchaser or
materially interfere with Purchaser's use of the Assets), the applicable
Environmental Condition will be deemed to have been disclosed to the Purchaser
pursuant to Schedule 3.14 of this Agreement and the existence of the
Environmental Condition (as remedied by the Seller) shall not be deemed to be a
breach of the representations and warranties made by the Seller pursuant to
Section 3.14 for which Purchaser may seek to be indemnified by Seller under
Section 7.2 (i). Seller shall also not be obligated to indemnify Purchaser under
Section 7.2 (iv) for costs subsequently incurred by Purchaser in addressing such
Environmental Condition; provided however, that this limitation shall only apply
to costs subsequently incurred by Purchaser for remediating soil, surface water
or groundwater located at the Yard itself and which constitute the same soil,
surface water or groundwater identified as the Environmental Condition;
provided, further, that this limitation shall not limit in any way Seller's
obligations under Section 7.2 (iv) to indemnify Purchaser for unidentified
contamination at the Yard, contamination existing on adjacent properties, or any
damage to persons or property as set forth therein.

                  5.14  Tax Matters.

                  (a)   Tax Reporting for 1998. The Seller will (i) prepare and
timely file with the IRS and each applicable taxing authority Tax Returns which
include all income, gains, losses, deductions and credits, and which report all
applicable Taxes, attributable to the operations relating to the Assets and
attributable to the Seller for the period or periods (including partial periods)
up to and including the applicable Closing Date and (ii) make timely payments
of, and indemnify and hold Purchaser harmless from and against, all Taxes
required to be reflected on such Tax Returns. The Purchaser will (A) prepare and
timely file with the IRS and each applicable taxing authority Tax Returns which
include all income, gains, losses, deductions and credits, and which report all
applicable Taxes, attributable to the operations relating to the Assets for the
period after the Closing Date and (B) make timely payments of, and indemnify and
hold the Seller harmless from and against, all Taxes required to be reflected on
such Tax Returns.

                  (b)   Transaction Taxes. The Purchaser and the Seller (i)
believe, based on their separate and independent research, that the transfers
provided for in this Agreement qualify as transfers that are exempt from sales
and use taxes, based on the 



                                       25
<PAGE>   31

casual sale and other allowable exemptions and (ii) shall make filings, adopt
reporting positions, and otherwise act in a manner that is consistent with the
foregoing. If any taxing authority asserts that sales and use taxes are due as a
result of the transfers provided for in this Agreement ("Transaction Taxes"), or
if there is otherwise any contest or proceeding involving Transaction Taxes,
each party shall promptly provide the other party with written notice of any
claim or assertion, or of the commencement of any audit or proceeding, and with
copies of all correspondence, notices or other documents relating thereto. The
Purchaser shall control and direct the conduct of any such inquiry, audit, or
administrative or judicial proceeding regarding Transaction Taxes and may, in
its sole discretion, agree to pay, settle, compromise, or concede any contest or
claim relating to Transaction Taxes. The Seller shall, on a timely and
commercially reasonable basis, (A) provide the Purchaser with powers of attorney
or other appropriate documents which will enable the Purchaser to conduct any
such proceeding, (B) furnish the Purchaser with such information and
documentation as is reasonably requested by the Purchaser in connection with
such proceedings, (C) take such actions and make such filings and submissions as
are required or requested by the Purchaser in connection with such proceedings.
If Transaction Taxes are ultimately determined to be payable, the Purchaser
shall be liable for, and shall indemnify and hold the Seller harmless from and
against, 75% of such Transaction Tax and related interest and penalties, and the
Seller shall be liable for, and shall indemnify and hold the Purchaser harmless
from and against, 25% of such Transaction Tax and related interest and
penalties.

                  5.15  Real Property.

                  (a)   As soon as reasonably practicable after the date hereof,
Seller, at Seller's expense, shall cause to be issued and delivered to the
Purchaser (i) an owner's title insurance policy commitment (the "Title
Commitment") from a nationally recognized title insurance company reasonably
acceptable to the Purchaser (the "Title Company") to be issued by the Title
Company in an amount to be determined by the Purchaser, insuring the Purchaser's
fee simple title to the Real Property to be good and indefeasible subject only
to the standard printed exceptions and to the Permitted Encumbrances, provided,
however that (i) the exception to the area and boundaries shall be deleted
except for "any shortages in area;" (ii) the standard exception as to
restrictive covenants shall be deleted; (iii) the exception as to standby fees
and taxes shall be limited to standby fees and taxes for the year of Closing and
subsequent years, and subsequent assessments for prior years due to changes in
land usage or ownership; (iv) the exception as to the rights of parties in
possession shall be deleted; (v) there shall be no exception for lack of access
and (vi) the arbitration provisions shall be deleted.

