SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(D) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

       Date of Report (Date of earliest event reported): January 10, 1998

                            POOL ENERGY SERVICES CO.
             (Exact name of registrant as specified in its charter)

                           
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<S>                                   <C>                              <C> 
           TEXAS                           000-18437                   76-0263755
  (State or other jurisdiction      (Commission file number)          (IRS employer
      of  incorporation)                                            identification no.)

</TABLE>

            10375 RICHMOND AVENUE                           77042
              HOUSTON, TEXAS
   (Address of principal executive offices)               (Zip code)

       Registrant's telephone number, including area code: (713) 954-3000


<PAGE>


                            POOL ENERGY SERVICES CO.

                                TABLE OF CONTENTS
                                       FOR
                           CURRENT REPORT ON FORM 8-K


                                                        Page
                                                        -----

Item 5.            Other Events                           2

Item 7.            Financial Statements and Exhibits      2

Signature                                                 3


<PAGE>



ITEM 5. OTHER EVENTS.

     On January 11, 1999, the Company issued a press release, a copy of which is
filed as Exhibit  99.1 hereto and  incorporated  herein by this  reference.  The
definitive  agreement  referred to in such press release is filed as Exhibit 2.1
hereto.


ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

     (a)  Financial statements of business acquired.

          Not applicable.

     (b)  Pro forma financial information.

          Not applicable.

     (c)  Exhibits

          The following documents are filed as exhibits to this Current Report:


Exhibit
 Number      Description of Exhibit
-------      ----------------------

2.1   Agreement  and Plan of Merger dated as of January 10, 1999,  by and Nabors
      Industries, Inc., Starry Acquisition Corp. and Pool Energy Services Co.

4.1  Form of First Amendment Rights Agreement,  dated as of January 10, 1999, by
     and between Pool Energy Services Co. and The First National Bank of Boston.

99.1  Press Release dated January 11, 1999.


<PAGE>


                                    SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                            POOL ENERGY SERVICES CO.

                            By: /s/ Geoffrey Arms 
                                ------------------
                                    Geoffrey Arms

                            Title: Vice President and General Counsel;
                                   Corporate Secretary

Dated: January 11, 1999


<PAGE>


                                  EXHIBIT INDEX

          The following documents are filed as exhibits to this Current Report:

Exhibit
 Number                Description of Exhibit
-------                ----------------------

2.1  Agreement  and Plan of Merger dated as of January 10, 1999,  by and between
     Nabors Industries,  Inc., Starry Acquisition Corp. and Pool Energy Services
     Co.

4.1  Form of First Amendment to Rights Agreement,  dated as of January 10, 1999,
     by and between  Pool Energy  Services  Co. and The First  National  Bank of
     Boston.

99.1 Press Release dated January 11, 1999.


<PAGE>


                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                            NABORS INDUSTRIES, INC.,

                            STARRY ACQUISITION CORP.

                                       and

                            POOL ENERGY SERVICES CO.






                          Dated as of January 10, 1999


<PAGE>

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                                TABLE OF CONTENTS

ARTICLE I  THE MERGER...............................................................................1
         1.1      The Merger........................................................................1
         1.2      Closing/Effective Time............................................................1
         1.3      Effect of the Merger..............................................................1
         1.4      Articles of Incorporation; Bylaws.................................................2
         1.5      Directors and Officers of Merger Sub..............................................2

ARTICLE II  CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES......................................2
         2.1      Conversion of Securities..........................................................2
         2.2      Exchange of Certificates..........................................................3
         2.3      Stock Transfer Books..............................................................4
         2.4      Absence of Dissenters' Rights.....................................................4
         2.5      Company Stock Options.............................................................4

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................5
         3.1      Organization, Qualification, Etc..................................................5
         3.2      Capital Stock.....................................................................6
         3.3      Corporate Authority Relative to this Agreement; No Violation......................6
         3.4      Reports and Financial Statements..................................................7
         3.5      No Undisclosed Liabilities........................................................7
         3.6      No Violation of Law...............................................................8
         3.7      Environmental Laws and Regulations................................................8
         3.8      No Undisclosed Employee Benefit Plan Liabilities or Severance Arrangements........8
         3.9      Absence of Certain Changes or Events..............................................8
         3.10     Litigation........................................................................8
         3.11     Ownership of Company Common Stock.................................................9
         3.12     Tax Matters.......................................................................9
         3.13     Required Vote....................................................................10
         3.14     Insurance........................................................................10
         3.15     Intellectual Property............................................................10
         3.16     Material Contracts...............................................................10
         3.17     Ownership of Merger Sub; No Prior Activities.....................................11
         3.18     Brokers..........................................................................11
         3.19     Property.........................................................................11
         3.20     Parent Equipment.................................................................12
         3.21     Permits..........................................................................12

ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................12
         4.1      Organization, Qualification, Etc.................................................12
         4.2      Capital Stock....................................................................12
         4.3      Corporate Authority Relative to this Agreement; No Violation.....................13
         4.4      Reports and Financial Statements.................................................14
         4.5      No Undisclosed Liabilities.......................................................14
         4.6      No Violation of Law..............................................................14
         4.7      Environmental Laws and Regulations...............................................14
         4.8      Employee Benefit Matters.........................................................15
         4.9      Absence of Certain Changes or Events.............................................17
         4.10     Litigation.......................................................................17
         4.11     Company Rights Plan..............................................................17
         4.12     Lack of Ownership of Parent Common Stock.........................................18
         4.13     Tax Matters......................................................................18
         4.14     Required Vote....................................................................18
         4.15     Insurance........................................................................18
         4.16     Intellectual Property............................................................19
         4.17     Material Contracts...............................................................19
         
                                                        
                                        i



<PAGE>

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         4.18     Vessels..........................................................................20
         4.19     Brokers...........................................................................20
         4.20     Opinion of Financial Advisor......................................................20
         4.21     Property..........................................................................20
         4.22     Company Equipment.................................................................21
         4.23     Permits...........................................................................21
         4.24     Financial Condition...............................................................21

ARTICLE V  COVENANTS................................................................................21
         5.1      Affirmative Covenants of the Company..............................................21
         5.2      Negative Covenants of the Company.................................................21
         5.3      Negative Covenants of Parent......................................................23
         5.4      Access and Information............................................................24
         5.5      No Solicitation...................................................................24
         5.6      Confidentiality...................................................................26
         5.7      Inspection of Vessels.............................................................26
         5.8      Company Rights Plan...............................................................26

ARTICLE VI  ADDITIONAL AGREEMENTS...................................................................26
         6.1      Meetings of Shareholders..........................................................26
         6.2      Registration Statement; Proxy Statement...........................................27
         6.3      Appropriate Action; Consents; Filings.............................................28
         6.4      Tax Treatment; Affiliates.........................................................29
         6.5      Public Announcements..............................................................29
         6.6      AMEX Listing......................................................................30
         6.7      Indemnification of Directors and Officers.........................................30
         6.8      Agreement to Defend...............................................................31
         6.9      Obligations of Merger Sub.........................................................31
         6.10     Accounting for Merger.............................................................31
         6.11     Takeover Statutes.................................................................31
         6.12     Board of Directors of Parent......................................................31
         6.13     Transition Employment.............................................................32
         6.14     Additional Agreements.............................................................32
         6.15     Notification of Certain Matters...................................................32
         6.16     Post-Closing Employee Benefits....................................................32

ARTICLE VII  CLOSING CONDITIONS.....................................................................33
         7.1      Conditions to Obligations of Each Party Under this Agreement......................33
         7.2      Additional Conditions to Obligations of Parent and Merger Sub.....................33
         7.3      Additional Conditions to Obligations of the Company...............................34

ARTICLE VIII  TERMINATION, AMENDMENT AND WAIVER.....................................................34
         8.1      Termination.......................................................................34
         8.2      Effect of Termination.............................................................36
         8.3      Amendment.........................................................................36
         8.4      Waiver............................................................................36
         8.5      Fees; Expenses and Other Payments.................................................36

ARTICLE IX  GENERAL PROVISIONS......................................................................37
         9.1      Effectiveness of Representations, Warranties and Agreements.......................37
         9.2      Notices...........................................................................37
         9.3      Certain Definitions...............................................................38
         9.4      Headings..........................................................................39
         9.5      Severability......................................................................39
         9.6      Entire Agreement..................................................................39
         9.7      Assignment........................................................................39
         9.8      Parties in Interest...............................................................39
         9.9      Failure or Indulgence Not Waiver; Remedies Cumulative.............................39
         9.10     Governing Law.....................................................................39

                                                      
                                       ii


</TABLE>
<PAGE>

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         9.11     Jurisdiction......................................................................39
         9.12     Counterparts......................................................................40
</TABLE>


EXHIBITS

1.4A     Restated Articles of Incorporation of Surviving Corporation
1.4B     Bylaws of Surviving Corporation
6.4      Form of Affiliate Letter
6.13     Possible Transition Employees



                                       iii


<PAGE>


                          AGREEMENT AND PLAN OF MERGER

          THIS  AGREEMENT  AND PLAN OF MERGER dated as of January 10, 1999 (this
"Agreement"),  is  entered  into  among  NABORS  INDUSTRIES,  INC.,  a  Delaware
corporation  ("Parent"),  STARRY ACQUISITION CORP., a Texas corporation ("Merger
Sub") and a wholly owned  subsidiary of Parent,  and POOL ENERGY SERVICES CO., a
Texas corporation (the "Company").

          WHEREAS,  upon  the  terms  and  subject  to the  conditions  of  this
Agreement and in accordance  with the Texas Business  Corporation  Act ("TBCA"),
Merger Sub will merge with and into the Company (the "Merger");

          WHEREAS, the respective Boards of Directors of Parent,  Merger Sub and
the Company have determined the Merger to be advisable and in the best interests
of their respective corporations and shareholders and to be consistent with, and
in furtherance  of, their  respective  business  strategies  and goals,  and, by
resolutions duly adopted, have approved and adopted this Agreement; and

          WHEREAS,  for Federal  income tax  purposes,  it is intended  that the
Merger shall qualify as a reorganization  under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement shall constitute a "plan of reorganization" for the purposes
of Section 368 of the Code.

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

                                    ARTICLE I
                                   THE MERGER

          1.1 The Merger. Upon the terms and subject to the conditions set forth
in this  Agreement,  and in accordance  with the TBCA, at the Effective Time (as
defined in Section  1.2),  Merger Sub shall be merged with and into the Company.
As a result of the Merger, the separate corporate  existence of Merger Sub shall
cease and the Company shall continue as the surviving  corporation in the Merger
(the "Surviving Corporation").

          1.2  Closing/Effective  Time.  Subject to the terms and  conditions of
this Agreement,  the closing of the Merger (the "Closing")  shall take place (a)
at the offices of Skadden,  Arps, Slate,  Meagher & Flom LLP, 1600 Smith Street,
Houston,  Texas  77002,  at 9:00 a.m.,  local time,  on the first  business  day
immediately following the day on which the last to be fulfilled or waived of the
conditions  set forth in Article VII shall be fulfilled or waived in  accordance
with this  Agreement or (b) at such other time,  date or place as Parent and the
Company may agree.  The date on which the Closing  occurs is referred to in this
Agreement  as  the  "Closing  Date".  As  promptly  as  practicable   after  the
satisfaction  or, if permissible,  waiver of the conditions set forth in Article
VII, the parties  hereto shall cause the Merger to be  consummated  by filing of
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Texas, in such form as required by, and executed in accordance with the
relevant  provisions of, the TBCA. The Merger shall become effective at the time
of the  issuance of a  certificate  of merger by the  Secretary  of State of the
State of Texas in  response  to the  filing of the  Articles  of  Merger  and in
accordance  with the TBCA,  or at such later time that the parties  hereto shall
have agreed upon and  designated in the Articles of Merger as the effective time
of the Merger (the "Effective Time").

          1.3 Effect of the Merger.  At the  Effective  Time,  the effect of the
Merger shall be as provided in the  applicable  provisions of the TBCA.  Without
limiting the generality of the foregoing,  and subject thereto, at the Effective
Time, except as otherwise  provided herein,  all rights,  title and interests to
all real property and other property of Merger Sub and the Company shall vest in
the Surviving Corporation, and all liabilities and obligations of Merger Sub and
the Company  shall  become the  liabilities  and  obligations  of the  Surviving
Corporation.

          1.4 Articles of Incorporation;  Bylaws. At the Effective Time, each of
the Articles of 



<PAGE>

Incorporation,  as amended,  and the Bylaws, as amended, of the Company shall be
amended and  restated in its  entirety to read as set forth in Exhibit  1.4A and
Exhibit 1.4B, respectively,  and as so amended shall be the Restated Articles of
Incorporation  and Bylaws of the Surviving  Corporation until further amended in
accordance with applicable law.

          1.5  Directors and Officers of Merger Sub. The directors of Merger Sub
immediately  prior to the Effective Time shall be the directors of the Surviving
Corporation,  each to hold office in  accordance  with the Restated  Articles of
Incorporation and Bylaws of the Surviving  Corporation,  and the officers of the
Company  immediately  prior to the  Effective  Time shall be the officers of the
Surviving  Corporation,  in each case until their respective successors are duly
elected or appointed and qualified.

                                   ARTICLE II
               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

          2.1 Conversion of Securities.  At the Effective Time, by virtue of the
Merger and without any action on the part of Parent,  Merger Sub, the Company or
any holders of any securities of the foregoing corporations:

          (a) Each share of common  stock,  without  par value,  of the  Company
("Company  Common  Stock")  issued  and  outstanding  immediately  prior  to the
Effective Time  (excluding any treasury shares held by the Company or any of its
Subsidiaries  (as defined in Section 9.3(g)) and shares held by Parent or any of
its Subsidiaries),  including the associated Company Rights, if any, outstanding
at the  Effective  Time  pursuant to the Company  Rights Plan (as such terms are
defined in Section  4.2),  shall be  converted  into the right to receive  1.025
fully paid,  non-assessable  shares of common stock (the "Exchange Ratio"),  par
value $.10 per share, of Parent ("Parent Common Stock").

          (b) If between the date of this  Agreement and the Effective  Time the
outstanding  shares of Parent  Common  Stock or Company  Common Stock shall have
been changed into a different  number of shares or a different  class, by reason
of any stock dividend, subdivision,  reclassification,  recapitalization, split,
combination or exchange of shares or if a "Flip-In  Event" or "Flip-Over  Event"
(each as defined  under the Company  Rights  Plan (as  defined in Section  4.2))
shall have occurred  under the Company  Rights Plan, the Exchange Ratio shall be
correspondingly   adjusted  to  reflect   such  stock   dividend,   subdivision,
reclassification,  recapitalization, split, combination or exchange of shares or
event.

          (c) All such  shares  of  Company  Common  Stock  shall no  longer  be
outstanding,  shall  automatically  be  canceled  and retired and shall cease to
exist,  and  each  certificate  previously  evidencing  any  such  shares  shall
thereafter  represent the right to receive the Merger  Consideration (as defined
in Section 2.2(b)). The holders of such certificates  previously evidencing such
shares of Company Common Stock  outstanding  immediately  prior to the Effective
Time shall  cease to have any  rights  with  respect  to such  shares of Company
Common Stock,  except as otherwise  provided herein or by law. Such certificates
previously  evidencing  shares of Company  Common Stock shall be  exchanged  for
certificates  evidencing  whole shares of Parent Common Stock upon the surrender
of such  certificates in accordance with the provisions of Section 2.2,  without
interest.  No fractional shares of Parent Common Stock shall be issued,  and, in
lieu thereof, a cash payment shall be made pursuant to Section 2.2(e).

          (d) Each share of Company  Common  Stock held in the  treasury  of the
Company and each share of Company Common Stock owned by Parent or any Subsidiary
of Parent or of the Company  immediately  prior to the  Effective  Time shall be
canceled and extinguished without any conversion thereof and no payment shall be
made with respect thereto.

          (e) Each share of common  stock,  par value $.10 per share,  of Merger
Sub issued and  outstanding  at the Effective  Time shall be converted  into one
fully paid, nonassessable share of common stock of the Surviving Corporation.

          2.2 Exchange of Certificates.




<PAGE>

          (a) Exchange Agent. As of the Effective Time, Parent shall deposit, or
shall cause to be  deposited,  with First  Chicago  Trust Company of New York or
such other bank or trust company designated by Parent and reasonably  acceptable
to the Company (the "Exchange Agent"),  for the benefit of the holders of shares
of Company Common Stock, for exchange in accordance with this Article II through
the Exchange Agent (i)  certificates  evidencing  such number of whole shares of
Parent  Common Stock equal to the  Exchange  Ratio  multiplied  by the number of
shares of Company  Common  Stock  outstanding  (other than shares  described  in
Section 2.1(d)) and (ii) additional cash in consideration  of fractional  shares
as  provided  in  Section  2.2(e)  (such  Parent  Common  Stock  and cash  being
hereinafter  referred to as the  "Exchange  Fund").  The  Exchange  Agent shall,
pursuant to irrevocable  instructions,  deliver the Parent Common Stock and cash
out of the Exchange Fund. Except as contemplated by Sections 2.2(e) and (f), the
Exchange Fund shall not be used for any other purpose.

          (b) Exchange Procedures.  As soon as reasonably  practicable after the
Effective  Time,  Parent will instruct the Exchange Agent to mail to each holder
of  record of a  certificate  or  certificates  which  immediately  prior to the
Effective  Time  evidenced  outstanding  shares of  Company  Common  Stock  (the
"Certificates"),  (i) a letter of transmittal (which shall specify that delivery
shall be effected,  and risk of loss and title to the  Certificates  shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other  provisions as Parent may  reasonably  specify)
and (ii)  instructions for use in effecting the surrender of the Certificates in
exchange  for  certificates  evidencing  shares of  Parent  Common  Stock.  Upon
surrender of a Certificate for  cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary documents as
may be required  pursuant to such  instructions,  the holder of such Certificate
shall be entitled to receive in exchange (A) certificates evidencing that number
of whole  shares of Parent  Common  Stock  which  such  holder  has the right to
receive in respect of the shares of Company Common Stock  formerly  evidenced by
such  Certificate  in  accordance  with  Section  2.1  and  (B)  cash in lieu of
fractional  shares of  Parent  Common  Stock to which  such  holder is  entitled
pursuant to Section  2.2(e) (such  shares of Parent  Common Stock and cash being
collectively,  the "Merger  Consideration"),  and the Certificate so surrendered
shall be canceled.  In the event of a transfer of ownership of shares of Company
Common Stock which is not registered in the transfer  records of the Company,  a
certificate evidencing the proper number of shares of Parent Common Stock may be
issued in  accordance  with this Article II to a transferee  if the  Certificate
evidencing  such shares of Company  Common  Stock is  presented  to the Exchange
Agent,  accompanied  by all  documents  required  to  evidence  and effect  such
transfer and by evidence  that any  applicable  stock  transfer  taxes have been
paid.  Until  surrendered as contemplated by this Section 2.2, each  Certificate
shall be deemed at any time after the Effective  Time to evidence only the right
to receive, upon such surrender,  the Merger  Consideration.  The Exchange Agent
shall not be entitled to vote or exercise any rights of  ownership  with respect
to the Parent Common Stock held by it from time to time  hereunder,  except that
it  shall  receive  and  hold  all  dividends  or  other  distributions  paid or
distributed  with  respect  thereto  for the  account  of the  persons  entitled
thereto.

          (c) Distributions with Respect to Unexchanged  Shares. No dividends or
other  distributions  declared or made after the Effective  Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock evidenced  thereby,  and no other part of the Merger  Consideration
shall be paid to any such  holder,  until the holder of such  Certificate  shall
surrender such Certificate,  at which time,  subject to the effect of applicable
laws,  there  shall be issued to the holder (i)  certificates  evidencing  whole
shares of Parent Common Stock issued in exchange  therefor and the amount of any
cash payable with respect to a fractional  share of Parent Common Stock to which
such holder is entitled  pursuant to Section  2.2(e) and the amount of dividends
or other  distributions  with a record date after the  Effective  Time then paid
with  respect  to such  whole  shares of Parent  Common  Stock,  and (ii) at the
appropriate  payment  date,  the  amount  of  dividends  or other  distributions
(without  interest  thereon),  with a record date after the  Effective  Time but
prior to surrender and a payment date occurring  after  surrender,  payable with
respect to such whole shares of Parent Common Stock.  No interest  shall be paid
on any such amounts.

          (d) No Further  Rights in Company  Common Stock.  All shares of Parent
Common Stock issued and cash paid in lieu of fractional  shares upon  conversion
of the  shares of  Company  Common  Stock 




<PAGE>

in  accordance  with the  terms of this  Agreement  shall be deemed to have been
issued or paid in full  satisfaction of all rights  pertaining to such shares of
Company Common Stock.



          (e) No Fractional Shares.

                  (i) No certificates or scrip evidencing  fractional  shares of
         Parent  Common Stock shall be issued upon the surrender for exchange of
         Certificates,  and such fractional share interests will not entitle the
         owner thereof to vote or to any rights of a stockholder of Parent.

                  (ii) Each holder of a Certificate having a fractional interest
         arising upon the conversion of such  Certificate  shall, at the time of
         surrender of the  Certificate,  be paid by the Exchange Agent an amount
         in cash  equal to the value of such  fractional  interest  based on the
         average  closing  price per share of Parent Common Stock as reported by
         The Wall Street  Journal  (Northeast  edition) for the ten  consecutive
         trading days ending on and including the fifth trading day prior to the
         Closing  Date,  appropriately  adjusted for any stock  splits,  reverse
         stock  splits,  stock  dividends,  recapitalizations  or other  similar
         transactions.  No  interest  shall  be paid on any  such  amounts.  All
         fractional  shares to which a single  record  holder  would be entitled
         shall be aggregated.

          (f)  Termination  of Exchange  Fund.  Any portion of the Exchange Fund
which remains  undistributed to the holders of Company Common Stock for one year
after the  Effective  Time shall be  delivered to Parent,  upon demand,  and any
holders of Company  Common Stock who have not then complied with this Article II
shall thereafter look only to Parent for the Merger  Consideration to which they
are entitled.

          (g) No Liability.  Neither Parent nor the Surviving  Corporation shall
be liable to any  holder of shares of  Company  Common  Stock for any  shares of
Parent  Common  Stock or cash in lieu of  fractional  shares  (or  dividends  or
distributions  with respect thereto)  delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.

          (h) Lost  Certificates.  In the event any Certificate  shall have been
lost,  stolen or destroyed,  upon the making of an affidavit of that fact by the
person  claiming  such  Certificate  to be lost,  stolen or  destroyed  and,  if
required by the Surviving  Corporation,  the posting by such person of a bond in
such  reasonable  amount as the  Surviving  Corporation  may direct as indemnity
against any claim that may be made against it with respect to such  Certificate,
the  Exchange  Agent will issue in exchange  for such lost,  stolen or destroyed
Certificate  the shares of Parent  Common  Stock and cash in lieu of  fractional
shares,  and unpaid dividends and distributions on shares of Parent Common Stock
as provided above, deliverable in respect thereof pursuant to this Agreement.

          2.3 Stock Transfer  Books.  At the Effective  Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of shares of Company Common Stock  thereafter on the records of the
Company.  On or after the  Effective  Time,  any  Certificates  presented to the
Exchange  Agent or Parent for any reason shall be canceled and exchanged for the
Merger Consideration.

          2.4  Absence of  Dissenters'  Rights.  Pursuant to the  provisions  of
Article  5.11(B) of the TBCA,  shareholders  of the Company are not  entitled to
exercise any rights to dissent from the Merger.

          2.5 Company Stock Options.

          (a) Each holder of an outstanding  Company Stock Option (as defined in
Section  4.2) to purchase  shares of Company  Common  Stock shall have the right
exercisable  no later than the third  business  day prior to the Closing Date to
elect either (i) by virtue of the Merger and without  further action on the part
of the Company or the holder of such  Company  Stock Option to have all (but not
part) of such holder's Company Stock Options  converted into options to purchase
Parent Common Stock ("Parent Stock Option") exercisable for that number of whole
shares of Parent  Common  Stock  equal to the product of the




<PAGE>

number of shares of  Company  Common  Stock  covered by a Company  Stock  Option
immediately prior to the Effective Time multiplied by the Exchange Ratio rounded
up to the nearest  whole number of shares of Parent  Common  Stock,  and the per
share  exercise  price for the shares of Parent  Common Stock  issuable upon the
exercise of such Parent Stock Options shall be equal to the quotient  determined
by dividing (A) the exercise price per share of Company  Common Stock  specified
for such Company Stock Option under the applicable  Company Stock Option plan or
agreement  immediately  prior to the Effective  Time, by (B) the Exchange  Ratio
(rounding  the  resulting  exercise  price up to the  nearest  whole  cent) (the
alternative in this clause (i) being the "Roll-Over Alternative"); or (ii) to be
paid in cash  immediately  after the Effective Time in full  cancellation of all
(but not part) of such holder's  Company Stock Options in an amount equal to the
product  of (x) the  number  of  shares of  Company  Common  Stock for which the
Company Stock Options are exercisable  multiplied by (y) the difference  between
the per share  option  exercise  price  and the value of 1.025  shares of Parent
Common Stock based on the average closing price per share of Parent Common Stock
as  reported  by the  Wall  Street  Journal  (northeast  edition)  for  the  ten
consecutive  trading days ending on and including the fifth trading day prior to
the Closing Date,  appropriately  adjusted for any stock  splits,  reverse-stock
splits,   stock  dividends,   recapitalizations  or  similar  transactions  (the
alternative in this clause (ii) being the "Cash-Out Alternative").  With respect
to those holders of Company Stock  Options  electing the Roll-Over  Alternative,
the date of grant of the  Parent  Stock  Option  shall be the date on which  the
applicable  Company  Stock  Option  originally  was granted and the Parent Stock
Option  received  pursuant  to the  RollOver  Alternative  shall  expire  on the
expiration  date of the Company  Stock Option which it replaces,  shall be fully
vested,  and may be exercised by the holder thereof at any time on or before its
stated expiration date  notwithstanding the earlier termination of such holder's
employment with the Surviving Corporation or one of its Subsidiaries, or, in the
case of  non-employee  directors'  Company Stock  Options,  the cessation of the
holder's  service as a director.  As to those  holders  who elect the  Roll-Over
Alternative,  such election  shall  include as a condition  thereto the holder's
agreement relieving the Company, Parent and the Surviving Corporation of (A) any
and all  obligations to pay or to reimburse such holder for any excise tax under
Section  4999 of the Code or any  gross-up for taxes with respect to such excise
tax that arises in connection with, or is otherwise  related to, any incremental
value for purposes of Section 280G of the Code with respect to the Company Stock
Option or the Parent Stock Option for which it is exchanged  attributable to the
extension of the term during which the Parent Stock Option is exercisable beyond
that of the Company Stock Option that it replaces,  as contemplated  pursuant to
the Roll-Over  Alternative and (B) all other  liabilities,  if any,  relating to
such  incremental  value.  In  addition  to the  Roll-Over  Alternative  and the
Cash-Out  Alternative,  those  holders of Company  Options whole are eligible to
retire in accordance  with the Company's 1993 Employee Stock  Incentive Plan and
the  agreements  thereunder as of the Closing Date may also elect in lieu of the
Roll-Over Alternative or the Cash-Out Alternative, to have all (but not part) of
their  Company  Stock  Options  converted  into Parent Stock Options on the same
basis  as set  forth  above  with  respect  to  the  RollOver  Alternative  (the
"Retirement Roll-Over Alternative"), provided, however, the Parent Stock Options
received  pursuant  to such  election,  shall have a term equal to the lesser of
five years or the  remaining  term of the Company  Stock Options as to which the
Retirement  Roll-Over  Alternative  is  elected.  Any holder of a Company  Stock
Option  who  does not  elect  any of the  Roll-Over  Alternative,  the  Cash-Out
Alternative  or the  Retirement  Roll-Over  Alternative  shall be deemed to have
elected the Cash-Out Alternative.

          (b) By virtue of the Merger and without  further action on the part of
the Company or the holder of an Incentive Award,  such holder's  Incentive Award
shall be  converted  into the right to  receive  the  number of whole  shares of
Parent  Common  Stock  equal to the  product  of the number of shares of Company
Common Stock covered by an Incentive  Award  immediately  prior to the Effective
Time  multiplied by the Exchange Ratio rounded up to the nearest whole number of
shares of Parent Common Stock.

          (c) Parent  shall  reserve for issuance the number of shares of Parent
Common Stock that will become issuable upon the exercise of Parent Stock Options
pursuant to this Section 2.5. As soon as practicable  after the Effective  Time,
Parent shall file a registration  statement on Form S-8 (or any successor form),
or another  appropriate  form with respect to the shares of Parent  Common Stock
subject to Parent  Stock  Options and shall use its best efforts to maintain the
effectiveness of such registration  statement or registration  statements for so
long as such options remain outstanding.  Except as otherwise expressly provided
herein, the Parent Stock Options shall be subject to the terms and conditions of
Parent's 1998 Employee Stock Option Plan,  and except as otherwise  contemplated
by Parent and  consistent  with




<PAGE>

this  Section  2.5(a),  the form of stock  option  agreement  shall be  Parent's
standard form as in effect on the date hereof.

          (d) The Company (i) shall take all  necessary  action  pursuant to the
Company's stock option plans or otherwise and (ii) to the extent necessary under
the terms of the  applicable  stock option plans and  agreements,  shall use its
best reasonable efforts to cause the holders of Company Stock Options to execute
any documents  necessary,  in each case, to  effectuate  the  provisions of this
Section 2.5.

                                   ARTICLE III
             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

          Except as set forth on the Disclosure  Schedule delivered by Parent to
the Company prior to the  execution of this  Agreement  (the "Parent  Disclosure
Schedule"),  each of Parent and Merger Sub jointly and severally  represents and
warrants to the Company that:

          3.1  Organization,  Qualification,  Etc. Parent is a corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware,  and Merger Sub is a corporation duly organized,  validly existing and
in good standing under the laws of the State of Texas. Each of Parent and Merger
Sub has the requisite  corporate  power and authority to own its  properties and
assets and to carry on its  business  as it is now being  conducted  and is duly
qualified to do business and is in good standing in each  jurisdiction  in which
the  ownership of its  properties  or the conduct of its business  requires such
qualification,  except for jurisdictions in which the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse  Effect (as defined  below) on Parent.  As used in this  Agreement,  any
reference  to any state of facts,  event,  change or effect  having a  "Material
Adverse Effect" on or with respect to Parent or the Company, as the case may be,
means  such  state of facts,  event,  change or  effect  that has had,  or would
reasonably  be  expected to have,  a material  adverse  effect on the  business,
results of operations or financial  condition of the  applicable  entity and its
Subsidiaries,  taken as a whole,  exclusive of such effects on general  economic
conditions or the oil and gas, contract  drilling,  workover service or oilfield
service  industries  in general.  A Material  Adverse  Effect shall be deemed to
exist if there shall occur any event which causes or may  reasonably be expected
to cause or  result in actual  monetary  loss not  covered  by  insurance  which
exceeds $30 million,  in the case of Parent, or $10 million,  in the case of the
Company.  The copies of  Parent's  Restated  Certificate  of  Incorporation  and
By-laws which have been delivered to the Company are complete and correct and in
full  force  and  effect  on the  date  of  this  Agreement.  Each  of  Parent's
Significant  Subsidiaries  (as defined in Section 9.3(f)) is a corporation  duly
organized,  validly existing and (if applicable) in good standing under the laws
of its jurisdiction of  incorporation  or organization,  has the requisite power
and  authority to own its  properties  and to carry on its business as it is now
being conducted,  and is duly qualified to do business and is (if applicable) in
good standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which the failure to be so qualified or (if  applicable)  in good standing would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
All the outstanding shares of capital stock of, or other ownership interests in,
Parent's   Significant   Subsidiaries   are  validly  issued,   fully  paid  and
non-assessable and are owned by Parent,  directly or indirectly,  free and clear
of all liens, claims, charges or encumbrances, except for restrictions contained
in credit  agreements  and similar  instruments to which Parent is a party under
which no event of default has occurred or arisen. There are no existing options,
rights  of  first  refusal,  preemptive  rights,  calls  or  commitments  of any
character  relating to the issued or unissued  capital stock or other securities
of, or other ownership interests in, any Significant Subsidiary of Parent.

          3.2  Capital  Stock.  The  authorized  stock  of  Parent  consists  of
200,000,000  shares of common stock,  par value $.10 per share  ("Parent  Common
Stock"), 10,000,000 shares of preferred stock, par value $.10 per share ("Parent
Preferred  Stock"),  and 8,000,000  shares of Class B Stock,  par value $.10 per
share ("Parent Class B Stock").  As of December 31, 1998,  100,808,778 shares of
Parent  Common  Stock  were  issued  and  outstanding  and no  shares  of Parent
Preferred  Stock or Parent  Class B Stock were  issued or  outstanding.  All the
outstanding shares of Parent Common Stock have been validly issued and are fully
paid and  non-assessable.  As of December  31, 1998,  there were no  outstanding
subscriptions, 




<PAGE>

convertible or exchangeable  securities,  options,  warrants,  calls,  rights or
other  arrangements or commitments  obligating Parent to issue,  deliver or sell
any shares of its capital  stock or debt  securities,  or any  securities of any
kind convertible into its capital stock, or obligating  Parent to grant,  extend
or enter  into any such  subscription,  option,  warrant,  call,  right or other
arrangement or commitment other than: (a) options and other rights to receive or
acquire 18,118,266 shares of Parent Common Stock granted on or prior to December
31,  1998  pursuant  to  employee  incentive  or  benefit  plans,  programs  and
arrangements and  non-employee  director plans; (b) warrants to purchase 200,000
shares of Parent Common Stock issued to the former  stockholders  of an acquired
entity;  (c) rights to acquire shares of Parent Common Stock upon  conversion of
Parent's  5%  Convertible   Subordinated   Notes  due  May  15,  2006;  and  (d)
approximately  6,825,000 shares of Parent Common Stock, options and other rights
to receive or acquire  approximately  486,000  shares of Parent Common Stock and
warrants to receive or acquire  approximately  142,000  shares of Parent  Common
Stock, all issuable in connection with the closing of that certain Agreement and
Plan of Merger dated October 19, 1998 between Parent,  Nabors  Acquisition Corp.
VII and Bayard  Drilling  Technologies,  Inc. (the "Bayard Merger  Agreement") .
Except for (i) the  issuance of shares of Parent  Common  Stock  pursuant to the
options and other rights referred to in clauses  3.2(a),  (b), (c) and (d), (ii)
any grants of options or other rights to acquire  shares of Parent  Common Stock
made to employees or  non-employee  directors in the ordinary course of business
after  December  31,  1998,  pursuant to employee  incentive  or benefit  plans,
programs or  arrangements  and  non-employee  director plans and (iii) potential
future issuances of Parent Common Stock, options,  warrants or similar rights to
acquire  Parent Common Stock for not less than fair value,  in  connection  with
acquisitions  by Parent,  since  December 31, 1998,  no shares of Parent  Common
Stock,  Parent  Preferred  Stock or Parent Class B Stock have been issued and no
options,  warrants or other securities  convertible into shares of capital stock
of Parent have been issued or granted.  The shares of Parent  Common Stock to be
issued as  consideration  in the Merger are duly  authorized and, when issued in
accordance with the terms of this Agreement,  will be validly issued, fully paid
and  nonassessable.  Except as  provided  in Section  5.5 of the  Bayard  Merger
Agreement,  Parent has not granted any  registration  rights with respect to its
securities that are currently exercisable.

          3.3 Corporate Authority Relative to this Agreement; No Violation. Each
of Parent and Merger Sub has the  corporate  power and  authority  to enter into
this Agreement and,  subject to the receipt of any required  Parent  Stockholder
Authorization  (as  defined  in  Section  3.13),  to carry  out its  obligations
hereunder.  The execution and delivery of this Agreement and the consummation of
the transactions  contemplated  hereby have been duly and validly  authorized by
the Boards of Directors of Parent and Merger Sub, and, subject to the receipt of
Parent Stockholder  Authorization (if required),  no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize the  consummation
of the transactions  contemplated  hereby. The Boards of Directors of Parent and
Merger Sub have determined that the transactions  contemplated by this Agreement
are in the best  interests of such entities and their  respective  stockholders.
This  Agreement  has been duly and validly  executed and delivered by Parent and
Merger  Sub  and,  assuming  this  Agreement  constitutes  a valid  and  binding
agreement  of the  Company  and  subject to the  receipt  of Parent  Stockholder
Authorization  (if  required),  this  Agreement  constitutes a valid and binding
agreement of Parent and Merger Sub,  enforceable against them in accordance with
its terms  (except  insofar  as  enforceability  may be  limited  by  applicable
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws  affecting
creditors'  rights  generally,  or by principles  governing the  availability of
equitable  remedies).  Neither  Parent nor Merger Sub is subject to or obligated
under any charter,  by-law or contract  provision  or any license,  franchise or
permit,  or subject to any order or decree,  which would be breached or violated
by its executing or, subject to the receipt of Parent Stockholder  Authorization
(if required),  carrying out the  transactions  contemplated  by this Agreement,
except for any breaches or violations  which would not,  individually  or in the
aggregate,  have a Material  Adverse Effect on Parent.  Other than in connection
with or in compliance  with the  provisions of the TBCA,  the  Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Hart-Scott-Rodino  Antitrust  Improvements Act
of 1976,  as  amended  (the "HSR  Act"),  Section  4043 of ERISA (as  defined in
Section 3.8), the regulations of the American Stock Exchange,  Inc. ("AMEX") and
the securities or blue sky laws of the various states (collectively, the "Parent
Required Approvals"), no authorization,  consent or approval of, or filing with,
any  governmental  body or authority is necessary for the consummation by Parent
of  the   transactions   contemplated  by  this   Agreement,   except  for  such
authorizations,  consents,  approvals or filings,  the failure to obtain or make
which  would not,  individually  or




<PAGE>

in the  aggregate,  have a Material  Adverse  Effect on Parent or  substantially
impair or delay the consummation of the transactions contemplated hereby.

          3.4 Reports and Financial Statements.  Parent has previously furnished
to the Company true and complete  copies of: (a) Parent's Annual Reports on Form
10-K filed with the Securities and Exchange  Commission  (the "SEC") for each of
the years ended September 30, 1995 through 1997; (b) Parent's  Quarterly Reports
on Form 10-Q filed with the SEC for the quarters ended December 31, 1997,  March
31, 1998,  June 30, 1998 and  September  30,  1998;  (c) each  definitive  proxy
statement filed by Parent



<PAGE>

with the SEC since September 30, 1995; (d) each final prospectus filed by Parent
with the SEC since September 30, 1995, except any final prospectus  constituting
part of a Form S-8; and (e) all Current Reports on Form 8-K filed by Parent with
the SEC since October 1, 1997. As of their respective dates, such reports, proxy
statements  and  prospectuses  (collectively,  the  "Parent  SEC  Reports")  (i)
complied as to form in all material respects with the applicable requirements of
the Securities Act, the Exchange Act and the rules and  regulations  promulgated
thereunder  and (ii) did not contain any untrue  statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not  misleading.  Except to the extent that  information  contained in any
Parent SEC Report has been  revised or  superseded  by a later filed  Parent SEC
Report,  none of the Parent SEC  Reports  contains  any  untrue  statement  of a
material fact or omits to state any material fact required to be stated  therein
or  necessary  in  order  to  make  the  statements  therein,  in  light  of the
circumstances   under  which  they  were  made,  not  misleading.   The  audited
consolidated  financial statements and unaudited  consolidated interim financial
statements  included in the Parent SEC Reports  (including any related notes and
schedules)  have  been  prepared  in  accordance  with and  fairly  present  the
financial  position of Parent and its consolidated  Subsidiaries as of the dates
thereof  and the results of  operations  and cash flows for the periods or as of
the  dates  then  ended  (subject,   where   appropriate,   to  normal  year-end
adjustments),  in each case in  accordance  with  past  practice  and  generally
accepted  accounting  principles  in the  United  States  ("GAAP")  consistently
applied during the periods  involved  (except (i) as otherwise  disclosed in the
notes thereto, (ii) in the case of unaudited interim financial statements,  such
differences  in  presentation  or  omissions  as are  permitted by Rule 10-01 of
Regulation S-X promulgated by the SEC and (iii) the unaudited  interim financial
statements  do not contain all notes  required by GAAP).  Since October 1, 1996,
Parent has timely filed all material reports,  registration statements and other
filings  required to be filed by it with the SEC under the rules and regulations
of the SEC, and each such report, registration statement or other filing met the
standards set forth in the second sentence of this Section 3.4.

          3.5  No  Undisclosed  Liabilities.  Neither  Parent  nor  any  of  its
Subsidiaries  has any  liabilities or obligations of any nature,  whether or not
accrued,  contingent  or  otherwise,  of a type  required to be  reflected  on a
balance  sheet  prepared in  accordance  with GAAP,  except (a)  liabilities  or
obligations  reflected in the Parent SEC Reports filed after  September 30, 1997
but prior to the date hereof  ("Parent Filed SEC Reports"),  (b) liabilities and
obligations incurred under this Agreement and fees and expenses related thereto,
(c)  liabilities  and  obligations  incurred in the ordinary  course of business
after  September  30,  1998 and (d)  liabilities  or  obligations  which are not
reasonably  expected,  individually  or in the  aggregate,  to  have a  Material
Adverse Effect on Parent.

          3.6 No Violation of Law. The businesses of Parent and its Subsidiaries
are not being conducted in violation of any law,  ordinance or regulation of any
governmental  body or authority  (provided that no representation or warranty is
made in this  Section  3.6 with  respect to  Environmental  Laws (as  defined in
Section  3.7))  except (a) as  described in the Parent Filed SEC Reports and (b)
for violations or possible  violations  which would not,  individually or in the
aggregate, have a Material Adverse Effect on Parent.

          3.7  Environmental  Laws and  Regulations.  Except as described in the
Parent  Filed  SEC  Reports,  (a)  Parent  and each of its  Subsidiaries  are in
compliance with all applicable international,  federal, state, local and foreign
laws and regulations  relating to pollution or protection of human health or the
environment (including,  without limitation,  ambient air, surface water, ground
water, land surface or subsurface strata) (collectively,  "Environmental Laws"),
which compliance  includes,  but is not limited to, the possession by Parent and
its Subsidiaries of all material permits and other  governmental  authorizations
required under applicable  Environmental Laws, and compliance with the terms and
conditions thereof, except for noncompliance which would not, individually or in
the aggregate,  have a Material Adverse Effect on Parent; (b) neither Parent nor
any of its  Subsidiaries has received written notice of, or, to the knowledge of
Parent,   is  the  subject   of,  any   actions,   causes  of  action,   claims,
investigations,  demands or notices by any Person  asserting  an  obligation  to
conduct  investigations  or  clean-up  activities  under  Environmental  Laws or
alleging   liability  under  or  noncompliance   with  any  Environmental   Laws
(collectively,  "Environmental  Claims")  which  would,  individually  or in the
aggregate, have a Material Adverse Effect on Parent; and (c)




<PAGE>

to the knowledge of Parent,  there are no facts,  circumstances or conditions in
connection  with the operation of the businesses of Parent and its  Subsidiaries
or any  currently  or formerly  owned,  leased or operated  facilities  that are
reasonably likely to lead to any such Environmental Claims in the future, except
for any such  Environmental  Claims  which  would  not,  individually  or in the
aggregate, have a Material Adverse Effect on Parent.

          3.8 No  Undisclosed  Employee  Benefit Plan  Liabilities  or Severance
Arrangements. Except as described in the Parent Filed SEC Reports, all "employee
benefit  plans," as defined in Section  3(3) of the Employee  Retirement  Income
Security Act of 1974,  as amended  ("ERISA"),  maintained or  contributed  to by
Parent or its Subsidiaries  are in compliance with all applicable  provisions of
ERISA and the Code, and Parent and its  Subsidiaries do not have any liabilities
or obligations with respect to any such employee benefit plans, whether accrued,
contingent  or  otherwise,  except  (a) as  described  in the  Parent  Filed SEC
Reports,  and (b) for instances of  noncompliance  or liabilities or obligations
that would not, individually or in the aggregate, have a Material Adverse Effect
on Parent. No employee of Parent will be entitled to any additional  benefits or
any  acceleration  of the time of payment or vesting of any  benefits  under any
employee  incentive or benefit plan, program or other arrangement as a result of
the transactions contemplated by this Agreement.

          3.9 Absence of Certain  Changes or Events.  Other than as disclosed in
the Parent Filed SEC Reports, since October 1, 1997 the businesses of Parent and
its  Subsidiaries  have been conducted in all material  respects in the ordinary
course  consistent  with  past  practice,  and  there  has not been  any  event,
occurrence,  development  or state of  circumstances  or facts that has had,  or
would have, a Material Adverse Effect on Parent.

          3.10 Litigation.  Except as described in the Parent Filed SEC Reports,
there are no actions,  suits or proceedings  pending (or, to Parent's knowledge,
threatened)  against or affecting  Parent or its  Subsidiaries,  or any of their
respective  properties at law or in equity, or before any federal,  state, local
or  foreign  governmental  body  or  authority,  which,  individually  or in the
aggregate,  are reasonably  likely to have a Material  Adverse Effect on Parent.
The Parent  Disclosure  Schedule  sets forth a complete  list of all  pending or
threatened  actions,  suits  or  proceedings  involving  amounts  in  excess  of
$250,000.

          3.11  Ownership  of  Company  Common  Stock.  As of the  date  of this
Agreement,  Parent and its  Subsidiaries  own 2,209,500 shares of Company Common
Stock or other securities convertible into shares of Company Common Stock.