                                       26

<PAGE>   32


                  (b) As soon as reasonably practicable after the date hereof
and prior to the Closing Date, Seller, at Seller's expense, shall provide
Purchaser with a current or currently recertified Condition II, Category 1A,
Land Title Survey (according to the Texas Surveyors Association's Manual of
Practice) of the Real Property (the "Survey"), which shall (i) reflect the
actual dimensions of, and area within, the Real Property, the location of any
easements, setback lines, encroachments, or overlaps thereon or thereover, if
any, identified on the Title Commitment, and the outside boundary lines of all
buildings, structures or improvements on the Real Property and (ii) otherwise be
in a form reasonably acceptable to the Purchaser and the Title Company. The
Warranty Deed to be delivered by Seller to the Purchaser at the Closing shall
follow the metes and bounds description of the Real Estate reflected in the
Survey.


                                   ARTICLE VI

                              CONDITIONS TO CLOSING

                  6.1. Conditions to the Obligations of Each of the Parties. The
obligations of the Purchaser and the Seller to consummate the transactions
contemplated hereby at the Closing are subject to the fulfillment, at or prior
to the Closing, of the following conditions:

                  (a)  there shall not be any injunction, writ, temporary
restraining order or any order issued by any court or governmental agency
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement; and

                  (b)  all applicable waiting periods under the HSR Act shall
have terminated or expired and no objection shall have been made to the
transaction by either the Federal Trade Commission or the Department of Justice.

                  6.2. Conditions to the Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated hereby
at the Closing are subject to the fulfillment, or waiver by the Purchaser, at or
prior to the Closing, of the following conditions:

                  (a)  the representations and warranties of the Seller 
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on such date;


                                       27
<PAGE>   33


                  (b)  the Seller shall have duly performed or complied in all
material respects with all of the agreements, covenants and obligations to be
performed or complied with by the Seller under the terms of this Agreement on or
prior to the Closing Date;

                  (c)  the Seller shall have entered into the Drilling Alliance
Agreement and the Initial Drilling Contracts;

                  (d)  Since January 31, 1998 or, if applicable, the Information
Date, there shall not have been a Material Adverse Change or any event or
occurrence or development that could reasonably be expected to result in a
Material Adverse Change;

                  (e)  the Seller shall have removed all Liens against the 
Assets (including, but not limited to, the judgment lien recorded in favor of
Hubert S. Finklestein) other than the Permitted Encumbrances; provided that, if
the Seller is not able to remove the judgment lien recorded in favor of Hubert
S. Finklestein prior to Closing, the Seller shall enter into (i) an escrow
agreement, providing for the deposit of an appropriate amount of the Purchase
Price with the escrow agent named therein pending the removal of such judgment
lien or (ii) such other security arrangement relating to such judgment lien, in
each case, in form and substance satisfactory to the Purchaser; and upon
Seller's compliance with this proviso, the judgment lien in favor of Hubert S.
Finklestein shall not be deemed to constitute a Lien under this Agreement;

                  (f)  the Purchaser shall have received the Environmental
Assessment which shall be in form and substance reasonably satisfactory to the
Purchaser and all Remedial Actions shall have been completed in accordance with
the provisions of Section 5.13(b);

                  (g)  the Seller shall have entered into (i) a letter of credit
or an escrow agreement, in form and substance satisfactory to the Purchaser,
providing, among other things, for (x) the payment of all obligations of the
Seller (up to $2,000,000) under any drilling contract entered pursuant to the
Drilling Alliance Agreement immediately upon Purchaser's presentment of a claim
to the bank or escrow agent, as the case may be, and (y) the maintenance during
the term of the Drilling Alliance Agreement of $2,000,000 in escrow or in a
letter of credit or (ii) such other form of security arrangement satisfactory to
the Purchaser (each, a "Security Arrangement");

                  (h)  the Seller shall have obtained the Title Commitment in
form and substance reasonably satisfactory to the Purchaser;


                                       28
<PAGE>   34


                  (i)  the Purchaser shall have received (a) certificates dated
the Closing Date, executed by a senior officer and the chief financial officer
of the Seller, certifying that the conditions set forth in paragraphs (a) and
(b) above, have been fulfilled; and

                  (j)  the Purchaser shall have received an opinion from Gardere
and Wynne, counsel to the Seller, dated the Closing Date, in form and substance
reasonably satisfactory to the Purchaser.