          3.12 Tax Matters.

          (a) All federal,  state,  local and foreign Tax Returns (as defined in
Section  3.12(c))  required  to be filed by or on behalf of Parent,  each of its
Subsidiaries,  and each affiliated,  combined,  consolidated or unitary group of
which  Parent  or any of its  Subsidiaries  (i) is a member (a  "Current  Parent
Group") or (ii) has been a member  within six years prior to the date hereof but
is not currently a member,  but only insofar as any such Tax Return relates to a
taxable period ending on a date within the last six years (a "Past Parent Group"
and, together with Current Parent Groups, a "Parent Affiliated Group") have been
timely filed,  and all such Tax Returns are complete and accurate  except to the
extent  any  failure to file or any  inaccuracies  in filed  returns  would not,
individually or in the aggregate,  have a Material  Adverse Effect on Parent (it
being  understood  that the  representations  made in this Section  3.12, to the
extent that they relate to Past Parent  Groups,  or to any  Subsidiary of Parent
for periods prior to the time such  Subsidiary was acquired by Parent,  are made
to the knowledge of Parent).  All Tax Returns include any required disclosure of
all positions  taken therein that could give rise to a substantial  underpayment
penalty  within Section 6662 of the Code or similar  provision of state,  local,
foreign or other law. All Taxes (as defined in Section 3.12(c)) due and owing by
Parent,  any Subsidiary of Parent or any Parent Affiliated Group have been paid,
or adequately  reserved for,  except to the extent any failure to pay or reserve
would not,  individually or in the aggregate,  have a Material Adverse Effect on
Parent. There is no audit examination,  deficiency, refund litigation,  proposed
adjustment or matter in  controversy  with respect to any Taxes due and owing by
Parent,  any  Subsidiary of Parent or any Parent  Affiliated  Group which would,
individually or in the aggregate,  have a Material Adverse Effect on Parent. All
assessments  for Taxes due and owing by Parent,  any Subsidiary




<PAGE>

of Parent or any Parent  Affiliated  Group with respect to completed and settled
examinations  or concluded  litigation  have been paid.  As soon as  practicable
after the public  announcement of the execution of this  Agreement,  Parent will
provide the Company  with written  schedules of (i) the taxable  years of Parent
for which the statutes of limitations  with respect to federal income Taxes have
not expired,  and (ii) with  respect to federal  income  Taxes,  those years for
which  examinations have been completed,  those years for which examinations are
presently being conducted,  and those years for which  examinations have not yet
been  initiated.  Parent  and  each of its  Subsidiaries  have  complied  in all
material  respects  with all rules and  regulations  relating to the payment and
withholding of Taxes, except to the extent any such failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.

          (b) None of Parent  nor any of its  Subsidiaries  knows of any fact or
has taken any action  that could  reasonably  be  expected to prevent the Merger
from qualifying as a reorganization  within the meaning of Section 368(a) of the
Code.

          (c) For  purposes of this  Agreement:  (i)  "Taxes"  means any and all
federal, state, local, foreign or other taxes of any kind (together with any and
all interest,  penalties,  additions to tax and additional  amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other  charges on or with  respect to income,  franchises,  windfall or
other profits,  gross receipts,  property,  sales, use, capital stock,  payroll,
employment,  social security, workers' compensation,  unemployment compensation,
or net worth,  and taxes or other charges in the nature of excise,  withholding,
ad valorem or value  added,  and (ii) "Tax Return"  means any return,  report or
similar statement  (including the attached  schedules) required to be filed with
respect to any Tax, including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.

          3.13 Required  Vote.  Assuming that Parent's  pending  acquisition  of
Bayard Drilling Technologies,  Inc. is consummated prior to the Closing Date, no
vote of the  stockholders  of Parent  ("Parent  Stockholder  Authorization")  is
required  by law,  the  charter or by-laws  of Parent or  otherwise  in order to
consummate the Merger and the transactions contemplated hereby. No other vote of
the  stockholders of Parent is required by law, the charter or by-laws of Parent
or otherwise in order for Parent to consummate  the Merger and the  transactions
contemplated hereby.

          3.14 Insurance. The Parent Disclosure Schedule sets forth all material
policies of  insurance or programs of  self-insurance  by which Parent or any of
its  Subsidiaries  or any of their  respective  properties or assets are covered
against  present losses,  all of which are now in full force and effect.  Parent
agrees to maintain such policies (or policies of substantially  the same nature)
in full  force and  effect at all times  until the  Effective  Time.  The Parent
Disclosure  Schedule  sets  forth for the  current  policy  year and each of the
preceding  five  policy  years (i) a summary of the loss  experience  under each
policy;  (ii) a statement  describing each claim under an insurance policy which
sets forth the name of the claimant, a description of the policy, and the amount
and a brief description of the claim; and (iii) a statement  describing the loss
experience  for all  claims  that were  self-insured,  including  the number and
aggregate cost of such claims.  Neither Parent nor any of its  Subsidiaries  has
received  any refusal of coverage or any notice that a defense  will be afforded
with reservation of rights.

          3.15 Intellectual Property. Parent and its Subsidiaries own or possess
adequate  licenses  or other valid  rights to use all  patents,  patent  rights,
trademarks, trademark rights and proprietary information used or held for use in
connection with their respective businesses as currently being conducted, except
where the failure to own or possess  such  licenses  and other  rights would not
have, individually or in the aggregate, a Material Adverse Effect on Parent, and
there  are no  assertions  or  claims  challenging  the  validity  of any of the
foregoing which are likely to have, individually or in the aggregate, a Material
Adverse  Effect  on  Parent.  The  conduct  of  Parent's  and its  Subsidiaries'
businesses as currently  conducted  does not conflict  with any patents,  patent
rights, licenses,  trademarks,  trademark rights, trade names, trade name rights
or  copyrights  of others  in any way  likely  to have,  individually  or in the
aggregate,  a Material  Adverse Effect on Parent.  The systems,  processes,  and
computer software and hardware used, operated, sold or licensed by Parent or its
Subsidiaries  that is material to its  business or its  internal  operations  is
capable  of  providing  or is being or will be  adapted,  or is capable of being
replaced,  to provide uninterrupted  millennium  functionality to record, store,
process  and  present  calendar  dates  falling  on or after  January 1, 2000 in
substantially the same manner and with  substantially the same  functionality as
such systems,  processes,  software and hardware records,  stores, processes and
presents such calendar dates falling on or before  December 31, 1999,  except as
would not have a Material Adverse Effect on Parent. The costs of the 




<PAGE>

adaptations and  replacements  referred to in the prior sentence will not have a
Material Adverse Effect on Parent.

          3.16 Material  Contracts.  The Parent  Disclosure  Schedule  lists the
following  contracts  and  other  agreements  to  which  Parent  or  any  of its
Subsidiaries is a party (other than  intercompany  arrangements)  as of the date
hereof (collectively, the "Parent Contracts"):

          (a) any  agreement (or group of related  agreements)  for the lease of
personal  property to or from any person  providing for lease payments in excess
of $5,000,000 per annum and a term of more than one year;

          (b) any agreement (or group of related agreements) for the purchase or
sale of raw  materials,  commodities,  supplies,  products,  or  other  personal
property, or for the furnishing or receipt of services, the performance of which
has a term  more  than six  months,  and  involves  consideration  in  excess of
$5,000,000;

          (c) any partnership or joint venture agreement;

          (d) any agreement (or group of related  agreements) under which it has
created,  incurred,  assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation,  in excess of $5,000,000, or under which it
has imposed a lien, security interest or other encumbrance on any of its assets,
tangible or intangible, to secure such indebtedness or obligations;

          (e) any agreement which purports to limit in any material  respect the
manner in which, or the localities in which,  all or any material portion of the
business of Parent and its  Subsidiaries,  taken as a whole,  or the Company and
its Subsidiaries, taken as a whole, is conducted;

          (f) any  agreement  with any of the  stockholders  of Parent and their
affiliates  relating  to  the  voting,   transfer  or  disposition  of  Parent's
securities;

          (g)  any  profit  sharing,   stock  option,   stock  purchase,   stock
appreciation,  deferred  compensation,  severance  or  other  material  plan  or
arrangement (including any employee benefit plan) for the benefit of its current
or former directors, officers and employees;

          (h) any collective bargaining agreement;

          (i) all  turnkey  and  footage  drilling  contracts  and  all  daywork
drilling  contracts  for  amounts  in  excess  of  $2,000,000  or  that  are not
terminable or subject to completion within 90 days;

          (j) any  agreement  under  which  the  consequences  of a  default  or
termination could have a Material Adverse Effect on Parent; and

          (k)  any  other  agreement  (or  group  of  related   agreements)  the
performance of which involves  consideration  in excess of $5,000,000 other than
agreements entered into in the ordinary course.

There is no contract or agreement  that is material to the  business,  financial
condition or results of  operations of Parent and its  Subsidiaries,  taken as a
whole, that is not set forth in the Parent Disclosure  Schedule.  Neither Parent
nor any of its  Subsidiaries  is in violation  or default  under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause a  violation  or  default  under)  any  Parent  Contract,  other than such
violations or defaults as would not have a Material Adverse Effect on Parent. To
the knowledge of Parent, none of the other parties to the Parent Contracts is in
violation of or in default under (nor does there exist any condition  which upon
the passage of time or the giving of notice  would cause a violation  or default
under) any Parent Contract,  other than such violations or defaults as would not
have a Material Adverse Effect on Parent.

          3.17  Ownership  of Merger Sub; No Prior  Activities.  Merger Sub is a
direct, wholly owned




<PAGE>

subsidiary  of  Parent.  Except  for  obligations  or  liabilities  incurred  in
connection  with  its   incorporation   or  organization  and  the  transactions
contemplated  by this  Agreement  and  except for this  Agreement  and any other
agreements or arrangements  contemplated  by this Agreement,  Merger Sub has not
and will not have incurred,  directly or  indirectly,  through any Subsidiary or
affiliate,  any obligations or liabilities or engaged in any business activities
of any type or kind  whatsoever or entered into any  agreements or  arrangements
with any person.

          3.18  Brokers.  Other  than  Merrill  Lynch,  Pierce,  Fenner  & Smith
Incorporated,  no  broker,  finder  or  investment  banker  is  entitled  to any
brokerage,   finder's  or  other  fee  or  commission  in  connection  with  the
transactions  contemplated by this Agreement based upon  arrangements made by or
on behalf of Parent or Merger Sub.

          3.19 Property.  Parent and each of the  Subsidiaries,  as the case may
be, have sufficient  title or leaseholds to property to conduct their respective
businesses as currently  conducted with only such  exceptions as individually or
in the aggregate would not have a Material Adverse Effect on Parent.

          3.20 Parent Equipment. Parent and its Subsidiaries have such ownership
of or such rights by license,  lease or other agreement to all equipment used or
necessary to conduct their  respective  businesses as currently  conducted  (the
"Parent  Equipment")  with  only  such  exceptions  as  individually  or in  the
aggregate  would not have a  Material  Adverse  Effect  on  Parent.  The  Parent
Equipment  that is currently  under  contract or is being  actively  marketed by
Parent or a Subsidiary  is in good  operating  condition and repair and adequate
for the uses to which it is being put.

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

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except  as set  forth  on the  Disclosure  Schedule  delivered  by the
Company  to  Parent  prior to the  execution  of this  Agreement  (the  "Company
Disclosure Schedule"),  the Company represents and warrants to Parent and Merger
Sub that:

          4.1  Organization,  Qualification,  Etc. The Company is a  corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Texas and has the  requisite  corporate  power and authority to own its
properties and assets and to carry on its business as it is now being  conducted
and  is  duly  qualified  to  do  business  and  is in  good  standing  in  each
jurisdiction  in which the  ownership  of its  properties  or the conduct of its
business  requires such  qualification,  except for  jurisdictions  in which the
failure to be so qualified or in good standing would not, individually or in the
aggregate,  have a Material  Adverse  Effect on the  Company.  The copies of the
Company's Articles of Incorporation,  as amended, and Bylaws, as amended,  which
have been  delivered  to Parent are  complete  and correct and in full force and
effect  on the  date  of  this  Agreement.  Each  of the  Company's  Significant
Subsidiaries  is duly  organized,  validly  existing and (if applicable) in good
standing under the laws of its  jurisdiction of  incorporation  or organization,
has the power and authority to own its  properties  and to carry on its business
as it is now being  conducted,  and is duly  qualified to do business and is (if
applicable) in good standing in each  jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification,  except for
jurisdictions in which the failure to be so qualified or (if applicable) in good
standing would not,  individually or in the aggregate,  have a Material  Adverse
Effect on the Company.  All the outstanding shares of capital stock of, or other
ownership  interests  in, the  Company's  Significant  Subsidiaries  are validly
issued, fully paid and non-assessable and are owned by the Company,  directly or




<PAGE>

indirectly, free and clear of all liens, claims, charges or encumbrances, except
for restrictions contained in credit agreements and similar instruments to which
the Company is a party  under which no event of default has  occurred or arisen.
There are no existing options, rights of first refusal, preemptive rights, calls
or commitments of any character relating to the issued or unissued capital stock
or other  securities  of,  or other  ownership  interests  in,  any  Significant
Subsidiary of the Company.

          4.2  Capital  Stock.  The  authorized  capital  stock  of the  Company
consists  of  40,000,000  shares of  Company  Common  Stock and 1,000  shares of
preferred stock, without par value ("Company Preferred Stock"). As of January 8,
1999, 21,114,655 shares of Company Common Stock were issued and outstanding,  no
shares of Company  Common  Stock were held in the  Company's  treasury and 1,000
shares of Company  Preferred Stock were held in the Company's  treasury.  All of
the  shares  of  Company  Common  Stock and  Company  Preferred  Stock  (whether
outstanding  or in  treasury)  have been  validly  issued and are fully paid and
nonassessable.  As of January 8, 1999, there were no outstanding  subscriptions,
convertible or  exchangeable  securities,  options,  warrants,  or other rights,
arrangements or commitments obligating the Company to issue, deliver or sell any
shares of its capital stock or debt  securities,  or any  securities of any kind
convertible  into its capital stock, or obligating the Company to grant,  extend
or  enter  into  any  such  subscription,   option,  warrant,  or  other  right,
arrangement or commitment,  other than: (a) rights ("Company Rights") to acquire
shares of the Company Common Stock pursuant to the Rights Agreement, dated as of
June 7, 1994,  between the Company  and The First  National  Bank of Boston (the
"Company  Rights Plan") and (b) options to acquire  1,431,754  shares of Company
Common  Stock  granted  on or prior to  January 8,  1999,  (the  "Company  Stock
Options")  and  incentive  awards  and other  similar  rights to receive up to a
maximum of 174,954  shares of the Company  Common  Stock  granted on or prior to
January 8, 1999 ("Incentive Awards"),  pursuant to employee incentive or benefit
plans,  programs and arrangements and nonemployee director plans. Except for the
issuance of shares of the Company Common Stock  pursuant to the options,  awards
and other rights  referred to in clauses (a) and (b) of this Section 4.2,  since
January 8, 1999, no shares of Company  Common Stock or Company  Preferred  Stock
have been issued and no options,  awards or other  securities  convertible  into
shares of capital  stock of the Company  have been  issued,  awarded or granted.
Section 4.2 of the Company  Disclosure  Schedule  sets forth a true and complete
list of all Company Stock Options and Incentive Awards,  showing for each holder
the number and type of Company Stock Options held, the exercise  prices thereof,
and the dates of grant,  expiration  and vesting  thereof.  The Company has made
available to Parent complete and correct copies of all agreements evidencing the
Company  Stock  Options and  Incentive  Awards.  The Company has not granted any
registration   rights  with  respect  to  its  securities   that  are  currently
exercisable.

          4.3 Corporate Authority Relative to this Agreement; No Violation.  The
Company has the requisite  corporate  power and authority to execute and deliver
this Agreement and, subject to the receipt of the Company  Shareholder  Approval
(as  defined in Section  4.14),  to  consummate  the  transactions  contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions  contemplated  hereby have been duly and validly  authorized by the
Board of  Directors  of the  Company  and,  subject  to the  receipt  of Company
Shareholder  Approval, no other corporate proceedings on the part of the Company
are necessary to authorize the  consummation  of the  transactions  contemplated
hereby  and  thereby.  The  Board of  Directors  of the  Company  has  taken all
appropriate  action so that none of the  Company,  Parent or Merger  Sub will be
subject to the limitations on "business combinations" set forth in Part Thirteen
of the TBCA by virtue of the Company,  Parent and Merger Sub entering  into this
Agreement and consummating the transactions  contemplated  hereby.  The Board of
Directors of the Company has determined  that the  transactions  contemplated by
this  Agreement are advisable and in the best  interests of the Company and that
it will recommend to the Company's  shareholders that they adopt this Agreement.
Neither the Company nor any  affiliate  or  associate of the Company has, at any
time during the last three  years,  owned in excess of 15% of the Parent  Common
Stock.  This  Agreement has been duly and validly  executed and delivered by the
Company and,  assuming this Agreement  constitutes a valid and binding agreement
of the other parties  hereto and the Company  Shareholder  Approval is received,
this  Agreement  constitutes  a valid  and  binding  agreement  of the  Company,
enforceable  against the Company in accordance with its terms (except insofar as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium  or  similar  laws  affecting   creditors'   rights
generally,  or by principles  governing the availability of equitable remedies).
Neither the Company nor any of its Subsidiaries is subject to or obligated





<PAGE>

under any charter,  by-law,  joint venture or partnership  agreement or contract
provision  or any  license,  franchise  or  permit,  or  subject to any order or
decree,  which would be breached or violated by its executing or, subject to the
receipt  of  Company  Shareholder   Approval,   carrying  out  the  transactions
contemplated  by this  Agreement,  except for any breaches or  violations  which
would not,  individually or in the aggregate,  have a Material Adverse Effect on
the Company.  The execution and delivery of this Agreement and the  consummation
of the transactions  contemplated  hereby will not (a) cause a change in control
to occur under the Shareholders Agreement by and between Pool International Inc.
and Arabian Petroleum Services Company ("Petroserv"),  dated as of September 20,
1974,  as amended  to the date of this  Agreement  or under any other  governing
documents related thereto  (collectively,  the "Saudi Joint Venture Agreement"),
(b)  result in  Petroserv  having  the right to acquire in excess of 65% of Pool
Arabia,  Ltd. or (c) result in Petroserv  obtaining  management  control of Pool
Arabia,  Ltd. Other than in connection with or in compliance with the provisions
of the TBCA, the Securities Act, the Exchange Act, the HSR Act,  Section 4043 of
ERISA and the securities or blue sky laws of the various  states  (collectively,
the "Company Required Approvals"), no authorization,  consent or approval of, or
filing  with,  any   governmental   body  or  authority  is  necessary  for  the
consummation by the Company of the transactions  contemplated by this Agreement,
except for such authorizations,  consents,  approvals or filings, the failure to
obtain  or make  which  would  not,  individually  or in the  aggregate,  have a
Material  Adverse  Effect on the  Company or  substantially  impair or delay the
consummation of the transactions contemplated hereby.

          4.4  Reports and  Financial  Statements.  The  Company has  previously
furnished  to Parent  true and  complete  copies  of: (a) the  Company's  Annual
Reports on Form 10-K filed with the SEC for each of the years ended December 31,
1995 through 1997; (b) the Company's  Quarterly  Reports on Form 10-Q filed with
the SEC for the quarters  ended March 31, 1998,  June 30, 1998 and September 30,
1998;  (c) each  definitive  proxy  statement  filed by the Company with the SEC
since December 31, 1995; (d) each final prospectus filed by the Company with the
SEC since December 31, 1995, except any final prospectus  constituting part of a
Form S-8; and (e) all Current  Reports on Form 8-K filed by the Company with the
SEC since January 1, 1998. As of their  respective  dates,  such reports,  proxy
statements and prospectuses  (collectively,  "Company SEC Reports") (i) complied
as to form in all material  respects  with the  applicable  requirements  of the
Securities  Act, the Exchange  Act,  and the rules and  regulations  promulgated
thereunder  and (ii) did not contain any untrue  statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not  misleading.  Except to the extent that  information  contained in any
Company SEC Report has been revised or  superseded  by a later filed Company SEC
Report,  none of Company SEC Reports contains any untrue statement of a material
fact or omits to state  any  material  fact  required  to be stated  therein  or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.  The audited consolidated  financial
statements and unaudited  consolidated  interim financial statements included in
the Company SEC Reports  (including any related notes and  schedules)  have been
prepared in accordance  with and fairly  present the  financial  position of the
Company  and its  consolidated  Subsidiaries  as of the  dates  thereof  and the
results of their  operations  and their cash flows for the  periods or as of the
dates then ended (subject,  where appropriate,  to normal year-end adjustments),
in each case in  accordance  with past  practice and GAAP  consistently  applied
during the periods  involved  (except (i) as  otherwise  disclosed  in the notes
thereto,  (ii) in the  case of  unaudited  interim  financial  statements,  such
differences  in  presentation  or  omissions  as are  permitted by Rule 10-01 of
Regulation S-X promulgated by the SEC and (iii) the unaudited  interim financial
statements  do not contain all notes  required by GAAP).  Since January 1, 1996,
the Company has timely filed all material reports,  registration  statements and
other  filings  required  to be filed by it with the SEC  under  the  rules  and
regulations  of the SEC, and each such report,  registration  statement or other
filing met the standards set forth in the second sentence of this Section 4.4.

          4.5 No  Undisclosed  Liabilities.  Neither  the Company nor any of its
Subsidiaries  has any  liabilities or obligations of any nature,  whether or not
accrued,  contingent  or  otherwise,  of a type  required to be  reflected  on a
balance  sheet  prepared in  accordance  with GAAP,  except (a)  liabilities  or
obligations  reflected in Company SEC Reports filed after  December 31, 1997 but
prior to the date hereof  ("Company  Filed SEC Reports"),  (b)  liabilities  and
obligations incurred under this Agreement and fees and expenses related thereto,
(c)  liabilities  and  obligations  incurred in the ordinary  course of business
after  September  30,  1998 and (d)  liabilities  or  obligations  which are not
reasonably  expected,  individually  or in the  aggregate, 




<PAGE>

to have a Material Adverse Effect on the Company.

          4.6 No  Violation  of  Law.  The  businesses  of the  Company  and its
Subsidiaries  are not being  conducted  in  violation  of any law,  ordinance or
regulation   of  any   governmental   body  or  authority   (provided   that  no
representation  or  warranty  is  made in  this  Section  4.6  with  respect  to
Environmental Laws) except (a) as described in the Company Filed SEC Reports and
(b) for violations or possible  violations  which would not,  individually or in
the aggregate, have a Material Adverse Effect on the Company.

          4.7  Environmental  Laws and  Regulations.  Except as described in the
Company Filed SEC Reports,  (a) the Company and each of its  Subsidiaries are in
compliance with all applicable  Environmental  Laws, which compliance  includes,
but is not limited to, the possession by the Company and its Subsidiaries of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof, except
for  non-compliance  which would not,  individually or in the aggregate,  have a
Material  Adverse Effect on the Company;  (b) neither the Company nor any of its
Subsidiaries  has  received  written  notice  of,  or, to the  knowledge  of the
Company, is the subject of, any Environmental  Claims which would,  individually
or in the aggregate,  have a Material Adverse Effect on the Company;  and (c) to
the knowledge of the Company, there are no facts, circumstances or conditions in
connection  with  the  operation  of the  businesses  of  the  Company  and  its
Subsidiaries or any currently or formerly owned,  leased or operated  facilities
that are  reasonably  likely  to lead to any such  Environmental  Claims  in the
future,  except for any such Environmental Claims which would not,  individually
or in the aggregate, have a Material Adverse Effect on the Company.

          4.8 Employee Benefit Matters.

          (a) The Company Disclosure Schedule sets forth a complete and accurate
list of:

                  (i) each  "employee  welfare  benefit  plan"  (as such term is
         defined in Section 3(1) of the ERISA) (the "Company Welfare Plans");

                  (ii) each  "employee  pension  benefit  plan" (as such term is
         defined in Section 3(2) of ERISA) (the "Company Pension Plans");

                  (iii)  all  other  material  employee  benefit  agreements  or
         arrangements,  including,  without  limitation,  deferred  compensation
         plans,  incentive  plans,  bonus plans or  arrangements,  stock  option
         plans, stock purchase plans, golden parachute agreements, severance pay
         plans,  dependent  care plans,  cafeteria  plans,  employee  assistance
         programs,   scholarship  programs,   employment   contracts,   vacation
         policies,  supplemental  income  arrangements  and other similar plans,
         agreements and  arrangements  (collectively,  with the Company  Welfare
         Plans and the Company Pension Plans, the "Company Benefit Plans"), that
         are in effect  on the date of this  Agreement,  or have  been  approved
         before the date of this  Agreement but are not yet  effective,  for the
         benefit of directors, officers, employees or former employees (or their
         respective  beneficiaries  or consultants)  of the Company,  any of its
         Subsidiaries  incorporated  in the United  States  (the  "Company  U.S.
         Subsidiaries") or any corporation,  trade, business or entity that is a
         member of a controlled  group,  affiliated  service  group or otherwise
         under common  control  with the Company  (within the meaning of Section
         414(b),  (c),  (m) or (o) of the  Code)  and  that is  incorporated  or
         domiciled in the United States (collectively, the "Company Group"). The
         Company  and U.S.  Subsidiaries  will  provide  to  Parent,  as to each
         Company Benefit Plan, as applicable,  access to a complete and accurate
         copy of (i) each such plan,  agreement or arrangement;  (ii) the trust,
         group annuity  contract or other document that provides the funding for
         such  plan;  (iii)  the most  recent  annual  Form  5500,  990 and 1041
         reports;  (iv) the most recent actuarial report or valuation statement;
         (v) the  most  current  summary  plan  description,  handbook  or other
         booklet that  describes any Company  Benefit  Plan,  and any summary of
         material   modifications   prepared   after  each  such   summary  plan
         description;  (vi) the most recent  Internal  Revenue  Service  ("IRS")
         determination  letter and all rulings or determinations  requested from
         the IRS subsequent to the date of such determination  letter; and (vii)
         all other  pending  correspondence  from the IRS or the  Department  of
         Labor  received by any member




<PAGE>

         of the Company Group that relates to such plan; and

                  (iv) all amendments or  modifications  to any Company  Benefit
         Plan  (including  any  increase  in  salary  or  bonus)  authorized  or
         implemented  since  October  1, 1998  which  increase  the cost of such
         Company Benefit Plan to the Company.

          (b) Each  Company  Welfare  Plan and  Company  Pension  Plan (i) is in
compliance  with  ERISA,  including,   without  limitation,  all  reporting  and
disclosure  requirements  of Part 1 of  Subtitle  B of Title I of ERISA  and the
Code; (ii) has not engaged in any transaction described in Section 406 or 407 of
ERISA or  Section  4975 of the Code  unless it  received  or is  entitled  to an
exemption under Section 408 of ERISA or Section 4975 of the Code, as applicable,
or unless such  transaction  has been corrected and all applicable  excise taxes
paid or waived;  (iii) has no issue,  action,  suit or claim pending (other than
the payment of benefits in the normal  course or the  qualification  of the plan
pursuant  to an  application  pending  before  the IRS) nor any  issue  resolved
adversely to the Company  Group that,  in either  case,  may subject the Company
Group to the payment of a penalty,  interest,  tax or other amount; and (iv) can
be unilaterally terminated or amended on no more than 90 days' notice. No notice
has been  received by the Company  Group of an increase or proposed  increase in
any premium  relative to any  Company  Benefit  Plan,  and no  amendment  to any
Company  Benefit  Plan  within  the last 12  months  has  increased  the rate of
employer  contributions  thereunder.  (i) The  Company  Group has  substantially
performed all  obligations,  whether arising by operation of law or by contract,
required to be performed by it in  connection  with the Company  Benefit  Plans,
(ii) each Company  Benefit Plan has been  administered  in  compliance  with its
governing  documents and applicable  law, (iii) no act,  omission or transaction
has occurred which would result in imposition on any member of the Company Group
of (A) breach of fiduciary  duty  liability  damages under Section 409 of ERISA,
(B) a civil penalty assessed  pursuant to subsections (c), (i) or (l) of Section
502 of ERISA or (C) a tax  imposed  pursuant  to Chapter 43 of Subtitle D of the
Code.

          (c) Each  Company  Benefit  Plan that is  intended  to be a  voluntary
employee  benefit  association  has been submitted to and approved by the IRS as
exempt  from  federal  income  tax under  Section  501(c)(9)  of the Code or the
applicable submission period relating to any such plan will not have ended prior
to the Closing.  No Company  Benefit  Plan will cause the Company  Group to have
liability for severance pay as a result of this Agreement.

          (d) Each Company  Pension Plan that is intended to be qualified  under
Section  401(a) of the Code has been  submitted  to and  approved as  qualifying
under Section 401(a) of the Code by the IRS or the applicable remedial amendment
period  relating to such plan will not have ended prior to the  Closing.  To the
knowledge  of the Company,  no facts have  occurred  that,  if known by the IRS,
could cause  disqualification  of any Company  Pension  Plan.  As to any Company
Pension Plan that is intended to be qualified  under Section 401(a) of the Code,
there has been no  termination  or partial  termination  of such plan within the
meaning of Section  411(d)(3) of the Code.  Each  Company  Pension Plan to which
Section 302 of ERISA or Section  412 of the Code is  applicable  fully  complies
with the  funding  requirements  of that  Section  and there is no  "accumulated
funding  deficiency" as defined in Section  302(a)(2) of ERISA or Section 412 of
the Code  (whether or not waived) in any such plan.  The Company  Group has paid
all premiums (including, without limitation, interest, charges and penalties for
late payment) due the Pension  Benefit  Guaranty  Corporation  (the "PBGC") with
respect to each Company Pension Plan for which premiums are required. No Company
Pension Plan has been terminated, and there has been no event or condition which
presents the material risk of termination, under circumstances that would result
in any material  liability to the PBGC or the Company  Group.  There has been no
"reportable  event" (as defined in Section  4043(c) of ERISA and the regulations
under that Section) with respect to any Company Pension Plan subject to Title IV
of ERISA.  With  respect to each  Company  Pension  Plan  subject to Title IV of
ERISA,  (i) no  notice  of intent to  terminate  the plan has been  given  under
Section 4041 of ERISA, (ii) no proceeding has been instituted under Section 4042
of ERISA to terminate the plan, (iii) no liability to the PBGC has been incurred
and (iv) the Company Group has not (A) ceased  operations at a facility so as to
become subject to the provisions of Section 4062(e) of ERISA, (B) withdrawn as a
substantial  employer so as to become  subject to the provisions of Section 4063
of ERISA or (C) ceased making contributions on or before the Closing Date to any
such plan  subject to Section  4064(a) of ERISA to which the Company  Group made
contributions  at any time during the six years prior to the  Closing  Date.  No
member of the Company  Group  contributes  to or has an obligation to contribute
to,  and  has not at any




<PAGE>

time  within  six  years  prior to the  Closing  Date  contributed  to or had an
obligation to contribute  to, from a  multiemployer  plan (as defined in Section
3(37) of ERISA).

          (e) The  Company  Disclosure  Schedule  sets forth the  amounts of all
severance  payments  or similar  obligations,  including  but not limited to any
increased employee compensation or additional benefits, vested rights or service
credits  under any Company  Benefit Plan  (whether or not some other  subsequent
action or event  would be  required  to cause such  payment or  provision  to be
triggered),  that will be owed by Company or any of its  Subsidiaries  to any of
their  respective  employees,   officers,  directors  or  consultants,  and  all
increases in severance  payments or other  benefits to which any of such persons
will be entitled, as a result of the Merger or the transactions  contemplated by
this Agreement.  Except as set forth in the Company Disclosure Schedule, no such
payments shall be due and payable as a result of the Merger or the  transactions
contemplated  hereby.  Company  has made  available  to Parent (i) copies of all
employment agreements with officers of Company and its Subsidiaries; (ii) copies
of all  agreements  with  consultants  obligating  Company to make  annual  cash
payments in an amount  exceeding  $100,000 or with a term greater than one year;
(iii) a schedule  listing all officers of Company and its  Subsidiaries who have
executed a  non-competition  agreement  with Company or its  Subsidiaries;  (iv)
copies of all  severance  agreements,  programs  and policies of Company with or
relating to its employees; and (v) copies of all plans, programs, agreements and
other  arrangements  of Company with or relating to its employees  which contain
change in  control  provisions.  Except as set forth in the  Company  Disclosure
Schedule,  in connection with the consummation of the transactions  contemplated
by this  Agreement,  no payments  of money or other  property,  acceleration  of
benefits,  or provisions of other rights have or will be made  hereunder,  under
the Company  Benefit Plans or under any other agreement that would be reasonably
likely to result in imposition  of the sanctions  imposed under Section 280G and
4999 of the Code,  whether or not some other subsequent action or event would be
required to cause such payment, acceleration or provision to be triggered.

          (f)  Since  January  1,  1996,  neither  the  Company  nor  any of its
Subsidiaries  has  been a party to any  collective  bargaining  or  other  labor
contract.  Since  January 1, 1997,  there has not been,  there is not  presently
pending or existing, and to the Company's knowledge there is not threatened, (i)
any strike,  slowdown,  picketing,  work stoppage or employee grievance process;
(ii) any proceeding  against or affecting the Company or any of its Subsidiaries
relating to the alleged violation of any legal  requirement  pertaining to labor
relations or employment  matters,  including any charge or complaint filed by an
employee or union with the National Labor Relations  Board, the Equal Employment
Opportunity Commission or any comparable governmental authority,  organizational
activity or other labor or employment  dispute  against or affecting  Company or
any of its  Subsidiaries  or  their  premises;  or  (iii)  any  application  for
certification of a collective  bargaining agent. To the Company's knowledge,  no
event has occurred or  circumstance  exists that could provide the basis for any
work  stoppage or other labor  dispute.  There is no lockout of any employees by
Company  or any of its  Subsidiaries,  and no such  action  is  contemplated  by
Company or any of its  Subsidiaries.  To the  knowledge of Company,  Company and
each of its  Subsidiaries  has complied in all material  respects with all legal
requirements   relating   to   employment,    equal   employment    opportunity,
nondiscrimination,  immigration,  wages, hours, benefits, collective bargaining,
the  payment of social  security  and  similar  taxes,  occupational  safety and
health, and plant closing. To the knowledge of Company,  neither Company nor any
of its Subsidiaries is liable for the payment of compensation,  damages,  taxes,
fines,  penalties, or other amounts,  however designated,  for failure to comply
with any of the foregoing legal requirements.

          (g) Except as otherwise  required by law, (i) no Company  Benefit Plan
provides retiree medical or retiree life insurance  benefits to any person,  and
(ii) none of Company or its Subsidiaries is contractually  obligated (whether or
not in writing) to provide any person with life  insurance  or medical  benefits
upon retirement or termination of employment. The Company Group has not made any
representations,  agreements,  covenants or commitments to provide such coverage
or benefits.

          4.9 Absence of Certain  Changes or Events.  Other than as disclosed in
the Company  Filed SEC  Reports,  since  January 1, 1998 the  businesses  of the
Company and its Subsidiaries have been



<PAGE>

conducted in all material  respects in the ordinary course  consistent with past
practice, and there has not been any event, occurrence,  development or state of
circumstances or facts that has had, or would have, a Material Adverse Effect on
the Company.

          4.10 Litigation.  Except as described in the Company Filed SEC Reports
or  previously  disclosed in writing to Parent,  there are no actions,  suits or
proceedings  pending (or, to the  Company's  knowledge,  threatened)  against or
affecting the Company or its Subsidiaries, or any of their respective properties
at law or in equity, or before any federal, state, local or foreign governmental
body or authority which, individually or in the aggregate, are reasonably likely
to have a  Material  Adverse  Effect  on the  Company.  The  Company  Disclosure
Schedule sets forth a complete list of all pending or threatened actions,  suits
or proceedings involving amounts in excess of $250,000.

          4.11 Company Rights Plan.  Under the terms of the Company Rights Plan,
as amended on the date of this  Agreement,  the  execution  and delivery of this
Agreement, the performance of the transactions contemplated by this Agreement in
accordance  with the terms  hereof  will not  (except  to the  extent  caused by
Parent's becoming the beneficial owner of any Company Common Stock other than in
accordance with this Agreement)  cause (i) Company Rights to become  exercisable
under the Company Rights Plan or (ii) a "Distribution  Date", "Share Acquisition
Date",  "Triggering Event", "Flip-In Event" or "Flip- Over Event" (as such terms
are defined in the Company  Rights Plan) to occur upon the  consummation  of any
such transactions.  In addition,  the Company has taken all actions necessary to
cause the  Company  Rights  Plan to be amended so that the  Company  Rights will
expire immediately prior to the Closing Date.

          4.12 Lack of Ownership of Parent Common Stock. Neither the Company nor
any of its  Subsidiaries  owns  any  shares  of  Parent  Common  Stock  or other
securities convertible into shares of Parent Common Stock.

          4.13 Tax Matters.

          (a) All federal,  state,  local and foreign Tax Returns required to be
filed  by or on  behalf  of the  Company,  each of its  Subsidiaries,  and  each
affiliated,  combined, consolidated or unitary group of which the Company or any
of its Subsidiaries (i) is a member (a "Current Company Group") or (ii) has been
a member  within  six years  prior to the date  hereof  but is not  currently  a
member,  but only  insofar  as any such Tax Return  relates to a taxable  period
ending on a date within the last six years (a "Past Company Group" and, together
with Current  Company  Groups,  a "Company  Affiliated  Group") have been timely
filed,  and all such Tax Returns are complete and accurate  except to the extent
any failure to file or any inaccuracies in filed returns would not, individually
or in the  aggregate,  have a Material  Adverse  Effect on the Company (it being
understood  that the  representations  made in this Section  4.13, to the extent
that they relate to Past Company Groups, or to any Subsidiary of the Company for
periods prior to the time such Subsidiary was acquired by the Company,  are made
to the  knowledge  of  the  Company).  All  Tax  Returns  include  any  required
disclosure of all positions  taken therein that could give rise to a substantial
underpayment  penalty  within  Section 6662 of the Code or similar  provision of
state, local,  foreign or other law. All Taxes due and owing by the Company, any
Subsidiary  of the Company or any Company  Affiliated  Group have been paid,  or
adequately  reserved  for,  except to the extent  any  failure to pay or reserve
would not,  individually or in the aggregate,  have a Material Adverse Effect on
the  Company.  There is no audit  examination,  deficiency,  refund  litigation,
proposed  adjustment or matter in controversy  with respect to any Taxes due and
owing by the Company,  any  Subsidiary of the Company or any Company  Affiliated
Group which would,  individually  or in the aggregate,  have a Material  Adverse
Effect on the Company.  All  assessments for Taxes due and owing by the Company,
any  Subsidiary of the Company or any Company  Affiliated  Group with respect to
completed and settled  examinations  or concluded  litigation have been paid. As
soon as  practicable  after the public  announcement  of the  execution  of this
Agreement,  the Company  will provide  Parent with written  schedules of (i) the
taxable years of the Company for which the statutes of limitations  with respect
to federal  income  Taxes  have not  expired,  and (ii) with  respect to federal
income Taxes,  those years for which  examinations  have been  completed,  those
years for which examinations are presently being conducted,  and those years for
which  examinations  have not yet been  initiated.  The  Company and each of its
Subsidiaries  have  complied  in  all  material  respects  with  all  rules  and
regulations  relating  to the payment and  withholding




<PAGE>

of  Taxes,  except  to  the  extent  any  such  failure  to  comply  would  not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Neither the Company nor any  Subsidiary is (nor has it ever been) a party to any
tax sharing  agreement and has not assumed the tax liability of any other person
under a contract;  has ever filed a consent under Section 341(f) of the Code; is
required to make any  adjustment  under  Section  481(a) of the Code for any tax
year  ending  after  the  Effective  Time by  reason  of a change  in  method of
accounting  or  otherwise;  or is required to make a payment with respect to the
remuneration  of an  employee  which  would  result  in  non-deductible  expense
pursuant to Section  162(m) of the Code.  Neither the Company nor any Subsidiary
is (nor has it ever been) a United  States  real  property  holding  corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii).

          (b) None of the Company nor any of its Subsidiaries  knows of any fact
or has taken any action that could  reasonably be expected to prevent the Merger
from qualifying as a reorganization  within the meaning of Section 368(a) of the
Code.

          4.14 Required  Vote. The  affirmative  vote of the holders of at least
two-thirds of the  outstanding  shares of the Company Common Stock (the "Company
Shareholder Approval") is required to adopt the Merger Agreement.  No other vote
of the  shareholders of the Company is required by law, the charter or bylaws of
the Company or otherwise in order for the Company to  consummate  the Merger and
the transactions contemplated hereby.

          4.15  Insurance.  The  Company  Disclosure  Schedule  sets  forth  all
material  policies  of  insurance  or programs  of  self-insurance  by which the
Company or any of its  Subsidiaries  or any of their  respective  properties  or
assets are covered against  present  losses,  all of which are now in full force
and  effect.  The Company  agrees to  maintain  such  policies  (or  policies of
substantially  the same  nature) in full force and effect at all times until the
Effective  Time.  The  Company  Disclosure  Schedule  sets forth for the current
policy year and each other  policy year since  January 1996 (i) a summary of the
loss experience under each policy; (ii) a statement  describing each claim under
an insurance  policy;  and (iii) a statement  describing the loss experience for
all claims that were  self-insured,  including the number and aggregate  cost of
such claims.  Neither the Company nor any of its  Subsidiaries  has received any
refusal of coverage or any notice of reservation of rights.

          4.16  Intellectual  Property.  The Company and its Subsidiaries own or
possess  adequate  licenses or other  valid  rights to use all  patents,  patent
rights,  trademarks,  trademark rights and proprietary  information used or held
for use in  connection  with their  respective  businesses  as  currently  being
conducted,  except where the failure to own or possess  such  licenses and other
rights would not have,  individually  or in the  aggregate,  a Material  Adverse
Effect on the Company,  and there are no  assertions or claims  challenging  the
validity of any of the foregoing  which are likely to have,  individually  or in
the  aggregate,  a Material  Adverse  Effect on the Company.  The conduct of the
Company's  and its  Subsidiaries'  businesses  as currently  conducted  does not
conflict  with any  patents,  patent  rights,  licenses,  trademarks,  trademark
rights, trade names, trade name rights or copyrights of others in any way likely
to have,  individually  or in the  aggregate,  a Material  Adverse Effect on the
Company.  The  systems,  processes,  and computer  software  and hardware  used,
operated,  sold or licensed by the Company or its Subsidiaries  that is material
to its business or its internal  operations  is capable of providing or is being
or will be adapted,  or is capable of being replaced,  to provide  uninterrupted
millennium  functionality to record,  store,  process and present calendar dates
falling on or after  January 1, 2000 in  substantially  the same manner and with
substantially the same  functionality as such systems,  processes,  software and
hardware records,  stores, processes and presents such calendar dates falling on
or before December 31, 1999,  except as would not have a Material Adverse Effect
on the Company. The costs of the adaptations and replacements referred to in the
prior sentence will not have a Material Adverse Effect on the Company.

          4.17 Material  Contracts.  The Company  Disclosure  Schedule lists the
following  contracts  and other  agreements  to which the  Company or any of its
Subsidiaries is a party (other than  intercompany  arrangements)  as of the date
hereof (collectively, the "Company Contracts"):




<PAGE>

               (a) any agreement (or group of related  agreements) for the lease
          of  personal  property  to or from  any  person  providing  for  lease
          payments in excess of  $500,000  per annum and a term of more than one
          year;

               (b) any  agreement  (or  group  of  related  agreements)  for the
          purchase or sale of raw materials, commodities, supplies, products, or
          other personal property, or for the furnishing or receipt of services,
          the performance of which has a term more than six months, and involves
          consideration in excess of $500,000;

               (c) any partnership or joint venture agreement;

               (d) any agreement (or group of related agreements) under which it
          has created,  incurred,  assumed,  or guaranteed any  indebtedness for
          borrowed  money,  or any capitalized  lease  obligation,  in excess of
          $500,000,  or under which it has imposed a lien,  security interest or
          other  encumbrance on any of its assets,  tangible or  intangible,  to
          secure such indebtedness or obligations;

          (e) any agreement which purports to limit in any material  respect the
manner in which, or the localities in which,  all or any material portion of the
business of the Company and its  Subsidiaries,  taken as a whole,  or Parent and
its Subsidiaries, taken as a whole, is conducted;

          (f) any  agreement  with any of the  shareholders  of the  Company and
their  affiliates  relating  to  the  voting,  transfer  or  disposition  of the
Company's securities;

               (g) all turnkey and footage  drilling  contracts  and all daywork
          drilling contracts for amounts in excess of $2,000,000 or that are not
          terminable or subject to completion within 90 days;

               (h) any agency, representation or similar agreement;

               (i) any  agreement  for the  construction  or  modification  of a
          drilling  rig or  vessel  where  total  costs are  expected  to exceed
          $500,000;

               (j) any  agreement  having  any  "change in  control"  or similar
          provision;

               (k) any agreement  under which the  consequences  of a default or
          termination could have a Material Adverse Effect on the Company; and

          (l)  any  other  agreement  (or  group  of  related   agreements)  the
performance of which involves  consideration  in excess of $500,000,  other than
agreements entered into in the ordinary course.

There is no contract or agreement  that is material to the  business,  financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, that is not set forth in the Company Disclosure  Schedule.  Neither the
Company nor any of its  Subsidiaries  is in violation or default under (nor does
there exist any condition which upon the passage of time or the giving of notice
would cause a violation or default under) any Company Contract,  other than such
violations  or  defaults  as would  not have a  Material  Adverse  Effect on the
Company.  To the  knowledge  of the  Company,  none of the other  parties to the
Company  Contracts is in violation of or in default  under (nor does there exist
any condition which upon the passage of time or the giving of notice would cause
a violation or default under) any Company  Contract,  other than such violations
or defaults as would not have a Material Adverse Effect on the Company.