                  6.3  Conditions to the Obligations of the Seller. The
obligation of the Seller to consummate the transactions contemplated hereby at
the Closing is subject to the fulfillment, or waiver by the Seller, at or prior
to the Closing, of the following conditions:

                  (a)  the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on such date;

                  (b)  the Purchaser shall have duly performed or complied in
all material respects with all of the agreements, covenants and obligations to
be performed or complied with by the Purchaser under the terms of this Agreement
on or prior to the Closing Date;

                  (c)  the Purchaser shall have entered into the Drilling
Alliance Agreement and the Initial Drilling Contracts;

                  (d)  the Seller shall have received a certificate, dated the
Closing Date, executed by the general partner of the Purchaser, certifying that
the conditions set forth in paragraphs (a) and (b) above have been fulfilled;
and

                  (e)  the Seller shall have received an opinion from Baker &
Botts, L.L.P., counsel to the Purchaser, dated the Closing Date, in form and
substance reasonably acceptable to the Seller.

                                       29

<PAGE>   35

                                   ARTICLE VII

                                 INDEMNIFICATION

                  7.1   Survival of Representations and Warranties. The
representations and warranties contained in this Agreement shall survive the
Closing and any investigation made at any time by or on behalf of the Purchaser,
and shall thereafter continue in full force and effect until the eighteen months
after the Closing Date, except for (i) the representations and warranties made
pursuant to Section 3.14, which shall continue in full force and effect until
the third anniversary of the Closing Date and (ii) the representations and
warranties made pursuant to Sections 3.9, 3.11 and 3.12, which shall continue in
full force and effect until the expiration of the applicable statute of
limitations covering any liability for which indemnification is provided under
such sections (taking into account any waiver or extension thereof); provided
that the representations and warranties solely as to the title of the Real
Property made pursuant to Section 3.9 shall not survive the delivery of the
Warranty Deed at Closing.

                  7.2   Indemnification by the Seller. The Seller shall, jointly
and severally, indemnify and hold harmless the Purchaser and each of its
partners, officers and Affiliates against any and all Damages incurred or
sustained by such person resulting from or arising out of :

                  (i)   the breach of any representation or warranty of the 
         Seller contained in this Agreement or in any Related Agreement;

                  (ii)  any breach of any agreement or covenant of the Seller
         contained in this Agreement or in any Related Agreement;

                  (iii) any Excluded Assets or Seller Liabilities; and

                  (iv)  any injury, sickness, disease or death of any Person,
         damage to any properties or assets or remediation of any soil, surface
         water or groundwater to the extent attributable to any conditions,
         events, facts, circumstances or other matters existing or occurring
         prior to the Closing Date which result from the use or operation of any
         real property owned or leased by the Seller in connection with the
         Assets or any oil and gas well drilling operations of the Seller
         conducted prior to the Closing Date (it being understood and agreed
         that this clause (iii) shall not be construed to limit the generality
         of clause (i) or (ii) above);


                                       30
<PAGE>   36


provided, however, that (x) the Purchaser will not be entitled to assert rights
of indemnification under this Article VII unless and until the aggregate of all
such Damages for which the Purchaser seeks indemnification hereunder exceeds
$500,000 (it being understood that such Damages will accumulate until such time
or times as the aggregate of all such Damages exceeds $500,000, at which time
the Purchaser will be entitled to indemnification for all such Damages covered
under this Article VII) and (y) the liability of the Seller in respect of any
claims of the Purchaser under this Article VII shall not exceed an aggregate of
$75,000,000.

                  7.3   Indemnification by the Purchaser. From and after the
Closing Date, the Purchaser shall indemnify and hold harmless the Seller and
their respective directors, officers, stockholders and Affiliates against any
and all Damages incurred or sustained by such Person resulting from or arising
out of:

                   (i)  the breach of any representation or warranty of 
         Purchaser contained in this Agreement or in any Related Agreement;

                  (ii)  any breach of any agreement or covenant of the Purchaser
         contained in this Agreement or in any Related Agreement; and

                  (iii) any Purchaser Liabilities;

provided, however, that the Seller will not be entitled to assert rights of
indemnification under this Article VII unless and until the aggregate of all
such Damages for which the Seller seeks indemnification hereunder exceeds
$500,000 (it being understood that such Damages will accumulate until such time
or times as the aggregate of all such Damages exceeds $500,000, at which time
the Seller will be entitled to indemnification for all such Damages covered
under this Article VII).

                  7.4   Indemnification for Third Party Claims. The following
procedures shall be applicable with respect to indemnification for Damages made
or asserted by third parties ("Third Party Claims").