          4.18  Vessels.  All vessels  owned or chartered by the Company are set
out in the Company Disclosure Schedule (the "Vessels"). Except as set out in the
Company  Disclosure  Schedule,  each  of the  Vessels  is,  and  will  be at the
Effective Time, owned by the Company or one of its  Subsidiaries  free and clear
of all liens,  charges and rights of others and duly  documented  under the laws
and flag of the




<PAGE>

U.S. entitling the Vessels to engage in the coastwise trade in the United States
and to  operate  on a  worldwide  basis in  support  of the  offshore  petroleum
industry.  Except as set out in the  Company  Disclosure  Schedule,  none of the
equipment  on board any of the  Vessels or held for use on any of the Vessels is
leased to the  Company or one of its  Subsidiaries.  All logs (deck and  engine)
shall be onboard the Vessels at the Effective Time.

          4.19 Brokers.  Other than Morgan Stanley & Co.  Incorporated  ("Morgan
Stanley"),  no broker, finder or investment banker is entitled to any brokerage,
finder's  or  other  fee or  commission  in  connection  with  the  transactions
contemplated by this Agreement based upon  arrangements  made by or on behalf of
the Company.  A copy of the Company's  engagement letter with Morgan Stanley has
been provided to Parent.

          4.20  Opinion of  Financial  Advisor.  The  Company has  received  the
opinion of Morgan  Stanley (a copy of which has been delivered to Parent) to the
effect that, as of the date of this Agreement, the Exchange Ratio is fair to the
holders of Company Common Stock from a financial point of view.

          4.21 Property.  The Company and each of the Subsidiaries,  as the case
may be,  have  sufficient  title or  leaseholds  to  property  to conduct  their
respective  businesses  as  currently  conducted  with only such  exceptions  as
individually or in the aggregate would not have a Material Adverse Effect on the
Company.

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

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

          4.24 Financial Condition.  As of December 31, 1998, the Company had at
least $30 million in cash or  short-term  investments  of a duration of not more
than seven days and no more than $174 million in funded debt.

                                    ARTICLE V
                                    COVENANTS

          5.1 Affirmative Covenants of the Company. The Company hereby covenants
and  agrees  that,  prior to the  Effective  Time,  unless  otherwise  expressly
contemplated by this Agreement or consented to in writing by Parent, the Company
will and will cause its Subsidiaries to:

          (a)  operate  its  business  only in the  usual  and  ordinary  course
consistent  with past practices and in compliance in all material  respects with
all applicable laws and regulations;

          (b) use its commercially  reasonable efforts to preserve substantially
intact its business  organizations,  maintain its rights and franchises,  retain
the  services of its  officers  and key  employees  and




<PAGE>

maintain its material relationships with its customers, suppliers, creditors and
joint venture or other business partners;

          (c) use its commercially  reasonable  efforts to maintain and keep its
properties  and assets in as good repair and condition in all material  respects
as at present, ordinary wear and tear excepted; and

          (d) use its commercially  reasonable efforts to keep in full force and
effect  insurance  and bonds  comparable in amount and scope of coverage to that
currently maintained;

          provided,  however,  that, in the event the Company deems it necessary
to take certain  actions that would  otherwise be proscribed  by clauses  5.1(a)
through (c), the Company shall consult with Parent and Parent shall  consider in
good faith the  Company's  request  to take such  actions  and not  unreasonably
withhold its consent.

          5.2  Negative   Covenants   of  the   Company.   Except  as  expressly
contemplated by this Agreement,  as set forth in the Company Disclosure Schedule
or otherwise  consented to in writing by Parent, from the date of this Agreement
until the Effective Time, the Company will not directly or indirectly,  and will
not permit any of its  Subsidiaries  to  directly or  indirectly,  do any of the
following:

          (a) (i) increase the compensation payable to, or to become payable to,
any  director,  executive  officer  or  employee;  (ii) grant any  severance  or
termination  pay  (other  than in  accordance  with the  terms of the  severance
agreements  set forth on the  Company  Disclosure  Schedule,  as the same may be
amended  pursuant  to this  Agreement)  to,  or  enter  into any  employment  or
severance agreement with, any director, officer or employee; or (iii) establish,
adopt,  enter into,  amend or otherwise  increase,  or accelerate the payment or
vesting of the amounts payable under,  any employee  benefit plan or arrangement
except as may be required by applicable law;

          (b) declare or pay any dividend on, or make any other  distribution in
respect of,  outstanding  shares of capital  stock,  except for  dividends  by a
Subsidiary of the Company to the Company or another  wholly owned  Subsidiary of
the Company;

          (c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its Subsidiaries' capital stock or any securities or obligations  convertible
into or exchangeable  or exercisable for any shares of its or its  Subsidiaries'
capital stock including, but not limited to, options,  warrants and other rights
to acquire securities (other than any such acquisition  directly from any wholly
owned  Subsidiary of the Company in exchange for capital  contributions or loans
to such Subsidiary),  (ii) effect any recapitalization;  or (iii) split, combine
or reclassify any of its or its respective  Subsidiaries' capital stock or issue
or authorize or propose the issuance of any other  securities  in respect of, in
lieu of or in substitution  for,  shares of its or its respective  Subsidiaries'
capital stock;

          (d) (i) issue, deliver,  award, grant or sell, or authorize or propose
the  issuance,  delivery,  award,  grant  or sale  (including  the  grant of any
security interests, liens, claims, pledges or other encumbrances) of, any shares
of any class of its or its Subsidiaries' capital stock (including shares held in
treasury),  any securities  convertible  into or exercisable or exchangeable for
any other shares, or any rights, warrants or options to acquire, any such shares
(except for the issuance of shares upon the exercise of Company Stock Options or
pursuant  to  Incentive  Awards  outstanding  on the date of this  Agreement  in
accordance with their terms or issuances by any Subsidiary of the Company to the
Company or any other Subsidiary of the Company);  (ii) amend or otherwise modify
the terms of any such  rights,  warrants or options the effect of which shall be
to make such terms more  favorable to the holders  thereof  (including,  without
limitation,  declaring a "change of control" or similar  event  thereunder);  or
(iii) take any action to accelerate the vesting of any Company Stock Options;

          (e) acquire or agree to acquire,  by merging or consolidating with, by
purchasing an equity  interest  valued in excess of $1 million or portion of the
assets  (for a  purchase  price in  excess  of $1  million)  of, or by any other
manner,   any   corporation,   partnership,   association  or  other   business,
organization 



<PAGE>

or division (other than a wholly owned Subsidiary) thereof, or otherwise acquire
or agree to acquire any assets of any other  person  (other than the purchase of
assets  from  suppliers  or  vendors  in the  ordinary  course of  business  and
consistent  with past  practice)  which  are  material,  individually  or in the
aggregate, to the Company and its Subsidiaries, taken as a whole;

          (f) other than (i) dispositions or proposed  dispositions set forth on
the Company Disclosure Schedule,  (ii) as may be necessary or required by law to
consummate the  transactions  contemplated  hereby or (iii)  dispositions in the
ordinary course of business consistent with past practice not to exceed $150,000
individually or $1 million in the aggregate,  sell, lease,  exchange,  mortgage,
pledge,  transfer or otherwise  dispose of, or agree to sell,  lease,  exchange,
mortgage,  pledge,  transfer or otherwise dispose of, any of its material assets
or any material assets of any of the Company's Significant Subsidiaries;

          (g) propose or adopt any amendments to its Articles of  Incorporation,
as amended, or to its Bylaws;

          (h) (i) change any of its methods of  accounting in effect at December
31,  1997 or (ii) make or rescind  any  express or deemed  election  relating to
Taxes, settle or compromise any claim,  action,  suit,  litigation,  proceeding,
arbitration, investigation, audit or controversy relating to Taxes (except where
the  amount  of  such  settlements  or  controversies,  individually  or in  the
aggregate,  does not exceed $500,000), or change any of its methods of reporting
income or deductions  for federal income tax purposes from those employed in the
preparation  of the  federal  income  tax  returns  for the  taxable  year ended
December 31, 1997,  except,  in the case of clause (i) or clause (ii), as may be
required by law or GAAP;

          (i) (A) spend or commit to spend more than $2 million in the aggregate
on the purchase of new or used  equipment,  supplies  (including  drill pipe and
other capital  expenditures  not referred to in (ii) below)  (provided  that the
Company shall inform Parent prior to committing to make capital  expenditures in
excess of  $750,000  in the  aggregate),  except  for (i)  capital  expenditures
heretofore  approved by the  Company's  Board of Directors  and described in the
Company  Disclosure  Schedule;  and (ii)  sustaining  capital  expenditures  for
Company Equipment and Vessels in the ordinary course of business consistent with
past practice; or (B) except for draw downs on the existing working capital line
of  credit,   incur  any   obligation  for  borrowed  money  or  purchase  money
indebtedness,  whether or not  evidenced by a note,  bond,  debenture or similar
instrument,  except in the  ordinary  course of  business  consistent  with past
practice;

          (j) enter into any contract, agreement or other arrangement that would
have been  required to be  disclosed as a Company  Contract  had such  contract,
agreement or other arrangement been in effect on the date of this Agreement;

          (k) pay,  discharge or satisfy any claims,  liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the  payment,  discharge or  satisfaction  of any such  claims,  liabilities  or
obligations,  (x) in the ordinary  course of business and  consistent  with past
practice,  properly reflected or reserved against in, the consolidated financial
statements  (or the notes  thereto) as of and for the fiscal year ended December
31, 1997 of the Company and its  consolidated  Subsidiaries,  (y) incurred since
December 31, 1997 in the ordinary  course of business and  consistent  with past
practice or (z) which are legally  required to be paid,  discharged or satisfied
(provided that if such claims,  liabilities  or obligations  referred to in this
clause (z) are legally required to be paid and are also not otherwise payable in
accordance  with  clauses (x) or (y) above,  the Company  will notify  Parent in
writing if such claims,  liabilities or obligations  exceed,  individually or in
the aggregate, $250,000 in value, reasonably in advance of their pay ment);

          (l) (i) incur or assume any long-term  debt, or except in the ordinary
course of business,  incur or assume any short-term  indebtedness in amounts not
consistent  with past  practice;  (ii) assume,  guarantee,  endorse or otherwise
become liable or responsible  (whether directly,  contingently or otherwise) for
the  obligations of any other person,  except in the ordinary course of business
and  consistent  with past practice;  (iii) make any loans,  advances or capital
contributions  to, or  investments  in, any other 




<PAGE>

person  (other than to wholly  owned  Subsidiaries  of the Company or  customary
loans or advances to employees in accordance  with past practice or with respect
to Pool International Argentina S. A. not in an amount in excess of $2 million);
or (iv) enter into any material  commitment or transaction  (including,  but not
limited to, any borrowing,  capital  expenditure  or purchase,  sale or lease of
assets);

          (m)  take or  agree to take any  action  that  would or is  reasonably
likely to result in any of the  Company's  representations  and  warranties  set
forth in this  Agreement  being  untrue  as of the  Closing  Date  (unless  such
representations  and warranties speak as of an earlier date, in which case as of
such date) or in any of the conditions to the Merger not being satisfied; or

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

provided,  that,  in the event the Company  deems it  necessary  to take certain
actions  that would  otherwise  be  proscribed  by this Section 5.2, the Company
shall consult with Parent and Parent shall  consider in good faith the Company's
request to take such actions.

          5.3 Negative Covenants of Parent. Except as expressly  contemplated by
this  Agreement  or otherwise  consented to in writing by the Company,  from the
date of this Agreement until the Effective  Time,  Parent will not, and will not
permit Merger Sub to, do any of the following:

          (a) amend any of the material terms or provisions of the Parent Common
Stock;

          (b)  knowingly  take any  action  which  would  result in a failure to
maintain the trading of Parent Common Stock on the AMEX;

          (c) declare or pay any  dividends  or other  distribution  (whether in
cash, stock or other property) on outstanding shares of capital stock;

          (d)  take or  agree to take any  action  that  would or is  reasonably
likely  to  result  in any of  Parent's  or  Merger  Sub's  representations  and
warranties  set forth in this  Agreement  being  untrue as of the  Closing  Date
(unless such  representations  and  warranties  speak as of an earlier  date, in
which case as of such date) or in any of the  conditions to the Merger not being
satisfied; or

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

          5.4 Access and Information.  Subject to confidentiality  agreements to
which the Company or Parent or any of their respective  Subsidiaries is a party,
each of the Company and Parent shall,  and shall cause its  Subsidiaries to, (a)
afford to the other party and its officers, directors,  employees,  accountants,
consultants, legal counsel, agents and other representatives (collectively,  the
"Representatives")  reasonable  access at reasonable times upon reasonable prior
notice  to its  officers,  employees,  agents,  properties,  offices  and  other
facilities  and its  Subsidiaries  and to the books and records  thereof and (b)
furnish  promptly to the other party and its  Representatives  such  information
concerning   its  business,   properties,   contracts,   records  and  personnel
(including,  without  limitation,   financial,  operating  and  other  data  and
information)  as may be reasonably  requested,  from time to time, by such other
party. In connection with the foregoing, the Company hereby consents to Parent's
use of the  services  and  advice of  William J Myers from and after the date of
this  Agreement in  conducting  its inquiry into the business and affairs of the
Company.  Notwithstanding  the foregoing,  no party shall be required to provide
any  information  which it  reasonably  believes it may not provide to the other
party by reason of  applicable  law,  rules or  regulations,  which  constitutes
information protected by attorney/client  privilege,  or which it is required to
keep  confidential  by reason of contract or agreement with third  parties.  The
parties  hereto  will make  reasonable  and  appropriate  substitute  disclosure
arrangements  under  circumstances  in which the  restrictions  of the preceding
sentence apply. Each of Parent and the Company agrees that (i) it will, and will
cause its Representatives to, treat any information obtained hereunder in strict
accordance  with Section 5.6 and (ii) it will not, and will cause its respective
Representatives  not to, use any information  obtained  pursuant




<PAGE>

to this  Section  5.4 for  any  purpose  unrelated  to the  consummation  of the
transactions contemplated by this Agreement. The Company shall permit Parent and
its  representatives to confirm, on reasonable notice and on the basis of agreed
methods, with the Company's and Subsidiaries'  principal vendors,  customers and
trade  affiliates,  that  the  acquisition  by  Parent  of the  Company  will be
acceptable  to such  vendors,  customers  and  trade  affiliates  and  that  the
acquisition  will  not  adversely  affect  the  relationship  of  such  vendors,
customers or trade affiliates with the Company or its Subsidiaries.  The Company
agrees  that such  access by Parent and its  representatives  shall  include the
right to perform a soil and  groundwater  analysis of any real  estate  owned or
leased by the Company or its  Subsidiaries  as Parent  shall deem  necessary  or
appropriate to determine  on-site  conditions and the presence or absence of any
hazardous materials,  provided,  however,  such analysis shall only be performed
after  good   faith   consultation   by  Parent   with  the   Company   and  its
Representatives.  In  connection  with such  environmental  investigations,  the
Company  will  provide to or make  available  for  inspection  by Parent and its
Representatives  (i) all  records  relating to the  disposal of waste  materials
generated at any real estate owned or leased by the Company or its Subsidiaries;
(ii) all  environmental  permits and records  relating to  compliance  with such
permits;  (iii)  all  records  of  spills or other  releases;  (iv) all  records
relating  to  employee  exposure  to  workplace  chemicals;   (v)  all  chemical
inventories  and  reports  of  chemical  emissions;  (viii)  all  correspondence
relating to pending or  threatened  environmental  claims;  and (ix) all records
obtained  from prior  owners or  operators of the real estate owned or leased by
the Company or its Subsidiaries relating to environmental conditions.

          5.5 No Solicitation.

          (a) Except as pursuant  this Section 5.5 or otherwise  consented to in
writing by Parent,  from and after the date of this Agreement  until the earlier
of the Effective Time or the date of termination of this Agreement in accordance
with its terms, the Company will not directly or indirectly, and will not permit
any of its  Subsidiaries,  or its  or  its  Subsidiaries'  directors,  officers,
employees,  representatives  and agents,  to, directly or indirectly,  initiate,
solicit or encourage (including by way of furnishing information or assistance),
or take any other action to  facilitate,  any Company  Acquisition  Proposal (as
defined below), or enter into discussions or negotiate with any person or entity
in furtherance of such Company Acquisition  Proposal, or enter into an agreement
with respect to any Company Acquisition  Transaction (as defined below) or agree
to or endorse any Company  Acquisition  Proposal,  or authorize or permit any of
the officers,  directors or employees of the Company or any of its  Subsidiaries
or any  investment  banker,  financial  advisor,  attorney,  accountant or other
representative  retained by the Company or any of its  Subsidiaries  to take any
such action,  and the Company  shall  notify  Parent of all terms of any Company
Acquisition  Proposal  received by the Company or any of its  Subsidiaries or by
any such officer,  director,  investment  banker,  financial advisor or attorney
within two business days after receipt thereof,  and if such inquiry or proposal
is in writing,  the Company  shall  deliver or cause to be delivered to Parent a
copy of such inquiry or proposal;  provided,  however, that nothing contained in
this  Agreement  shall  prohibit  the Board of Directors of the Company from (i)
complying  with Rule 14e-2  promulgated  under the Exchange Act with regard to a
Company Acquisition  Proposal;  or (ii) at any time prior to the satisfaction of
the  condition  set  forth in  Section  7.1(b),  furnishing  information  to, or
entering  into  discussions  or  negotiations  with,  any  person  or  entity in
connection with an unsolicited, bona fide, written Company Acquisition Proposal,
recommending the same to the Company's  shareholders or otherwise  communicating
with the Company's shareholders regarding such proposal in a manner permitted by
law,  if, and only to the extent that (A) the Board of Directors of the Company,
after  consultation  with legal counsel (which may include its regularly engaged
legal  counsel),  determines  in good faith that such action is required for the
Board of  Directors  of the  Company  to  comply  with its  fiduciary  duties to
shareholders  imposed by the TBCA and other  applicable  Texas law; (B) prior to
furnishing  such  information  to, or entering into  discussions or negotiations
with,  such person or entity the Company (x) provides two business days' written
notice to Parent to the effect that it is furnishing information to, or entering
into  discussions or  negotiations  with,  such person or entity and (y) obtains
from such person or entity a customary  confidentiality  agreement;  and (C) the
Board of Directors of the Company  determines in good faith (after  consultation
with its financial  advisor) that, in light of the  information  furnished to it
relating to such Company Acquisition Proposal is a Superior Proposal (as defined
below).  The  Company  will  immediately  cease and cause to be  terminated  any
existing  activities,  discussions or negotiations  with any parties  heretofore
conducted  which are  prohibited  pursuant to this Section  5.5(a).  The Company
agrees that it will take the necessary  steps to promptly inform the individuals
or entities  referred to in the first  sentence 




<PAGE>

of this Section 5.6(a) of the obligations undertaken in this Section 5.5(a).

          (b) "Company Acquisition  Proposal" means an inquiry or proposal which
relates to or contemplates a Company Acquisition Transaction.

          (c)  "Company  Acquisition  Transaction"  means  any of the  following
transactions:

               (i) any merger,  consolidation,  share exchange or other business
          combination  involving  the Company or any  Subsidiary  of the Company
          (other  than any such  arrangement  between the Company and any of its
          Subsidiaries or among any of its Subsidiaries);

               (ii) any sale,  exchange,  transfer or other disposition (whether
          in the form of an asset  sale,  merger  or  otherwise)  to any  person
          (other than Parent or any of its Subsidiaries) of properties or assets
          of the Company or any of its Subsidiaries  which constitute (i) all or
          substantially  all of the properties  and assets of the Company,  (ii)
          all  or  substantially  all  of  the  properties  and  assets  of  any
          Significant Subsidiary,  or a material division or other business unit
          of the Company or any Significant Subsidiary,  or (iii) properties and
          assets which are material to the business or operations of the Company
          at its Subsidiaries, taken as a whole;

               (iii) any tender  offer or  exchange  offer by any person  (other
          than the  Parent  or any of its  Subsidiaries)  for 15% or more of the
          outstanding shares of Company Common Stock; or

               (iv) any  acquisition  of shares of Company  Common  Stock by any
          person or group (other than Parent or any of its  Subsidiaries)  which
          would require an amendment,  waiver,  termination or alteration of the
          Company Rights Plan so that such acquisition  would not result in such
          person  becoming an "Acquiring  Person" under the terms of the Company
          Rights Plan.

          (d)  "Superior  Proposal"  means any Company  Acquisition  Proposal on
terms which,  if  consummated  pursuant  thereto,  the Board of Directors of the
Company  determines in good faith in the exercise of its fiduciary  duties to be
more favorable to the Company and its  shareholders  than the Merger taking into
account  such  factors  as the  Board  deems  relevant  (based  on advice of the
Company's financial advisor that the value of the consideration  provided for in
such proposal is superior to the value of the consideration  provided for in the
Merger),  for which  financing,  to the extent  required,  is then  committed or
which, in the good faith  reasonable  judgment of the Board of Directors,  after
receiving  advice from its financial  advisor,  is  reasonably  capable of being
financed by such third party.

          5.6  Confidentiality.  Between  the  date  of this  Agreement  and the
Effective  Time, the parties hereto will maintain in confidence,  and will cause
its Representatives to maintain in confidence, and not use to the detriment of a
party to this Agreement any information  obtained from a party to this Agreement
or its  Subsidiaries  in  connection  with this  Agreement  or the  transactions
contemplated  hereby  (regardless of whether such information was obtained prior
to, on or after the date of this  Agreement),  unless  (a) such  information  is
already  known to such  receiving  party  or to  others  not  bound by a duty of
confidentiality or such information  becomes publicly available through no fault
of such receiving party, (b) use of such information is necessary or appropriate
in making any filing or  obtaining  any  consent or  approval  required  for the
consummation of the  transactions  contemplated  hereby or (c) the furnishing or
use of such  information  is required by legal  proceedings or applicable law or
requirement of the AMEX. Upon any termination of this Agreement, each party will
return or  destroy  all  confidential  information  provided  to it by the other
party.

          5.7 Inspection of Vessels.  Parent shall have the right to inspect the
Vessels at any reasonable  time and from time to time prior to the Closing Date,
provided  that such  inspection  shall be  conducted  in a manner  that does not
unreasonably  interfere with the operation of the Vessels.  Any such  inspection
may include the opening up of machinery and equipment  and, at Parent's  option,
may be conducted by drydocking  any Vessel  (subject to obtaining the consent of
the user of such Vessel).  The Company shall keep Parent advised of the location
and whereabouts of each Vessel to facilitate such an




<PAGE>

inspection.

          5.8 Company  Rights Plan.  Except for the amendments  contemplated  by
this  Agreement or  amendments  approved in writing by Parent,  the Company will
not, following the date of this Agreement,  amend the Company Rights Plan in any
manner. In addition the Company covenants and agrees that it will not redeem the
Company Rights unless such redemption is consented to in writing by Parent prior
to such redemption.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

          6.1 Meetings of Shareholders.

          (a) The Company shall  promptly  after the date of this Agreement take
all action  necessary  in  accordance  with  applicable  law and its Articles of
Incorporation,  as amended,  and Bylaws, as amended, to convene a meeting of its
shareholders  to consider and vote upon the approval of this  Agreement  and the
Merger,  and the Company  shall  consult  with Parent in  connection  therewith;
provided  that the Company  shall use its  reasonable  best  efforts to hold the
special  meeting  of  shareholders  within 40 days  after  effectiveness  of the
Registration Statement (as defined in Section 6.2(a)). The Company,  through its
Board of Directors,  shall  recommend  approval of such matters,  subject to the
terms and conditions set forth in Section 5.5. The Company, through its Board of
Directors, shall vote the 769,231 shares of Company Common Stock subject to that
certain Voting Agreement dated as of March 31, 1998,  between the Company and Al
A. Gonsoulin in favor of this Agreement and the Merger.

          (b) If  required,  Parent  shall  promptly  after  the  date  of  this
Agreement take all action  necessary in accordance  with  applicable law and its
Restated Certificate of Incorporation and Bylaws to convene a special meeting of
its stockholders to consider and vote on the Parent  Stockholder  Authorization;
and Parent  shall  consult  with the Company in  connection  therewith.  Parent,
through  its  Board  of  Directors,  shall  recommend  approval  of  the  Parent
Stockholder Authorization.

          6.2 Registration Statement; Proxy Statement

          (a) Parent  promptly shall prepare and shall file with the SEC and the
AMEX a  registration  statement  on Form  S-4  under  the  Securities  Act  (the
registration  statement,   together  with  the  amendments  thereto,  being  the
"Registration   Statement"),   containing  a  proxy   statement/prospectus,   in
connection with the  registration of the Parent Common Stock to be issued in the
Merger.  The  Company  promptly  shall  prepare  and  file  with the SEC a proxy
statement  that will be the same  proxy  statement/prospectus  contained  in the
Registration  Statement,  and a form of proxy with respect to the meeting of the
shareholders  of the  Company  in  connection  with  the  Merger  and the  other
transactions  contemplated by this Agreement  (such proxy  statement/prospectus,
together with any amendments thereof or supplements thereto, in each case in the
form or forms mailed to such shareholders, being the "Proxy Statement"). Each of
Parent and the Company shall use its best efforts to (i) cause the  Registration
Statement to become  effective as promptly as practicable  after such filing and
(ii) cause the Proxy  Statement to be mailed to  shareholders  of the Company at
the earliest practicable date. Parent shall take any action required to be taken
under any applicable  federal or state  securities  laws in connection  with the
issuance of shares of Parent Common Stock in the Merger.  Each of Parent and the
Company  shall  furnish  all  information  concerning  it and the holders of its
capital  stock as the other  may  reasonably  request  in  connection  with such
actions. As promptly as practicable after the Registration  Statement shall have
become   effective,   the  Company  shall  mail  the  Proxy   Statement  to  its
shareholders.  The Proxy Statement shall include the unanimous recommendation of
the Board of  Directors  of the  Company in favor of the  Merger  subject to the
terms and conditions set forth in Section 5.5.

          (b) The  information  supplied  by the Company  for  inclusion  in the
Registration  Statement  shall not, at the time the  Registration  Statement  is
declared  effective,  contain any untrue statement of a material fact or omit to
state any material fact  required to be stated  therein or necessary in order to
make




<PAGE>

the statements therein not misleading.  The information  supplied by the Company
for inclusion in the Proxy Statement to be sent to the Company's shareholders in
connection with the special meeting of shareholders to consider the Merger shall
not, at the date the Proxy  Statement  (or any  amendment  thereof or supplement
thereto)  is  first  mailed  to  shareholders,   at  the  time  of  the  special
shareholders'  meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or  necessary  in order  to make the  statements  therein,  in the  light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event or  circumstance  relating to the Company or any of
its  affiliates,  or its or their  respective  officers or directors,  occurs or
exists which should be set forth in an amendment to the  Registration  Statement
or a supplement to the Proxy Statement, the Company shall promptly inform Parent
and the Company shall cooperate with Parent in the prompt filing with the SEC of
any  necessary   amendment  or  supplement  to  the  Proxy   Statement  and  the
Registration Statement and, as required by law, in disseminating the information
contained in such  amendment or supplement to the  shareholders  of the Company.
All  documents  that the  Company  is  responsible  for  filing  with the SEC in
connection with the transactions  contemplated herein will comply as to form and
substance in all  material  respects  with the  applicable  requirements  of the
Securities Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder.

          (c)  The   information   supplied  by  Parent  for  inclusion  in  the
Registration  Statement  shall not, at the time the  Registration  Statement  is
declared  effective,  contain any untrue statement of a material fact or omit to
state any material fact  required to be stated  therein or necessary in order to
make the statements therein not misleading.  The information  supplied by Parent
for inclusion in the Proxy Statement to be sent to the Company's shareholders in
connection  with the special  shareholders'  meeting  shall not, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to  shareholders,  at the time of the meeting or at the Effective Time,  contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in the light of the  circumstances  under  which  they are  made,  not
misleading.   If  at  any  time  prior  to  the  Effective  Time  any  event  or
circumstances relating to Parent or any of its respective affiliates,  or to its
or their respective officers or directors,  occurs or exists which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement,  Parent shall promptly  inform the Company and Parent shall cooperate
with the Company in the prompt filing with the SEC of any necessary amendment or
supplement  to the  Proxy  Statement  and the  Registration  Statement  and,  as
required by law, in disseminating the information contained in such amendment or
supplement to the  shareholders  of the Company.  All  documents  that Parent is
responsible  for  filing  with  the  SEC  in  connection  with  the  transaction
contemplated  herein  will  comply  as to form  and  substance  in all  material
respects with the  applicable  requirements  of the Securities Act and the rules
and  regulations  thereunder and the Exchange Act and the rules and  regulations
thereunder.

          (d) (i) The Company  shall use its  reasonable  efforts to cause to be
delivered  to Parent a letter of Deloitte & Touche LLP dated as of a date within
five business  days before the date on which the  Registration  Statement  shall
become  effective  and  addressed  to  Parent in form and  substance  reasonably
satisfactory  to Parent  and  customary  in scope and  substance  for  "comfort"
letters  delivered  by  independent   public   accountants  in  connection  with
registration  statements  and  proxy  statements  similar  to  the  Registration
Statement and Proxy Statement;  and (ii) Parent shall use its reasonable efforts
to cause to be delivered to the Company a letter of  PricewaterhouseCoopers  LLP
dated as of a date  within  five  business  days  before  the date on which  the
Registration  Statement  shall become  effective and addressed to the Company in
form and substance reasonably satisfactory to the Company and customary in scope
and substance for "comfort" letters delivered by independent  public accountants
in connection with registration  statements and proxy statements  similar to the
Registration Statement and Proxy Statement.

          6.3 Appropriate Action; Consents; Filings.

          (a) The Company and Parent each shall use its reasonable  best efforts
to (i) take, or cause to be taken, all appropriate  action,  and do, or cause to
be done,  all things  necessary,  proper or advisable  under  applicable  law or
otherwise to consummate and make effective the transactions contemplated by this
Agreement;  (ii) obtain the Parent Required  Approvals and the Company  Required




<PAGE>

Approvals;  and (iii) make all necessary filings,  and thereafter make any other
required  submissions,  with respect to this  Agreement and the Merger  required
under (A) the  Securities  Act (in the case of Parent) and the  Exchange Act and
the rules and regulations thereunder,  and any other applicable federal or state
securities laws, (B) the HSR Act and (C) any other applicable law; provided that
Parent and the Company shall  cooperate  with each other in connection  with the
making of all such filings,  including providing copies of all such documents to
the  non-filing  party and its  advisors  prior to  filing  and,  if  requested,
accepting all reasonable additions, deletions or changes suggested in connection
therewith;  and provided,  further,  that, unless otherwise agreed by Parent, in
its sole  discretion,  the  reasonable  efforts of Parent  shall not include (a)
proffering Parent's willingness to accept an order providing for the divestiture
of such of the properties,  assets, operations or business of the Company or any
of its Subsidiaries (or, in lieu thereof, such properties, assets, operations or
business of Parent or any of Parent's affiliates) as are necessary to permit the
consummation of the  transactions  contemplated by this Agreement,  including an
offer to hold separate such properties, assets, operations or businesses pending
any such divestiture,  (b) proffering  Parent's  willingness to accept any other
conditions, restrictions, limitations or agreements affecting the full rights of
ownership  of the  Company's or any of its  Subsidiary's  assets (or any portion
thereof) as may be  necessary  to permit the  consummation  of the  transactions
contemplated by this Agreement or (c) entering into or continuing any litigation
relating to this Agreement or the transactions  contemplated hereby. The Company
and Parent shall furnish all  information  required for any application or other
filing to be made pursuant to the rules and  regulations  of any  applicable law
(including all  information  required to be included in the Proxy  Statement and
the Registration Statement) in connection with the transactions  contemplated by
this  Agreement.  If (x) necessary  approvals  under the HSR Act are conditioned
solely upon Parent taking one or more actions  described in clauses (a), (b) and
(c) of this Section  6.3(a),  which  condition may not be waived,  appealed,  or
modified,  (y)  Parent  has  conclusively  decided  not to take  such  action or
actions,  and (z) the Company has fulfilled its  obligations  under this Section
6.3(a),  then  Parent  shall  notify the  Company of its intent not to take such
action or actions (the "HSR Act Termination Notice").  Delivery by Parent to the
Company of the HSR Act  Termination  Notice  shall  constitute  a failure of the
condition contained in Section 7.1(e) of this Agreement.

               (b) (i) Each of the Company and Parent shall give (or shall cause
          each of their  respective  Subsidiaries  to give) any notices to third
          parties,   and  shall  use,   and  cause  each  of  their   respective
          Subsidiaries  to use, its reasonable  best efforts to obtain any third
          party  consents (A)  necessary,  proper or advisable to consummate the
          transactions contemplated in this Agreement, (B) disclosed or required
          to be  disclosed  in the  Company  Disclosure  Schedule  or the Parent
          Disclosure  Schedule,  (C)  otherwise  required  under any  contracts,
          licenses,   leases  or  other   agreements  in  connection   with  the
          consummation of the transactions  contemplated  herein or (D) required
          to prevent a Company  Material  Adverse Effect from occurring prior to
          or after the Effective Time or a Parent  Material  Adverse Effect from
          occurring  after the Effective  Time.  Without in any way limiting the
          foregoing,  each of the Company and Parent agrees to use  commercially
          reasonable efforts to maintain the business  relationship and goodwill
          of Petroserv  and to obtain an  amendment  to the Saudi Joint  Venture
          Agreement  or  other  arrangement  so that  (A) the  operation  in the
          Kingdom of Saudi Arabia of Pool Arabia, Ltd. and Nadrico Saudi Company
          Limited,  immediately after the Effective Time, will not be materially
          adversely  affected  by the  Merger  and (B)  the  change  in  control
          provisions thereof will not be triggered as a result of the Merger.

               (ii) In the event  that  either  party  shall  fail to obtain any
          third party consent described in Section  6.3(b)(i),  such party shall
          use its  reasonable  best  efforts,  and shall  take any such  actions
          reasonably  requested  by the other  party  hereto,  to  minimize  any
          adverse  effect  upon  the  Company  and  Parent,   their   respective
          Subsidiaries,  and their  respective  businesses  resulting,  or which
          could  reasonably be expected to result after the Effective Time, from
          the failure to obtain such consent.

          6.4 Tax Treatment; Affiliates.

          (a) From and after the date hereof and until the Effective  Time, none
of Parent,  the Company or any of their respective  Subsidiaries shall knowingly
(i) take any action, or fail to take any reasonable action, as a result of which
the  Merger  would fail to qualify  as a  reorganization  within the




<PAGE>

meaning  of  Section  368(a)  of the  Code  or (ii)  enter  into  any  contract,
agreement,  commitment or  arrangement  to take or fail to take any such action.
Each of the parties shall use its reasonable  best efforts to obtain the opinion
of counsel referred to in Section 7.1(d).

          (b) The Company  shall use its best  efforts to obtain from any person
who may be deemed to have become an affiliate  of the Company  after the date of
this  Agreement  and on or  prior  to the  Effective  Time a  written  agreement
substantially in the form of Exhibit 6.4 as soon as practicable  after attaining
such status.

          (c) The Company shall deliver to Parent a statement dated no more than
30 days prior to the  Effective  Time in form and  substance  as is described in
Treas. Reg. Section 1.1445-2(c)(3)(i).

          6.5 Public  Announcements.  Parent and the Company will agree upon the
timing and  content of the initial  press  release to be issued  describing  the
transactions  contemplated  by this  Agreement,  and will  not  make any  public
announcement  thereof prior to reaching such agreement  unless required to do so
by  applicable  law or  regulation.  Thereafter,  unless  otherwise  required by
applicable law or stock exchange  requirements  (and in that event, only if time
does not permit),  Parent and the Company  shall  consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Merger or the Stock Option  Agreement  and shall not issue any such press
release or make any such public statement prior to such consultation.

          6.6 AMEX  Listing.  Parent  shall  use its best  efforts  to cause the
shares of Parent  Common  Stock to be issued in the  Merger to be  approved  for
listing on the AMEX prior to the Effective Time.

          6.7 Indemnification of Directors and Officers.

          (a)  The  Articles  of  Incorporation  and  Bylaws  of  the  Surviving
Corporation  shall contain the provisions  with respect to  indemnification  set
forth in Exhibit 1.4A and Exhibit 1.4B,  which  provisions shall not be amended,
repealed or  otherwise  modified  for a period of six years after the  Effective
Time in any  manner  that  would  adversely  affect  the  rights  thereunder  of
individuals  who at any time  prior to the  Effective  Time  were  directors  or
officers of the Company in respect of actions or omissions occurring at or prior
to  the  Effective  Time  (including,   without  limitation,   the  transactions
contemplated  by this  Agreement),  unless  such  modification  is  required  by
applicable law.  Parent  covenants and agrees that, from and after the Effective
Time, it will cause the Surviving  Corporation to perform its obligations  under
the   Indemnification   Agreements   between  the  Company  and  its   directors
substantially  in the form  filed as  Exhibit  10.1 to the  Company's  Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998.

          (b) For a period  of six  years  following  the  Effective  Time,  the
Surviving  Corporation and Parent (each, an "Indemnifying  Party") shall jointly
and  severally  indemnify,  defend  and hold  harmless  the  present  and former
officers and directors of the Company or any of its Subsidiaries  (collectively,
the  "Indemnified  Parties")  against all  losses,  expenses,  claims,  damages,
liabilities  or amounts  that are paid in  settlement  of (with the  approval of
Parent and the Surviving  Corporation  (which approval shall not unreasonably be
withheld or delayed)), or otherwise in connection with, any threatened or actual
claim, action, suit, proceeding or investigation (a "Claim"),  based in whole or
in part on the fact that such  person is or was a  director  or  officer  of the
Company or any of its  Subsidiaries  and  arising  out of  actions or  omissions
occurring at or prior to the Effective Time (including,  without limitation, the
transactions  contemplated by this  Agreement),  in each case to the full extent
permitted   under  the  TBCA  (and  shall  pay  expenses   (including  fees  and
disbursements of counsel),  as incurred,  in advance of the final disposition of
any such action or proceeding to each  Indemnified  Party to the fullest  extent
permitted  under the  TBCA,  upon  receipt  from the  Indemnified  Party to whom
expenses are advanced of the undertaking to repay such advances  contemplated by
the TBCA).

          (c) Without limiting the foregoing,  in the event any Claim is brought
against any  Indemnified  Party  (whether  arising before or after the Effective
Time)  after the  Effective  Time (i) the  Indemnified  Parties  may  retain the
Company's  regularly  engaged  independent  legal counsel,  or other independent
legal  counsel  satisfactory  to them  provided that such other counsel shall be
reasonably 




<PAGE>

acceptable to the Surviving  Corporation,  (ii) the  Indemnifying  Parties shall
jointly and severally pay all  reasonable  fees and expenses of such counsel for
the Indemnified  Parties promptly as statements  therefor are received and (iii)
the Indemnifying Parties will use their reasonable best efforts to assist in the
vigorous defense of any such matter,  provided that no Indemnifying  Party shall
be liable for any settlement of any Claim effected  without its written consent,
which consent shall not be  unreasonably  withheld or delayed.  Any  Indemnified
Parties wishing to claim  indemnification  under this Section 6.7, upon learning
of any such Claim,  shall notify the Indemnifying  Parties (although the failure
so to notify the Indemnifying Parties shall not relieve the Indemnifying Parties
from any liability  which the  Indemnifying  Parties may have under this Section
6.7 except to the extent such failure prejudices the Indemnifying  Parties), and
shall,  if  requested,  deliver  to the  Indemnifying  Parties  the  undertaking
contemplated by the TBCA. The Indemnified  Parties as a group may retain one law
firm (in addition to local  counsel) to represent them with respect to each such
matter unless there is, under applicable  standards of professional  conduct (as
determined by counsel to the Indemnified Parties), a conflict on any significant
issue between the  positions of any two or more  Indemnified  Parties,  in which
event,  such  additional  counsel  as may be  required  may be  retained  by the
Indemnified Parties.

          (d)  Commencing at the Effective  Time,  the directors and officers of
the Surviving  Corporation  shall be insured under the policies of directors and
officers insurance currently or hereafter maintained by Parent. In addition, for
a period of six years after the Effective  Time,  Parent shall use  commercially
reasonable  efforts to maintain in effect the current policies of directors' and
officers'  liability  insurance  maintained by the Company and its  Subsidiaries
(provided  that  Parent may  substitute  therefor  policies of at least the same
coverage  and  amounts  containing  terms that are no less  advantageous  in any
material  respect to the persons covered thereby) with respect to claims arising
from facts or events which  occurred  before the Effective  Time;  provided that
Parent  shall not be required to pay an annual  premium  for such  insurance  in
excess of two times the last annual  premium  paid by the  Company  prior to the
date hereof,  but in such case shall  purchase as much  coverage as possible for
such amount.

          (e) This  Section  6.7 is intended to be for the benefit of, and shall
be  enforceable   by,  the  Indemnified   Parties,   their  heirs  and  personal
representatives  and shall be binding on  Parent,  Merger Sub and the  Surviving
Corporation and their  representative  successors and assigns. No termination or
modification of the obligations of the  Indemnifying  Parties under this Section
6.7  that  adversely  affects  the  rights  of any  Indemnified  Party  shall be
effective  against  such  Indemnified  Party  without  his or her prior  written
consent.

          (f) The rights granted to the Indemnified  Parties  hereunder shall be
in addition to, and not in limitation of, any other rights that the  Indemnified
Parties may have by contract, the TBCA, or otherwise.

          (g) In the event  Parent,  the Surviving  Corporation  or any of their
respective  successors or assigns (i) consolidates with or merges into any other
person and shall not be the  continuing  or surviving  corporation  or entity in
such  consolidation or merger or (ii) transfers all or substantially  all of its
properties  and  assets to any  person,  then and in either  such  case,  proper
provision  shall be made so that the  successors  and  assigns  of Parent or the
Surviving  Corporation,  as the case may be,  shall assume the  obligations  set
forth in this Section 6.7.

          6.8  Agreement  to  Defend.  In the event  any  claim,  action,  suit,
investigation or other  proceeding by any  governmental  body or other person or
other  legal or  administrative  proceeding  is  commenced  that  questions  the
validity or legality of the transactions contemplated hereby or seeks damages in
connection  therewith,  whether before or after the Effective  Time, the parties
hereto agree to cooperate and use their reasonable efforts to defend against and
respond thereto.

          6.9 Obligations of Merger Sub. Parent shall take all action  necessary
to cause  Merger  Sub to  approve  and  adopt  the  Agreement,  to  perform  its
obligations  hereunder and to consummate  the Merger on the terms and conditions
set forth in this Agreement.




<PAGE>

          6.10  Accounting  for Merger.  The Merger shall be accounted for under
the purchase method.

          6.11 Takeover Statutes.  If any "fair price",  "moratorium",  "control
share  acquisition"  or other form of  antitakeover  statute or  regulation  (in
addition  to  Part  Thirteen  of  the  TBCA)  shall  become  applicable  to  the
transactions contemplated hereby, each of Parent and the Company and the members
of their respective Boards of Directors shall grant such approvals and take such
actions as are reasonably necessary so that the transactions contemplated hereby
may be consummated as promptly as practicable on the terms  contemplated  hereby
and  otherwise  act to  eliminate  or minimize  the  effects of such  statute or
regulation on the transactions contemplated hereby.

          6.12 Board of Directors of Parent. At the Effective Time, the Board of
Directors of Parent shall be expanded to add one  additional  member to Class I,
which member shall be designated  by mutual  agreement of Parent and the Company
from the current independent members of the Company's Board of Directors. If the
individual so selected consents to serve as a director, such individual shall be
elected as a director of Parent,  effective as of the Effective Time, for a term
expiring at Parent's next annual meeting of shareholders following the Effective
Time at which  the term of the class to which  such  director  belongs  expires,
subject to being  renominated  as a director at the discretion of Parent's Board
of Directors.

          6.13 Transition  Employment.  The Surviving Corporation shall continue
to employ five (the  "Transition  Employees")  of the persons  listed on Exhibit
6.13 for a period of between three and nine months after the Effective Time at a
salary for each  Transition  Employee equal to two times his current annual base
salary on the date of this  Agreement,  pro  rated  for the  number of days such
person is so employed.  Parent shall select the Transition Employees in its sole
discretion, and shall notify the Company at least 20 days prior to the Effective
Time of the names of the Transition Employees selected by Parent. In the event a
person  listed on Exhibit 6.13 leaves his  employment  with the Company prior to
the  Effective  Time or any such  Transition  Employee  notifies  Parent and the
Company  prior to the  Effective  Time  that he is  unwilling  to  continue  his
employment  with  the  Surviving   Corporation,   the  Company  shall  have  the
opportunity  to  provide  the  name  of a  substitute  employee  having  similar
credentials and experience for Parent to consider.

          6.14 Additional Agreements. Subject to the terms and conditions herein
provided,  each of the parties  hereto agrees to use all  reasonable  efforts to
take,  or cause to be taken,  all  action  and to do,  or cause to be done,  all
things necessary,  proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement.

          6.15  Notification of Certain  Matters.  The Company shall give prompt
notice to Parent and Parent shall give prompt notice to the Company,  of (i) the
occurrence,  or non-occurrence of any event the occurrence, or non-occurrence of
which would cause any  representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect (unless such  representation  or
warranty is qualified by materiality in which case notice shall be given if such
representation  or warranty  would become untrue or inaccurate in any respect as
so qualified) at or prior to the Effective Time and (ii) any material failure of
the  Company  or  Parent,  as the case may be, to  comply  with or  satisfy  any
covenant,  condition  or  agreement  to be  complied  with  or  satisfied  by it
hereunder;  provided,  however, that the delivery of any notice pursuant to this
Section  6.16  shall  not  limit or  otherwise  affect  the  remedies  available
hereunder to the party receiving such notice.