                  (a)   Each Person entitled to indemnification under Section
7.2 or 7.3 hereof (each, an "Indemnified Party") shall give the party or parties
from whom it is seeking indemnification hereunder (collectively, the
"Indemnifying Party") written notice as promptly as reasonably practicable after
the written assertion of any Third-Party Claim or commencement of any action,
suit or proceeding in respect thereof; provided, however, that, if an
Indemnified Party fails to give Indemnifying Party written notice as provided
herein, Indemnifying Party shall only be relieved of its obligations 



                                       31
<PAGE>   37

under this Article VII in respect of such Third-Party Claim if and to the extent
that the Indemnifying Party is materially prejudiced thereby (whether as a
result of the forfeiture of substantive defenses or otherwise).

                  (b) Promptly after receipt of written notice of a Third-Party
Claim as contemplated by Section 7.4(a), the Indemnifying Party may in its sole
discretion elect to assume the defense of such Third-Party Claim with counsel
reasonably satisfactory to the Indemnified Party; provided, however, that (i) if
the Indemnifying Party fails, within a reasonable time after receipt of written
notice of such Third-Party Claim, to assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Party, the Indemnified Party shall
have the right to undertake the defense, compromise and settlement of such
Third-Party Claim on behalf of and for the account and risk of the Indemnifying
Party, subject to the right of the Indemnifying Party (upon notifying the
Indemnified Party of its election to do so) to assume the defense of such
Third-Party Claim with counsel reasonably satisfactory to the Indemnified Party
at any time prior to the settlement, compromise, judgment or other final
determination thereof, (ii) if there exists a direct or indirect conflict of
interest exists between the Indemnified Party and the Indemnifying Party in
respect of the Third-Party Claim that would prohibit the assumption of the
defense by the Indemnified Party under the applicable principles of legal
ethics, the Indemnified Party shall (upon written notice to the Indemnifying
Party of its election to do so) have the right to undertake the defense of such
Third-Party Claim on behalf of and for the account and risk of the Indemnifying
Party (it being understood and agreed that the Indemnifying Party shall not be
entitled to assume the defense of such Third-Party Claim), provided that if the
Indemnified Party does undertake the defense, the Indemnified Party shall not
settle such claim without the written consent of the Indemnifying Party, such
consent not to be unreasonably withheld, (iii) if the Indemnified Party in its
sole discretion so elects, it shall be entitled to employ separate counsel and
to participate in the defense of such Third-Party Claim (and the Indemnifying
Party shall cooperate with the Indemnified Party so as to allow it to
participate in the defense thereof), but the fees and expenses of counsel so
employed shall (except as otherwise contemplated by clauses (i) and (ii) above)
be borne solely by the Indemnified Party and (iv) without the prior written
consent of the Indemnified Party, the Indemnifying Party shall not settle or
compromise any Third-Party Claim, or consent to the entry of any judgment
relating thereto, that does not include as an unconditional term thereof the
grant by the claimant or plaintiff to each Indemnified Party of a release from
any and all liability in respect thereof. In any event, the Indemnifying Party
and the Indemnified Party shall cooperate in the defense of any claim or
litigation subject to this Section 7.4 and the records of each shall be
available to the other with respect to the defense.



                                       32
<PAGE>   38


                  7.5   Express Negligence. THE PARTIES AGREE THAT THE 
OBLIGATIONS OF EACH INDEMNIFYING PARTY TO INDEMNIFY THE INDEMNIFIED PARTY UNDER
THIS AGREEMENT SHALL APPLY WITHOUT REGARD TO THE NEGLIGENCE OR STRICT LIABILITY
OF THE INDEMNIFIED PARTY AND WHETHER THE NEGLIGENCE OR STRICT LIABILITY IS
ACTIVE, PASSIVE, JOINT, CONCURRENT OR SOLE.


                                  ARTICLE VIII

                                   TERMINATION

                  8.1   Termination. This Agreement may be terminated:

                  (a)   at any time prior to the Closing by mutual consent of
the Purchaser and the Seller;

                  (b)   by the Purchaser upon notice to the Seller if the Seller
breaches any of the material terms hereof so that any of the conditions set
forth in Sections 6.1 or 6.2 shall become incapable of fulfillment and shall not
have been waived by the Purchaser; provided however, that Purchaser has
diligently and in good faith performed and complied in all material respects
with the agreements and covenants required to be performed by it hereunder;

                  (c)   by the Seller upon notice to the Purchaser if the
Purchaser breaches any of the material terms hereof so that any of the
conditions set forth in Sections 6.1 or 6.3 shall become incapable of
fulfillment and shall not have been waived by the Seller; provided however, that
the Seller has diligently and in good faith performed and complied in all
material respects with the agreements and covenants required to be performed by
it hereunder;

                  (d)   by the Purchaser, at any time prior to July 20, 1998, if
the Purchaser determines that it will be unable to obtain financing on terms
which they consider to be satisfactory in its sole discretion (the "Financing")
in order to pay the Purchase Price and any necessary fees and expenses;

                  (e)   by the Purchaser, if the Closing shall not have taken
place on or before July 20, 1998, or such later date as the parties may have
agreed to in writing, provided that the nonoccurrence of the Closing is not
attributable to a breach of the terms hereof by the Purchaser; or

                                       33
<PAGE>   39


                  (f)  by the Seller, if the Closing shall not have taken place
on or before July 20, 1998, or such later date as the parties may have agreed to
in writing, provided that the nonoccurrence of the Closing is not attributable
to a breach of the terms hereof by the Seller.

                  8.2  Termination Fee.

                  (a)  If the Purchaser elects to terminate this Agreement
pursuant to Section 8.1(d) or if the Purchaser terminates this Agreement
pursuant to Section 8.1(e) solely as a result of the Purchaser being unable to
obtain the Financing, then the Purchaser shall pay to the Seller a fee of
$7,500,000, which amount shall be paid in immediately available funds no later
than five days after the date of termination hereof. Such amount shall
constitute liquidated damages in respect of the Purchaser's failure to obtain
financing and, notwithstanding anything to the contrary in this Agreement, shall
be the sole and exclusive remedy of the Seller against the Purchaser (or any of
its partners, officers, employees, agents and representatives or Affiliates) and
the Purchaser's entire liability with respect to its failure to obtain the
Financing and all other related matters. The parties agree that the amount
payable to this Section 8.1 is a reasonable estimate of the damages that would
be suffered by the Seller as a consequence of such failure and does not
constitute a penalty (the parties hereby acknowledging the inconvenience and
difficulty of otherwise obtaining an adequate remedy).

                  (b)  The Guarantor hereby guarantees the performance on demand
and punctual payment by the Purchaser of the fee set forth in Section 8.2(a), if
the Purchaser shall become obligated to pay such fee to the Seller.

                  8.3  Survival. In the event of termination pursuant to Section
8.1, no party shall have any further liability hereunder, except (i) with
respect to any willful breach of this Agreement prior to such termination and
(ii) Sections 5.6, 5.10, 8.2 and 9.4 shall survive such termination and shall
remain in full force and effect.


                                       34
<PAGE>   40

                                   ARTICLE IX

                          DEFINITIONS AND MISCELLANEOUS

                  9.1  Definitions.

                  (a)  As used in this Agreement, the terms set forth below 
shall have the following respective meanings:

                  "Affiliate" means, with respect to any Person, any other
Person who, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. As used herein, the term "control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

                  Asset Inventory" means the Inventory Report, dated May 15,
1998 (as annotated by the parties), prepared by M.E.L. Valuations, Inc. attached
as Exhibit E.

                  "Casualty Loss" means (i) the destruction of all or any
portion of the Assets by fire or any other casualty or (ii) the loss of all or
any portion of the Assets through condemnation or under the right of eminent
domain, or a pending or threatened proceeding for such purpose.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Confidentiality Agreement" means the Confidentiality
Agreement, dated as of May 8, 1998 between the Seller and the Guarantor.

                  "Environmental Laws" shall mean laws (including, without
limitation, federal, state or local laws, ordinances, rules, regulations,
guidelines, interpretations and orders of courts or governmental agencies or
authorities) relating to health, safety, pollution or protection of the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface and subsurface strata), including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act of 1976, the Solid Waste Disposal
Act, the Federal Clean Water Act, the Federal Clean Air Act, the Hazardous
Materials Transportation Act (all as amended), and any common law or equitable
doctrines (including, without limitation, negligence, nuisance, trespass and
strict liability) when applied to health, safety or the environment.

                                       35

<PAGE>   41


                  "ERISA Affiliate" means, with respect to the Seller, any
corporation or other trade or business under common control with the Seller
(within the meaning of Section 414(b) and (c) of the Internal Revenue Code or
Section 4001(a)(14) or 4001(b) of ERISA).

                  "GAAP" means United States generally accepted accounting
principles as set forth in the opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board.

                  "Governmental Authority" means any nation or government, any
state or political subdivision thereof, any federal or state court and any other
agency or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

                  "Information Date" means the date prior to the date hereof on
which (i) true and correct information was provided to the Purchaser with
respect to a particular matter, item or circumstance or (ii) the Purchaser
inspected the Assets and thereby reasonably would have discovered a particular
matter, item or circumstance.

                  "Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof, (iii) copyrights (registered and
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) computer software, data, data bases and documentation
thereof, (v) trade secrets and other confidential information (including, but
not limited to, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information) and (vi) other intellectual property rights.

                  "IRS" means the Internal Revenue Service.