          6.16  Post-Closing  Employee  Benefits.   After  the  Effective  Time,
employees of the Surviving Corporation and its Subsidiaries shall be entitled to
benefits that are comparable to those in effect from time to time  applicable to
comparably  located and situated  employees of Parent and its  Subsidiaries  and
each  employee  shall be  entitled  to  receive




<PAGE>

severance on the same basis as  currently  applies to employees of Parent or its
Subsidiaries. For all purposes other than benefit plan accrual,  post-retirement
medical plans and vacation policies,  employees of the Surviving Corporation and
its  Subsidiaries  shall  be  credited  for  service  with the  Company  and its
Subsidiaries  and each  employee  shall be entitled to receive  severance on the
same basis as currently applies to employees of Parent or its Subsidiaries.  For
purposes of this Section 6.16,  employees of the Surviving  Corporation  and its
Subsidiaries,  (i)  shall  not  include  persons  (a)  subject  to a  collective
bargaining  agreement,  (b) on  long-term  disability  (which  persons  shall be
terminated  prior to the  Effective  Time) or (c) on  short-term  disability  in
excess of 90 days (which  persons  shall be  terminated  prior to the  Effective
Time) but (ii) shall include any employee on short-term disability for less than
90 days,  absent as a result of a workers'  compensation  claim or on authorized
leave (such as  maternity,  military,  family and  medical  leave or other leave
where return to work is subject to statutory requirements).  Notwithstanding the
foregoing, in no respect shall this Section 6.16 be interpreted to provide for a
duplication of benefits.

          6.17 Parent Stockholder Authorization.  Each of Parent, Merger Sub and
the Company agrees that, in the event the Parent Stockholder Authorization shall
be  required  in  connection  with the  Merger,  such  parties  shall amend this
Agreement to provide that (a)  obtaining  the Parent  Stockholder  Authorization
shall be a condition to each party's  obligation to consummate  the Merger,  (b)
either Parent or the Company shall have a right to terminate  this  Agreement if
the  required  Parent  Stockholder  Authorization  is not  obtained at a special
meeting of Parent  stockholders held for that purpose,  (c) Parent shall pay the
Company a fee of $1 million,  plus all actual,  documented Third Party Costs (as
defined in Section 8.5(b)), at the time of a termination  pursuant to clause (b)
of this Section 6.17,  in cash by wire transfer to an account  designated by the
Company and (d) Parent shall have the equivalent obligations with respect to its
special meeting of stockholders  and the proxy statement  related thereto as the
Company to the extent relevant.

                                   ARTICLE VII
                               CLOSING CONDITIONS

          7.1 Conditions to Obligations of Each Party Under this Agreement.  The
respective  obligations  of each  party  to  effect  the  Merger  and the  other
transactions  contemplated  herein  shall be subject to the  satisfaction  at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:

          (a)  Effectiveness  of the  Registration  Statement.  The Registration
Statement  shall have been  declared  effective by the SEC under the  Securities
Act. No stop order suspending the  effectiveness  of the Registration  Statement
shall have been issued by the SEC and no proceedings for that purpose shall have
been initiated by the SEC.

          (b) Shareholder Approval.  The Company Shareholder Approval shall have
been obtained and, if required, the Parent Stockholder  Authorization shall have
been obtained.

          (c) No Order.  No  governmental  entity or federal  or state  court of
competent  jurisdiction  shall have enacted,  issued,  promulgated,  enforced or
entered any statute,  rule, regulation,  executive order, decree,  injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the  effect of making  the Merger  illegal  or  otherwise  prohibiting
consummation of the Merger.

          (d) Tax  Opinions.  The Company  shall have received an opinion of its
tax counsel and Parent shall have  received an opinion of its tax counsel,  each
dated as of the Closing Date,  substantially  to the effect that the Merger will
qualify as a  reorganization  within the meaning of Section  368(a) of the Code.
The issuance of such opinions shall be conditioned  upon the receipt by such tax
counsel of customary representation letters from each of the Company, Parent and
Merger Sub, in each case, in form and substance reasonably  satisfactory to such
tax counsel. The specific provisions of each such representation letter shall be
in form and substance reasonably satisfactory to such tax counsel, and each such
representation  letter  shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect.

          (e) HSR Act.  The  applicable  waiting  period under the HSR Act shall
have expired or been terminated.





<PAGE>

          (f) AMEX. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on the AMEX, subject to notice of issuance.

          7.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations  of  Parent  to  effect  the  Merger  and  the  other   transactions
contemplated in this Agreement,  unless  otherwise  waived in writing,  are also
subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
of the Company  contained in this Agreement  shall be true and correct when made
and on and as of the  Effective  Time as if made on and as of such date,  except
where failure to be so true and correct would not have a Material Adverse Effect
on the  Company,  and except that those  representations  and  warranties  which
address matters only as of a particular date shall remain true and correct as of
such date,  except where the failure to be so true and correct  would not have a
Material  Adverse  Effect on the  Company.  Solely for  purposes of this Section
7.2(a) and in determining  compliance with the conditions set forth herein,  any
representation  and warranty made by the Company in this Agreement shall be read
and  interpreted  as  if  the  qualification  stated  therein  with  respect  to
materiality  or the Material  Adverse  Effect on the Company were not  contained
therein.  Parent  shall have  received a  certificate  of the  President  of the
Company to such effect.

          (b)  Agreements  and  Covenants.  The Company shall have  performed or
complied in all material respects with all agreements and covenants  required by
this  Agreement  to be  performed  or  complied  with by it on or  prior  to the
Effective  Time.  Parent shall have received a  certificate  of the President or
Chief Financial Officer of the Company to such effect.

          (c) Affiliate Agreements.  The affiliate agreements to be entered into
prior to the Effective  Time, as  contemplated  by Section 6.4, shall be in full
force and effect.

          (d) Company Material Adverse Effect. Since the date of this Agreement,
there shall not have  occurred any Material  Adverse  Effect or  combination  of
state of facts, events,  changes or effects that has had, or would reasonably be
expected to have, a Material Adverse Effect on the Company.

          (e) Saudi Joint Venture.  The Saudi Joint Venture Agreement shall have
been amended or other  arrangement  shall be made prior to the Effective Time so
that, as of and after the Effective Time,  Parent shall be reasonably  satisfied
in its good faith judgment that the operations of Pool Arabia,  Ltd. and Nadrico
Saudi Company  Limited will not be materially  adversely  affected by the Merger
and that the Merger shall not result in a change in control of Pool Arabia, Ltd.
under the provisions of the Saudi Joint Venture Agreement.

          7.3  Additional   Conditions  to  Obligations  of  the  Company.   The
obligation  of the  Company  to effect  the  Merger  and the other  transactions
contemplated  in this Agreement,  unless  otherwise  waived in writing,  is also
subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this  Agreement  shall be true and correct
when made and on and as of the Effective Time as if made on and as of such date,
except  where the  failure to be so true and  correct  would not have a Material
Adverse Effect on Parent, and except that those  representations  and warranties
which address matters only as of a particular date shall remain true and correct
as of such date,  except  where the failure to be so true and correct  would not
have a Material  Adverse  Effect on Parent.  Solely for purposes of this Section
7.3(a) and in determining  compliance with the conditions set forth herein,  any
representation  and warranty made by the Parent in this Agreement  shall be read
and  interpreted  as  if  the  qualification  stated  therein  with  respect  to
materiality or Material Adverse Effect on Parent were not contained therein. The
Company  shall have  received a  certificate  of the President of Parent to such
effect.

          (b) Agreements and Covenants. Each of Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this  Agreement to be




<PAGE>

performed or complied with by such party on or prior to the Effective  Time. The
Company shall have received a certificate  of the President of Parent and Merger
Sub to that effect.

          (c) Parent Material Adverse Effect.  Since the date of this Agreement,
there shall not have  occurred any Material  Adverse  Effect or  combination  of
state of facts, events,  changes or effects that has had, or would reasonably be
expected to have, a Material Adverse Effect on Parent.

                                  ARTICLE VIII
                        TERMINATION, AMENDMENT AND WAIVER

          8.1 Termination.

          (a)  This  Agreement  may be  terminated  at  any  time  prior  to the
Effective  Time,  whether  before or after  approval of this  Agreement  and the
Merger by the shareholders of the Company, only in the following ways:

               (i) by mutual written consent of Parent and the Company;

               (ii) by Parent, upon a breach of any covenant or agreement on the
          part  of  the  Company  set  forth  in  this  Agreement,   or  if  any
          representation  or  warranty  of the  Company  shall be or shall  have
          become  untrue,  in either case such that the  conditions set forth in
          Section   7.2(a)  or  Section   7.2(b)   would  not  be  satisfied  (a
          "Terminating  Company  Breach"),  provided  that if  such  Terminating
          Company  Breach is curable by the Company  through the exercise of its
          reasonable  best  efforts and for so long as the Company  continues to
          exercise such reasonable  best efforts,  Parent may not terminate this
          Agreement under this Section 8.1(a)(ii);

               (iii) by the Company,  upon a breach of any covenant or agreement
          on the part of Parent or Merger Sub set forth in this Agreement, or if
          any  representation  or  warranty  of Parent or Merger Sub shall be or
          shall have become untrue,  in either case such that the conditions set
          forth in Section  7.3(a) or Section  7.3(b)  would not be satisfied (a
          "Terminating Parent Breach"), provided that if such Terminating Parent
          Breach is curable by Parent or Merger Sub through the  exercise of its
          reasonable  best  efforts  and for so long as  Parent  or  Merger  Sub
          continues to exercise such  reasonable  best efforts,  the Company may
          not terminate this Agreement under this Section 8.1(a)(iii);

               (iv) by  either  Parent  or the  Company,  if there  shall be any
          order, decree or ruling of any United States federal or state court of
          competent  jurisdiction,   or  any  United  States  federal  or  state
          governmental,  regulatory or administrative authority,  which is final
          and  nonappealable,  permanently  restraining,  enjoining or otherwise
          preventing the consummation of the Merger;

               (v) by either Parent or the Company, if the Merger shall not have
          been consummated before September 30, 1999,  provided,  however,  that
          such date shall be extended for up to an additional  six months if the
          applicable  waiting period under the HSR Act shall not have expired or
          been  terminated  by such date (unless the failure to  consummate  the
          Merger by the applicable date shall be due to the action or failure to
          act of the party seeking to terminate this Agreement);

               (vi)  by  either  Parent  or the  Company,  if the  shareholders'
          meeting  provided  for in  Section  6.1  shall  have been held and the
          Agreement  shall fail to receive the  requisite  shareholder  approval
          required by Section 7.1(b) at such meeting (including any adjournments
          and postponements thereof);

               (vii) by Parent,  if, (A) the Board of  Directors  of the Company
          withdraws,   or  materially  modifies  or  materially   changes,   its
          recommendation  of this Agreement or the Merger in a manner adverse to
          Parent  or  Merger  Sub  or  shall  have  resolved  to do  any  of the
          foregoing;  (B) the Board of  Directors  of the Company (i) shall have
          recommended to the  shareholders of the Company a Company  Acquisition
          Proposal or (ii) after the  expiration of ten business days  following
          the





<PAGE>

          commencement  of any  Company  Acquisition  Proposal  that is a tender
          offer,  shall  have (1) failed to  recommend  against  accepting  such
          tender offer or (2) taken no position  with  respect  thereto or (iii)
          resolved to do any of the  foregoing;  or (C) the  Company  shall have
          effected an amendment,  waiver, termination or other alteration of the
          provisions of the Company Rights Plan in such a manner that any person
          (other than Parent or Merger Sub) shall have been permitted to acquire
          "beneficial  ownership" or the right to acquire  beneficial  ownership
          of, or any "group" (as such terms are defined  under  Section 13(d) of
          the   Exchange   Act  and  the  rules  and   regulations   promulgated
          thereunder),  shall have been formed which  beneficially  owns, or has
          the right to acquire  beneficial  ownership  of,  more than 15% of the
          then outstanding  shares of Company Common Stock, in each case without
          triggering the Company Rights Plan or shall have resolved to do any of
          the foregoing;

               (viii) by the  Company,  if the Board of Directors of the Company
          shall have  withdrawn,  or modified or changed in a manner  adverse to
          Parent or Merger Sub, its approval or recommendation of this Agreement
          or the Merger in order to approve  and permit the Company to execute a
          definitive agreement providing for a Superior Proposal,  and elects to
          terminate this Agreement  effective  prior to the  satisfaction of the
          condition set forth in Section  7.1(b);  provided that the Company may
          not effect  such  termination  pursuant to this  Section  8.1(a)(viii)
          unless and until (A) Parent  receives  at least  five  business  days'
          prior written  notice from the Company of its intention to effect such
          termination  pursuant  to  this  Section  8.1(a)(viii),  which  notice
          specifies the material terms and conditions of such Superior  Proposal
          and  identifies the person making such Superior  Proposal;  (B) during
          such  period,  the  Company  shall,  and shall  cause  its  respective
          financial and legal  advisors to,  negotiate in good faith with Parent
          to make such adjustments in the terms and conditions of this Agreement
          that  would  enable  the  Company  to  proceed  with the  transactions
          contemplated by this Agreement on such adjusted  terms;  and provided,
          further,  that any  termination  of this  Agreement  pursuant  to this
          Section 8.1(a)(viii) shall not be effective until the Company has made
          the termination payment required by Section 8.5(b); or

               (ix) by the  Company,  if  Parent  shall  have  delivered  to the
          Company the HSR Act Termination Notice.

          (b)  Notwithstanding  any of the  foregoing,  the  right of any  party
hereto to  terminate  this  Agreement  pursuant to Section  8.1(a)  shall remain
operative and in full force and effect regardless of any  investigation  made by
or on behalf of any party hereto,  any person  controlling any such party or any
of their  respective  officers  or  directors,  whether  prior  to or after  the
execution of this Agreement.

          8.2  Effect of  Termination.  Except as  provided  in  Section  8.5 or
Section  9.1,  in the event of the  termination  of this  Agreement  pursuant to
Section 8.1(a),  this Agreement shall forthwith  become void,  there shall be no
liability  on the part of  Parent,  Merger  Sub or the  Company  or any of their
respective  officers or directors to the other and all rights and obligations of
any party hereto shall cease.

          8.3 Amendment.  This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time;  provided,  however,  that,  after approval of this
Agreement and the Merger by the shareholders of the Company,  no amendment shall
be made which by the TBCA requires the further  approval of  shareholders.  This
Agreement may not be amended  except by an  instrument in writing  signed by the
parties hereto.

          8.4 Waiver.  At any time prior to the Effective Time, any party hereto
may (a) extend the time for the  performance of any of the  obligations or other
acts  of  the  other  parties  hereto,   (b)  waive  any   inaccuracies  in  the
representations  and  warranties of the other party  contained  herein or in any
document delivered pursuant hereto and (c) waive compliance by the other parties
with any of the  agreements  or  conditions  contained  herein (other than those
required to be complied with by applicable  law).  Any such  extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
or parties to be bound thereby.

          8.5 Fees; Expenses and Other Payments.




<PAGE>

          (a) Except as provided  in clauses  (b),  (c) and (d) of this  Section
8.5,  each party shall bear its own costs and expenses in  connection  with this
Agreement and the transactions contemplated hereby, provided,  however, that the
allocable  share of each of Parent and the  Company  for all costs and  expenses
related to printing, filing and mailing the Registration Statement and the Proxy
Statement  and all SEC and other  regulatory  filing fees incurred in connection
with the  Registration  Statement  and the Proxy  Statement  shall be  one-half.
Notwithstanding  anything  to the  contrary,  all of the costs and  expenses  in
connection with this Agreement and the transactions contemplated hereby incurred
by the Company and the Parent shall,  upon the  consummation  of the Merger,  be
borne by the Surviving Corporation.

          (b) If this Agreement is terminated for any reason pursuant to Section
8.1(a)(ii),  (vii) or  (viii),  then the  Company  shall pay Parent a fee of $15
million,  plus all actual,  documented  third party  costs,  including,  but not
limited to, filing fees and costs for attorneys,  accountants and other advisors
("Third Party Costs")  incurred by Parent,  at the time of such  termination  in
cash by wire transfer to an account designated by Parent.

          (c) If this Agreement is terminated by the Company pursuant to Section
8.1(a)(iii),  then Parent shall pay the Company a fee of $15  million,  plus all
actual, documented Third Party Costs, at the time of such termination in cash by
wire transfer to an account designated by the Company.

          (d) If this Agreement is terminated by Parent or the Company  pursuant
to Section  8.1(a)(vi),  the Company shall pay Parent a fee of $1 million,  plus
all actual,  documented  Third Party Costs,  at the time of such  termination in
cash by wire  transfer to an account  designated by Parent,  provided,  however,
that if at or prior to the time the  shareholders'  meeting  has been held there
has  been  announced   (whether  or  not  rejected  or  withdrawn)  any  Company
Acquisition Proposal and within 18 months thereafter the Company enters into any
agreement  with respect to any Company  Acquisition  Proposal,  then the Company
shall pay  Parent an  additional  fee of $14  million,  upon  execution  of such
agreement in cash by wire transfer to an account designated by Parent.

          (e) The parties  agree that the amounts  provided in clauses  (b), (c)
and (d) of this Section 8.5 payable upon the occurrence of the events  specified
therein have been  determined by negotiation and reflect their best estimate and
judgment  of the  monetary  value of the losses and  damages to be  incurred  in
connection with, and time,  effort,  expense and cost of opportunity  associated
with, the transactions  contemplated in this Agreement, and the parties agree to
accept  payment  of such  amount  as  liquidated  damages  in full and  complete
satisfaction  of all claims and  expenses  arising from the  occurrence  of such
events (including,  but not limited to, claims for specific  performance and not
as a penalty payment).

                                   ARTICLE IX
                               GENERAL PROVISIONS

          9.1 Effectiveness of Representations, Warranties and Agreements.

          (a)  Except  as set  forth in  Section  9.1(b),  the  representations,
warranties  and  agreements  of each party hereto shall remain  operative and in
full force and effect  regardless of any  investigation  made by or on behalf of
any other party hereto,  any person  controlling  any such party or any of their
officers  or  directors,  whether  prior  to or  after  the  execution  of  this
Agreement.

          (b) The  representations,  warranties and agreements in this Agreement
shall  terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII,  except that the agreements set forth in Article I and
II, and  Sections  6.4(a),  6.7,  6.8,  6.10,  6.13 and 6.16 shall  survive  the
Effective  Time and those set forth in  Sections  5.6,  8.2,  8.5 and Article IX
shall survive the termination of this Agreement.

          9.2  Notices.  All  notices  and  other  communications  given or made
pursuant  hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or 




<PAGE>

transmitted,  and shall be effective upon receipt, if delivered personally, sent
by expedited  courier or messenger  service,  mailed by  registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses  (or at such other  address for a party as shall be  specified by like
changes of address) or sent by electronic  transmission to the telecopier number
specified below:

(a)       If to Parent or Merger Sub:

          Nabors  Industries,  Inc.
          515 West Greens Road,  Suite 1200
          Houston, Texas 77067
          Attention:  Anthony G. Petrello, President and Chief Operating Officer
          Telecopier No.: (281) 775-8188
 
          with a copy to:

          Nabors Corporate Services, Inc.
          515 West Greens Road, Suite 1200
          Houston, Texas   77067
          Attention:  Legal Department
          Telecopier No.: (281) 775-8431

(b)      If to the Company:

         Pool Energy Services Co.
         10375 Richmond Avenue
         Houston, Texas  77042
         Attention:  J.T. Jongebloed, Chairman, President and
         Chief Executive Officer
         Telecopier No.:  (713) 954-3037

         with a copy to:

         Bracewell & Patterson, L.L.P.
         2900 South Tower Pennzoil Place
         711 Louisiana Street
         Houston, Texas  77002-2781
         Attention:  Edgar J. Marston III
         Telecopier No.:  (713) 221-1212


          Notice to a "copy to" address  shall be  provided  as a courtesy,  but
shall not be deemed to be actual notice received by a party for any purpose. Any
party may change the address to which  notices,  requests,  demands,  claims and
other  communications  hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.

          9.3 Certain Definitions. For purposes of this Agreement, the term:

          (a)  "affiliate"  means a person that directly or indirectly,  through
one or more  intermediaries,  controls,  is  controlled  by, or is under  common
control with, the first mentioned person.

          (b)  "business  day" means any day other than a day on which  banks in
the State of Texas are authorized or obligated to be closed.

          (c) "control"  (including the terms "controlled,"  "controlled by" and
"under common control with") means the  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  stock,  by  contract  or  credit
arrangement or otherwise.



<PAGE>

          (d)  "knowledge" or "known" shall mean,  with respect to any matter in
question,  if an executive officer of the Company or Parent, as the case may be,
has actual knowledge of such matter.

          (e)   "person"   means  an   individual,   corporation,   partnership,
association,  trust,  unincorporated  organization,  other  entity  or group (as
defined in Section 13(d) of the Exchange Act).

          (f) "Significant  Subsidiary" or "Significant  Subsidiaries" means any
Subsidiary of the Company or Parent, as the case may be, that would constitute a
Significant  Subsidiary  of such  party  within  the  meaning  of  Rule  1-02 of
Regulation S-X of the SEC.

          (g)  "Subsidiary"  or  "Subsidiaries"  of  the  Company,  Parent,  the
Surviving  Corporation or any other person, means any corporation,  partnership,
limited  liability  company,  joint  venture or other legal  entity of which the
Company, Parent, the Surviving Corporation or such other person, as the case may
be (either  alone or  through  or  together  with any other  Subsidiary),  owns,
directly  or  indirectly,  50% or more of the  capital  stock  or  other  equity
interests the holders of which are  generally  entitled to vote for the election
of the board of directors or other  governing body of such  corporation or other
legal entity.

          9.4  Headings.  The  headings  contained  in  this  Agreement  are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

          9.5 Severability.  If any term or other provision of this Agreement is
determined to be invalid,  illegal or incapable of being enforced by any rule of
law or public  policy,  all other  conditions  and  provisions of this Agreement
shall  nevertheless  remain in full force and effect so long as the  economic or
legal substance of the transactions  contemplated  hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid,  illegal or incapable of being enforced, the parties
hereto shall  negotiate  in good faith to modify this  Agreement so as to effect
the  original  intent of the  parties as closely as  possible  in an  acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.

          9.6 Entire  Agreement.  This  Agreement  (together  with the Exhibits)
constitutes  the  entire  agreement  of the  parties  and  supersedes  all prior
agreements and undertakings,  both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.

          9.7  Assignment.  This Agreement shall not be assigned by operation of
law or otherwise except Merger Sub may, without the Company's  approval,  assign
its interests to any wholly owned Subsidiary of Parent.

          9.8 Parties in  Interest.  This  Agreement  shall be binding  upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied  (other than the  provisions  of Article II and Sections 6.7,
6.13 and 6.16),  is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.

          9.9 Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure
or delay on the part of any party hereto in the exercise of any right  hereunder
shall impair such right or be construed to be a waiver of, or  acquiescence  in,
any breach of any  representation,  warranty or agreement herein,  nor shall any
single or partial  exercise of any such right preclude other or further exercise
thereof or of any other right. Except as set forth in Section 8.5(c), all rights
and remedies existing under this Agreement are in addition to, and not exclusive
of, any rights or remedies otherwise available.