                  "Liens" means liens, security interests, options, rights of
first refusal, easements, mortgages, charges, debentures, indentures, deeds of
trust, rights-of-way, restrictions, agreements, encroachments, licenses, leases,
permits, security agreements, or any other encumbrances or other restrictions or
limitations on the use of real or personal property or irregularities in title
thereto.


                                       36
<PAGE>   42


                  "Material Adverse Change" means an event, occurrence or
development which would reasonably decreases the value of the Assets by
$6,000,000 or more.

                  "Material Adverse Effect" means an effect which would
reasonably decrease the value of the Assets by $6,000,000 or more.

                  "Person" means an individual, a partnership (whether general,
limited or limited liability), a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a Governmental Authority or any department, agency or political
subdivision thereof.

                  "Taxes" shall mean all taxes, charges, fees, levies or other
similar assessments or liabilities, including, without limitation, any federal,
state, local or foreign income, gross receipts, ad valorem, value added, excise,
real property, personal property, windfall profit, sales, stamp, use,
consumption, licensing, withholding, employment, payroll, share, capital,
surplus, franchise, occupational, net proceeds, estimated, alternative or add-on
minimum, production, severance, lease, excise, duty, net worth, transfer, fuel,
excess profits, interest equalization or other taxes of any kind whatsoever, and
any recording, registration or notary fees, together with any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with, any such tax or any contest or dispute thereof.

                  "Tax Return" shall mean any report, return, information
return, statement, invoice, or estimate, including any schedule or attachment
thereto, required to be supplied to, or filed with, the Internal Revenue Service
or any other taxing authority, and any amendment thereto, with respect to Taxes.

                  (b) Each of the terms set forth below has the meaning set
forth opposite such term in the following table:


     TERM                                                  PROVISION
     ----                                                  ---------     
     Asset                                                 Section 1.1
     Agreement                                             Preamble
     Closing                                               Section 2.1
     Closing Date                                          Section 2.1
     Damage Amount                                         Section 5.12(c)
     Damages                                               Section 5.1(b)
     Drilling Alliance Agreement                           Section 2.2(a)(i)
     Drilling Services Division                            Section 1.1


                                       37
<PAGE>   43

     TERM                                                  PROVISION
     ----                                                  --------- 
     Employee Benefit Plans                                Section 3.13(a)
     Environmental Assessment                              Section 5.12(a)
     Environmental Consultant                              Section 5.12(a)
     ERISA                                                 Section 3.13(a)
     Financial Statements                                  Section 3.8
     Financing                                             Section 8.1(d)
     HSR Act                                               Section 3.4
     Indemnified Party                                     Section 7.4(a)
     Indemnifying Party                                    Section 7.4(a)
     Initial Drilling Contracts                            Section 2.2(a)(ii)
     Non-Competition Area                                  Section 5.11(a)
     Non-Competition Period                                Section 5.11(a)
     Non-Material Casualty Loss                            Section 5.12(a)
     Permitted Encumbrances                                Section 3.10(a)
     Proceeds                                              Section 5.12(b)
     Purchase Price                                        Section 1.3
     Purchase Price Allocation Schedule                    Section 1.5
     Purchaser                                             Preamble
     Real Property                                         Section 3.15(b)
     Real Property Laws                                    Section 3.16(d)
     Related Agreements                                    Section 3.2
     Sale Effective Time                                   Section 1.1
     Seller                                                Preamble
     Security Arrangement                                  Section 6.2(g)
     Target Employees                                      Section 5.7(a)
     Third Party Claims                                    Section 7.4
     WARN                                                  Section 3.14(h)
     Warranty Deed                                         Section 2.2(a)(ii)
     Yard                                                  Section 1.1(d)


                  9.2 Notices. All communications required or permitted to be
given under this Agreement shall be in writing and delivered, mailed or
transmitted to the parties at the addresses set out below. Notices shall be
deemed given when received except that notices given by facsimile transmission
on weekends, holidays or after 5:00 p.m. Central Time, shall be deemed received
on the next business day. If delivered by



                                       38
<PAGE>   44

commercial delivery service or mailed by registered or certified mail, the
delivery receipt shall be evidence of the date of receipt. Either party may, by
written notice so delivered to the other, change the address to which delivery
shall thereafter be made.

                  (a)    Notices to the Purchaser or the Guarantor:

                         Bayard Drilling, L.P.
                         Bayard Drilling Technologies, Inc.
                         4005 N.W. Expressway, Suite 400E
                         P.O. Box 268867 (73126-8867)
                         Oklahoma City, Oklahoma 73116-1679
                         Attention:  President
                         Fax No. (405) 840-9553

                  (b)    Notices to the Seller:

                         TransTexas Gas Corporation
                         1300 North Sam Houston Parkway
                         Suite 310
                         Houston, Texas  77032
                         Attention: President
                         Fax No. (281) 986-8865

                  9.3    Binding Effect; Assignability. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns (it being understood and agreed that, except
as expressly provided herein, nothing contained in this Agreement is intended to
confer upon any other Person any rights, benefits or remedies of any kind or
character whatsoever). No party may assign this Agreement without the prior
written consent of the other party hereto. Notwithstanding the foregoing, the
Purchaser shall be entitled to assign this Agreement or any of its rights
hereunder to any Affiliate or to any lender in respect of any arrangements
entered into in connection with the Financing and any refinances, extensions,
refundings or renewals thereof.

                  9.4    Expenses. Each party hereto will bear and pay its own
expenses of negotiating and consummating the transactions contemplated hereby.

                  9.5    Amendment; Waivers. The terms and provisions of this
Agreement may be modified or amended only by a written instrument executed by
each of the parties hereto, and compliance with any term or provision hereof may
be waived



                                       39
<PAGE>   45

only by a written instrument executed by each party entitled to the benefits of
the same. Except as expressly provided herein to the contrary, no failure to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
granted hereunder.

                  9.6    Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof. Accordingly,
the parties agree that each of them shall be entitled to seek injunctive relief
to prevent breaches of the terms of this Agreement and the Related Agreements
and to seek specific performance of the terms hereof and thereof, in addition to
any other remedy now or hereafter available at law or in equity, or otherwise.

                  9.7    Dispute Resolution.

                  (a)    Any controversy or claim arising out of or relating to
(i) this Agreement or any Related Agreement, (ii) the breach, termination or
validity hereof or thereof or (iii) the transactions contemplated by this
Agreement or any Related Agreement shall be fully, finally and exclusively
settled by arbitration in accordance with this Section 9.7, except for any
controversy or claim (x) seeking specific performance of the terms of this
Agreement or any Related Agreement in accordance with Section 9.6 or (y) seeking
enforcement of any arbitration award in accordance with subparagraph (c) below.
The arbitration shall constitute the sole and exclusive method of adjudication
of all matters between the parties and shall be final, binding and
non-appealable.


                  (b)   The arbitration shall be heard and determined by a
single, neutral arbitrator selected in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (such arbitrator being
hereinafter referred to as the "Arbitrator").

                  (c)   Unless otherwise expressly agreed in writing by the
parties to the arbitration proceedings, the following provisions and procedures
shall govern the conduct of any arbitration proceedings pursuant to this Section
9.7:

                        (i) The arbitration proceedings shall be held at a site
                  in the State of Texas chosen by mutual agreement of the
                  parties, or if the



                                       40
<PAGE>   46
                  parties cannot reach agreement on a location within 30 days of
                  the appointment of the Arbitrator, then at a site chosen by
                  the Arbitrator;

                        (ii)   The Arbitrator shall be and remain at all times
                  wholly independent and impartial;

                        (iii)  The arbitration proceedings shall be conducted in
                  accordance with the Commercial Arbitration Rules of the
                  American Arbitration Association, as amended from time to
                  time;

                        (iv)   Any procedural issues not determined under the
                  arbitral rules selected pursuant to subparagraph (c)(iii)
                  above shall be determined by the law of the place of
                  arbitration, other than those laws which would refer the
                  matter to another jurisdiction;

                        (v)    The costs of the arbitration proceedings 
                  (including attorneys' fees and costs) shall be borne in the
                  manner determined by the Arbitrator;

                        (vi)   The decision of the Arbitrator shall be reduced 
                  to writing and shall be final, binding and conclusive;

                        (vii)  Any monetary award made by the Arbitrator shall
                  bear interest from the date of the award at a variable rate
                  equal to the rate publicly announced from time to time by
                  Citibank, N.A. at its principal offices in New York, New York,
                  as its "base rate";

                        (viii) Any costs or fees incident to enforcing any award
                  made by the Arbitrator shall, to the maximum extent permitted
                  by law, be charged against the party resisting such
                  enforcement; and

                        (ix)   Judgment upon any award made by the Arbitrator 
                  may be enforced in any court having jurisdiction over the
                  person or the assets of the party against whom the award is
                  made.

                  9.8   Section Headings. The section headings contained in this
Agreement are for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Agreement.




                                       41

<PAGE>   47


                  9.9   Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto and the certificates, opinions and documents delivered in
accordance with the provisions hereof) constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
written or oral agreements and understandings and all contemporaneous oral
agreements and understandings among the parties or any of them with respect to
the subject matter hereof. All Exhibits and Schedules hereto and certificates,
opinions and other documents delivered in accordance with the provisions hereof
are expressly made a part of this Agreement.

                  9.10  Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Texas,
without regard to the principles of conflicts of laws.

                  9.11  Exclusivity of Representations and Warranties. Except as
and to the extent expressly set forth in this Agreement, no party hereto makes
any representation or warranty in connection with the transactions contemplated
herein (including any representation or warranty with respect to any opinion,
information or advice which may have been provided to any party by any
Affiliate, officer, director, stockholder, partner, employee, agent, consultant
or representative of any other party or by any investment banker or investment
bank firm, engineer or engineering firm, legal counsel or any other agent,
consultant or representative of such other party). WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THE SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR
OTHERWISE RELATING TO THE CONDITION OF THE DRILLING RIGS AND OTHER PERSONAL
PROPERTY INCLUDED IN THE ASSETS (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR
EXPRESS WARRANTY OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OR OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS).

                  9.12  Waiver of Certain Damages. THE PARTIES TO THIS AGREEMENT
EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER PUNITIVE OR EXEMPLARY DAMAGES OR
LOST PROFITS OR LOST BUSINESS OPPORTUNITIES OR OTHER CONSEQUENTIAL DAMAGES WHICH
ARE REMOTE OR SPECULATIVE IN ANY ARBITRATION, LAWSUIT, LITIGATION OR PROCEEDING
ARISING OUT OF OR RESULTING FROM ANY BREACH OF THE REPRESENTATIONS AND
WARRANTIES OF THE PARTIES SET FORTH IN ARTICLES III AND IV HEREUNDER; PROVIDED,
HOWEVER, THAT THE PURCHASER DOES NOT WAIVE AND FORGO ANY RIGHT TO RECOVER THE
REPLACEMENT VALUE OF THE ASSETS WHICH FOR THIS


                                       42
<PAGE>   48

PURPOSE SHALL BE DEEMED TO BE THE AMOUNT SET FORTH IN THE PURCHASE PRICE
ALLOCATION SCHEDULE.

                  9.13  Costs of Enforcement. The prevailing party in any
litigation initiated to enforce rights under or collect damages for breach of
this Agreement shall be entitled to reimbursement from the nonprevailing party
of all costs and expenses, including attorneys' fees, incurred by the prevailing
party in connection with such litigation.

                  9.14  Severability. If any term or provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated is not affected in any manner adverse to any
party. Upon any binding determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a legally enforceable manner, to the end that
the transactions contemplated herein may be completed to the extent reasonably
possible.

                  9.15  Waiver of Deceptive Trade Practices. THE PURCHASER'S
RIGHTS AND REMEDIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
WITH RESPECT TO THE SELLER'S ACTIONS OR PRACTICES WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREUNDER SHALL BE GOVERNED BY LEGAL PRINCIPLE OTHER
THAN THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, TEX. BUS. &
ANN. SS.17.41 ET SEQ. (THE "DTPA"). THE PURCHASER HEREBY WAIVES THE
APPLICABILITY OF THE DTPA TO THIS TRANSACTION AND ANY AND ALL RIGHTS, DUTIES OR
REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA, PROVIDED, HOWEVER, THAT THE
PURCHASER DOES NOT WAIVE SECTION 17.555 OF THE DTPA. THE PURCHASER ACKNOWLEDGES
THAT IT IS PURCHASING THE ASSETS FOR COMMERCIAL OR BUSINESS USE. THE PURCHASER
FURTHER ACKNOWLEDGES THAT IT (I) HAS ASSETS OF, OR IS OWNED BY AN ENTITY HAVING
ASSETS OF, $25,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL STATEMENT
PREPARED IN ACCORDANCE WITH GAAP, (II) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL
AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND THE RISKS OF A
TRANSACTION SUCH AS THIS AND (III) IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION WITH THE SELLER.

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


                                       43

<PAGE>   49



                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.


                                       SELLER:

                                       TRANSTEXAS GAS CORPORATION


                                       By:  /s/ Arnold H. Brackenridge
                                          ------------------------------------
                                       Name:  Arnold H. Brackenridge
                                            ---------------------------------- 
                                       Title:     President
                                             ---------------------------------


                                       PURCHASER:

                                       BAYARD DRILLING, L.P.

                                       By: Bayard Drilling, L.L.C.,
                                           general partner


                                       By:  /s/ James E. Brown
                                          -----------------------------------
                                          Manager


                                       SOLELY FOR THE PURPOSE OF THE
                                       GUARANTY OF PERFORMANCE IN
                                       SECTION 8.2:

                                       BAYARD DRILLING TECHNOLOGIES, INC.



                                       By:   /s/ James E. Brown
                                          ------------------------------------
                                       Name: James E. Brown
                                            ---------------------------------- 
                                       Title:    President
                                             ---------------------------------