          9.10 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas,  regardless of the laws that
might otherwise govern under  applicable  principles of conflicts of law, except
to the extent that the General Corporation Law of the State of Delaware shall be
mandatorily  applicable  to the shares of Parent  Common  Stock  issuable in the
Merger.




<PAGE>

          9.11  Jurisdiction.  Each  party  hereby  irrevocably  submits  to the
exclusive  jurisdiction  of the United  States  District  Court for the Southern
District of Texas, Houston Division,  or any court of the State of Texas located
in the City of Houston in any action,  suit or proceeding  arising in connection
with this Agreement,  and agrees that any such action,  suit or proceeding shall
be  brought  only in such court (and  waives  any  objection  based on forum non
conveniens or any other objection to venue  therein);  provided,  however,  that
such  consent to  jurisdiction  is solely for the  purpose  referred  to in this
Section  9.11  and  shall  not  be  deemed  to be a  general  submission  to the
jurisdiction  of said  Courts  or in the  State  of  Texas  other  than for such
purpose. PARENT, MERGER SUB AND THE COMPANY HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.

          9.12  Counterparts.  This  Agreement  may be  executed  in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed  shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.



<PAGE>

          IN WITNESS  WHEREOF,  Parent,  Merger Sub and the Company  have caused
this  Agreement  to be  executed  as of the date  first  written  above by their
respective officers thereunto duly authorized.

                            NABORS INDUSTRIES, INC

                            By:  /s/ Anthony G. Petrello 
                                 ----------------------- 
                                 Anthony G. Petrello
                                 President and Chief Operating Officer

                            STARRY ACQUISITION CORP.

                            By:  /s/ Anthony G. Petrello  
                                 ------------------------ 
                                 Anthony G. Petrello
                                 President

                            POOL ENERGY SERVICES CO.

                            By:  /s/ J. T. Jongebloed     
                                 ------------------------ 
                                 J. T. Jongebloed
                                 Chairman, President and
                                 Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(D) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

       Date of Report (Date of earliest event reported): January 10, 1998

                            POOL ENERGY SERVICES CO.
             (Exact name of registrant as specified in its charter)
TEXAS                           000-18437                   76-0263755
  (State or other jurisdiction      (Commission file number)          (IRS employer
      of  incorporation)                                            identification no.)
10375 RICHMOND AVENUE                           77042
              HOUSTON, TEXAS
   (Address of principal executive offices)               (Zip code)

       Registrant's telephone number, including area code: (713) 954-3000
POOL ENERGY SERVICES CO.

                                TABLE OF CONTENTS
                                       FOR
                           CURRENT REPORT ON FORM 8-K

                                                        Page
                                                        -----

Item 5.            Other Events                           2

Item 7.            Financial Statements and Exhibits      2

Signature                                                 3
ITEM 5. OTHER EVENTS.

     On January 11, 1999, the Company issued a press release, a copy of which is
filed as Exhibit  99.1 hereto and  incorporated  herein by this  reference.  The
definitive  agreement  referred to in such press release is filed as Exhibit 2.1
hereto.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

     (a)  Financial statements of business acquired.

          Not applicable.

     (b)  Pro forma financial information.

          Not applicable.

     (c)  Exhibits

          The following documents are filed as exhibits to this Current Report:

Exhibit
 Number      Description of Exhibit
-------      ----------------------

2.1   Agreement  and Plan of Merger dated as of January 10, 1999,  by and Nabors
      Industries, Inc., Starry Acquisition Corp. and Pool Energy Services Co.

4.1  Form of First Amendment Rights Agreement,  dated as of January 10, 1999, by
     and between Pool Energy Services Co. and The First National Bank of Boston.

99.1  Press Release dated January 11, 1999.
SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                            POOL ENERGY SERVICES CO.

                            By: /s/ Geoffrey Arms 
                                ------------------
                                    Geoffrey Arms

                            Title: Vice President and General Counsel;
                                   Corporate Secretary

Dated: January 11, 1999
EXHIBIT INDEX

          The following documents are filed as exhibits to this Current Report:

Exhibit
 Number                Description of Exhibit
-------                ----------------------

2.1  Agreement  and Plan of Merger dated as of January 10, 1999,  by and between
     Nabors Industries,  Inc., Starry Acquisition Corp. and Pool Energy Services
     Co.

4.1  Form of First Amendment to Rights Agreement,  dated as of January 10, 1999,
     by and between  Pool Energy  Services  Co. and The First  National  Bank of
     Boston.

99.1 Press Release dated January 11, 1999.
AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                            NABORS INDUSTRIES, INC.,

                            STARRY ACQUISITION CORP.

                                       and

                            POOL ENERGY SERVICES CO.

                          Dated as of January 10, 1999
TABLE OF CONTENTS

ARTICLE I  THE MERGER...............................................................................1
         1.1      The Merger........................................................................1
         1.2      Closing/Effective Time............................................................1
         1.3      Effect of the Merger..............................................................1
         1.4      Articles of Incorporation; Bylaws.................................................2
         1.5      Directors and Officers of Merger Sub..............................................2

ARTICLE II  CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES......................................2
         2.1      Conversion of Securities..........................................................2
         2.2      Exchange of Certificates..........................................................3
         2.3      Stock Transfer Books..............................................................4
         2.4      Absence of Dissenters' Rights.....................................................4
         2.5      Company Stock Options.............................................................4

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................5
         3.1      Organization, Qualification, Etc..................................................5
         3.2      Capital Stock.....................................................................6
         3.3      Corporate Authority Relative to this Agreement; No Violation......................6
         3.4      Reports and Financial Statements..................................................7
         3.5      No Undisclosed Liabilities........................................................7
         3.6      No Violation of Law...............................................................8
         3.7      Environmental Laws and Regulations................................................8
         3.8      No Undisclosed Employee Benefit Plan Liabilities or Severance Arrangements........8
         3.9      Absence of Certain Changes or Events..............................................8
         3.10     Litigation........................................................................8
         3.11     Ownership of Company Common Stock.................................................9
         3.12     Tax Matters.......................................................................9
         3.13     Required Vote....................................................................10
         3.14     Insurance........................................................................10
         3.15     Intellectual Property............................................................10
         3.16     Material Contracts...............................................................10
         3.17     Ownership of Merger Sub; No Prior Activities.....................................11
         3.18     Brokers..........................................................................11
         3.19     Property.........................................................................11
         3.20     Parent Equipment.................................................................12
         3.21     Permits..........................................................................12

ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................12
         4.1      Organization, Qualification, Etc.................................................12
         4.2      Capital Stock....................................................................12
         4.3      Corporate Authority Relative to this Agreement; No Violation.....................13
         4.4      Reports and Financial Statements.................................................14
         4.5      No Undisclosed Liabilities.......................................................14
         4.6      No Violation of Law..............................................................14
         4.7      Environmental Laws and Regulations...............................................14
         4.8      Employee Benefit Matters.........................................................15
         4.9      Absence of Certain Changes or Events.............................................17
         4.10     Litigation.......................................................................17
         4.11     Company Rights Plan..............................................................17
         4.12     Lack of Ownership of Parent Common Stock.........................................18
         4.13     Tax Matters......................................................................18
         4.14     Required Vote....................................................................18
         4.15     Insurance........................................................................18
         4.16     Intellectual Property............................................................19
         4.17     Material Contracts...............................................................19
         
                                                        
                                        i
4.18     Vessels..........................................................................20
         4.19     Brokers...........................................................................20
         4.20     Opinion of Financial Advisor......................................................20
         4.21     Property..........................................................................20
         4.22     Company Equipment.................................................................21
         4.23     Permits...........................................................................21
         4.24     Financial Condition...............................................................21

ARTICLE V  COVENANTS................................................................................21
         5.1      Affirmative Covenants of the Company..............................................21
         5.2      Negative Covenants of the Company.................................................21
         5.3      Negative Covenants of Parent......................................................23
         5.4      Access and Information............................................................24
         5.5      No Solicitation...................................................................24
         5.6      Confidentiality...................................................................26
         5.7      Inspection of Vessels.............................................................26
         5.8      Company Rights Plan...............................................................26

ARTICLE VI  ADDITIONAL AGREEMENTS...................................................................26
         6.1      Meetings of Shareholders..........................................................26
         6.2      Registration Statement; Proxy Statement...........................................27
         6.3      Appropriate Action; Consents; Filings.............................................28
         6.4      Tax Treatment; Affiliates.........................................................29
         6.5      Public Announcements..............................................................29
         6.6      AMEX Listing......................................................................30
         6.7      Indemnification of Directors and Officers.........................................30
         6.8      Agreement to Defend...............................................................31
         6.9      Obligations of Merger Sub.........................................................31
         6.10     Accounting for Merger.............................................................31
         6.11     Takeover Statutes.................................................................31
         6.12     Board of Directors of Parent......................................................31
         6.13     Transition Employment.............................................................32
         6.14     Additional Agreements.............................................................32
         6.15     Notification of Certain Matters...................................................32
         6.16     Post-Closing Employee Benefits....................................................32

ARTICLE VII  CLOSING CONDITIONS.....................................................................33
         7.1      Conditions to Obligations of Each Party Under this Agreement......................33
         7.2      Additional Conditions to Obligations of Parent and Merger Sub.....................33
         7.3      Additional Conditions to Obligations of the Company...............................34

ARTICLE VIII  TERMINATION, AMENDMENT AND WAIVER.....................................................34
         8.1      Termination.......................................................................34
         8.2      Effect of Termination.............................................................36
         8.3      Amendment.........................................................................36
         8.4      Waiver............................................................................36
         8.5      Fees; Expenses and Other Payments.................................................36

ARTICLE IX  GENERAL PROVISIONS......................................................................37
         9.1      Effectiveness of Representations, Warranties and Agreements.......................37
         9.2      Notices...........................................................................37
         9.3      Certain Definitions...............................................................38
         9.4      Headings..........................................................................39
         9.5      Severability......................................................................39
         9.6      Entire Agreement..................................................................39
         9.7      Assignment........................................................................39
         9.8      Parties in Interest...............................................................39
         9.9      Failure or Indulgence Not Waiver; Remedies Cumulative.............................39
         9.10     Governing Law.....................................................................39

                                                      
                                       ii
9.11     Jurisdiction......................................................................39
         9.12     Counterparts......................................................................40
EXHIBITS

1.4A     Restated Articles of Incorporation of Surviving Corporation
1.4B     Bylaws of Surviving Corporation
6.4      Form of Affiliate Letter
6.13     Possible Transition Employees

                                       iii
AGREEMENT AND PLAN OF MERGER

          THIS  AGREEMENT  AND PLAN OF MERGER dated as of January 10, 1999 (this
"Agreement"),  is  entered  into  among  NABORS  INDUSTRIES,  INC.,  a  Delaware
corporation  ("Parent"),  STARRY ACQUISITION CORP., a Texas corporation ("Merger
Sub") and a wholly owned  subsidiary of Parent,  and POOL ENERGY SERVICES CO., a
Texas corporation (the "Company").

          WHEREAS,  upon  the  terms  and  subject  to the  conditions  of  this
Agreement and in accordance  with the Texas Business  Corporation  Act ("TBCA"),
Merger Sub will merge with and into the Company (the "Merger");

          WHEREAS, the respective Boards of Directors of Parent,  Merger Sub and
the Company have determined the Merger to be advisable and in the best interests
of their respective corporations and shareholders and to be consistent with, and
in furtherance  of, their  respective  business  strategies  and goals,  and, by
resolutions duly adopted, have approved and adopted this Agreement; and

          WHEREAS,  for Federal  income tax  purposes,  it is intended  that the
Merger shall qualify as a reorganization  under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement shall constitute a "plan of reorganization" for the purposes
of Section 368 of the Code.

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

                                    ARTICLE I
                                   THE MERGER

          1.1 The Merger. Upon the terms and subject to the conditions set forth
in this  Agreement,  and in accordance  with the TBCA, at the Effective Time (as
defined in Section  1.2),  Merger Sub shall be merged with and into the Company.
As a result of the Merger, the separate corporate  existence of Merger Sub shall
cease and the Company shall continue as the surviving  corporation in the Merger
(the "Surviving Corporation").

          1.2  Closing/Effective  Time.  Subject to the terms and  conditions of
this Agreement,  the closing of the Merger (the "Closing")  shall take place (a)
at the offices of Skadden,  Arps, Slate,  Meagher & Flom LLP, 1600 Smith Street,
Houston,  Texas  77002,  at 9:00 a.m.,  local time,  on the first  business  day
immediately following the day on which the last to be fulfilled or waived of the
conditions  set forth in Article VII shall be fulfilled or waived in  accordance
with this  Agreement or (b) at such other time,  date or place as Parent and the
Company may agree.  The date on which the Closing  occurs is referred to in this
Agreement  as  the  "Closing  Date".  As  promptly  as  practicable   after  the
satisfaction  or, if permissible,  waiver of the conditions set forth in Article
VII, the parties  hereto shall cause the Merger to be  consummated  by filing of
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Texas, in such form as required by, and executed in accordance with the
relevant  provisions of, the TBCA. The Merger shall become effective at the time
of the  issuance of a  certificate  of merger by the  Secretary  of State of the
State of Texas in  response  to the  filing of the  Articles  of  Merger  and in
accordance  with the TBCA,  or at such later time that the parties  hereto shall
have agreed upon and  designated in the Articles of Merger as the effective time
of the Merger (the "Effective Time").

          1.3 Effect of the Merger.  At the  Effective  Time,  the effect of the
Merger shall be as provided in the  applicable  provisions of the TBCA.  Without
limiting the generality of the foregoing,  and subject thereto, at the Effective
Time, except as otherwise  provided herein,  all rights,  title and interests to
all real property and other property of Merger Sub and the Company shall vest in
the Surviving Corporation, and all liabilities and obligations of Merger Sub and
the Company  shall  become the  liabilities  and  obligations  of the  Surviving
Corporation.

          1.4 Articles of Incorporation;  Bylaws. At the Effective Time, each of
the Articles of
Incorporation,  as amended,  and the Bylaws, as amended, of the Company shall be
amended and  restated in its  entirety to read as set forth in Exhibit  1.4A and
Exhibit 1.4B, respectively,  and as so amended shall be the Restated Articles of
Incorporation  and Bylaws of the Surviving  Corporation until further amended in
accordance with applicable law.

          1.5  Directors and Officers of Merger Sub. The directors of Merger Sub
immediately  prior to the Effective Time shall be the directors of the Surviving
Corporation,  each to hold office in  accordance  with the Restated  Articles of
Incorporation and Bylaws of the Surviving  Corporation,  and the officers of the
Company  immediately  prior to the  Effective  Time shall be the officers of the
Surviving  Corporation,  in each case until their respective successors are duly
elected or appointed and qualified.

                                   ARTICLE II
               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

          2.1 Conversion of Securities.  At the Effective Time, by virtue of the
Merger and without any action on the part of Parent,  Merger Sub, the Company or
any holders of any securities of the foregoing corporations:

          (a) Each share of common  stock,  without  par value,  of the  Company
("Company  Common  Stock")  issued  and  outstanding  immediately  prior  to the
Effective Time  (excluding any treasury shares held by the Company or any of its
Subsidiaries  (as defined in Section 9.3(g)) and shares held by Parent or any of
its Subsidiaries),  including the associated Company Rights, if any, outstanding
at the  Effective  Time  pursuant to the Company  Rights Plan (as such terms are
defined in Section  4.2),  shall be  converted  into the right to receive  1.025
fully paid,  non-assessable  shares of common stock (the "Exchange Ratio"),  par
value $.10 per share, of Parent ("Parent Common Stock").

          (b) If between the date of this  Agreement and the Effective  Time the
outstanding  shares of Parent  Common  Stock or Company  Common Stock shall have
been changed into a different  number of shares or a different  class, by reason
of any stock dividend, subdivision,  reclassification,  recapitalization, split,
combination or exchange of shares or if a "Flip-In  Event" or "Flip-Over  Event"
(each as defined  under the Company  Rights  Plan (as  defined in Section  4.2))
shall have occurred  under the Company  Rights Plan, the Exchange Ratio shall be
correspondingly   adjusted  to  reflect   such  stock   dividend,   subdivision,
reclassification,  recapitalization, split, combination or exchange of shares or
event.

          (c) All such  shares  of  Company  Common  Stock  shall no  longer  be
outstanding,  shall  automatically  be  canceled  and retired and shall cease to
exist,  and  each  certificate  previously  evidencing  any  such  shares  shall
thereafter  represent the right to receive the Merger  Consideration (as defined
in Section 2.2(b)). The holders of such certificates  previously evidencing such
shares of Company Common Stock  outstanding  immediately  prior to the Effective
Time shall  cease to have any  rights  with  respect  to such  shares of Company
Common Stock,  except as otherwise  provided herein or by law. Such certificates
previously  evidencing  shares of Company  Common Stock shall be  exchanged  for
certificates  evidencing  whole shares of Parent Common Stock upon the surrender
of such  certificates in accordance with the provisions of Section 2.2,  without
interest.  No fractional shares of Parent Common Stock shall be issued,  and, in
lieu thereof, a cash payment shall be made pursuant to Section 2.2(e).

          (d) Each share of Company  Common  Stock held in the  treasury  of the
Company and each share of Company Common Stock owned by Parent or any Subsidiary
of Parent or of the Company  immediately  prior to the  Effective  Time shall be
canceled and extinguished without any conversion thereof and no payment shall be
made with respect thereto.

          (e) Each share of common  stock,  par value $.10 per share,  of Merger
Sub issued and  outstanding  at the Effective  Time shall be converted  into one
fully paid, nonassessable share of common stock of the Surviving Corporation.

          2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit, or
shall cause to be  deposited,  with First  Chicago  Trust Company of New York or
such other bank or trust company designated by Parent and reasonably  acceptable
to the Company (the "Exchange Agent"),  for the benefit of the holders of shares
of Company Common Stock, for exchange in accordance with this Article II through
the Exchange Agent (i)  certificates  evidencing  such number of whole shares of
Parent  Common Stock equal to the  Exchange  Ratio  multiplied  by the number of
shares of Company  Common  Stock  outstanding  (other than shares  described  in
Section 2.1(d)) and (ii) additional cash in consideration  of fractional  shares
as  provided  in  Section  2.2(e)  (such  Parent  Common  Stock  and cash  being
hereinafter  referred to as the  "Exchange  Fund").  The  Exchange  Agent shall,
pursuant to irrevocable  instructions,  deliver the Parent Common Stock and cash
out of the Exchange Fund. Except as contemplated by Sections 2.2(e) and (f), the
Exchange Fund shall not be used for any other purpose.

          (b) Exchange Procedures.  As soon as reasonably  practicable after the
Effective  Time,  Parent will instruct the Exchange Agent to mail to each holder
of  record of a  certificate  or  certificates  which  immediately  prior to the
Effective  Time  evidenced  outstanding  shares of  Company  Common  Stock  (the
"Certificates"),  (i) a letter of transmittal (which shall specify that delivery
shall be effected,  and risk of loss and title to the  Certificates  shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other  provisions as Parent may  reasonably  specify)
and (ii)  instructions for use in effecting the surrender of the Certificates in
exchange  for  certificates  evidencing  shares of  Parent  Common  Stock.  Upon
surrender of a Certificate for  cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary documents as
may be required  pursuant to such  instructions,  the holder of such Certificate
shall be entitled to receive in exchange (A) certificates evidencing that number
of whole  shares of Parent  Common  Stock  which  such  holder  has the right to
receive in respect of the shares of Company Common Stock  formerly  evidenced by
such  Certificate  in  accordance  with  Section  2.1  and  (B)  cash in lieu of
fractional  shares of  Parent  Common  Stock to which  such  holder is  entitled
pursuant to Section  2.2(e) (such  shares of Parent  Common Stock and cash being
collectively,  the "Merger  Consideration"),  and the Certificate so surrendered
shall be canceled.  In the event of a transfer of ownership of shares of Company
Common Stock which is not registered in the transfer  records of the Company,  a
certificate evidencing the proper number of shares of Parent Common Stock may be
issued in  accordance  with this Article II to a transferee  if the  Certificate
evidencing  such shares of Company  Common  Stock is  presented  to the Exchange
Agent,  accompanied  by all  documents  required  to  evidence  and effect  such
transfer and by evidence  that any  applicable  stock  transfer  taxes have been
paid.  Until  surrendered as contemplated by this Section 2.2, each  Certificate
shall be deemed at any time after the Effective  Time to evidence only the right
to receive, upon such surrender,  the Merger  Consideration.  The Exchange Agent
shall not be entitled to vote or exercise any rights of  ownership  with respect
to the Parent Common Stock held by it from time to time  hereunder,  except that
it  shall  receive  and  hold  all  dividends  or  other  distributions  paid or
distributed  with  respect  thereto  for the  account  of the  persons  entitled
thereto.

          (c) Distributions with Respect to Unexchanged  Shares. No dividends or
other  distributions  declared or made after the Effective  Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock evidenced  thereby,  and no other part of the Merger  Consideration
shall be paid to any such  holder,  until the holder of such  Certificate  shall
surrender such Certificate,  at which time,  subject to the effect of applicable
laws,  there  shall be issued to the holder (i)  certificates  evidencing  whole
shares of Parent Common Stock issued in exchange  therefor and the amount of any
cash payable with respect to a fractional  share of Parent Common Stock to which
such holder is entitled  pursuant to Section  2.2(e) and the amount of dividends
or other  distributions  with a record date after the  Effective  Time then paid
with  respect  to such  whole  shares of Parent  Common  Stock,  and (ii) at the
appropriate  payment  date,  the  amount  of  dividends  or other  distributions
(without  interest  thereon),  with a record date after the  Effective  Time but
prior to surrender and a payment date occurring  after  surrender,  payable with
respect to such whole shares of Parent Common Stock.  No interest  shall be paid
on any such amounts.

          (d) No Further  Rights in Company  Common Stock.  All shares of Parent
Common Stock issued and cash paid in lieu of fractional  shares upon  conversion
of the  shares of  Company  Common  Stock
in  accordance  with the  terms of this  Agreement  shall be deemed to have been
issued or paid in full  satisfaction of all rights  pertaining to such shares of
Company Common Stock.

          (e) No Fractional Shares.

                  (i) No certificates or scrip evidencing  fractional  shares of
         Parent  Common Stock shall be issued upon the surrender for exchange of
         Certificates,  and such fractional share interests will not entitle the
         owner thereof to vote or to any rights of a stockholder of Parent.

                  (ii) Each holder of a Certificate having a fractional interest
         arising upon the conversion of such  Certificate  shall, at the time of
         surrender of the  Certificate,  be paid by the Exchange Agent an amount
         in cash  equal to the value of such  fractional  interest  based on the
         average  closing  price per share of Parent Common Stock as reported by
         The Wall Street  Journal  (Northeast  edition) for the ten  consecutive
         trading days ending on and including the fifth trading day prior to the
         Closing  Date,  appropriately  adjusted for any stock  splits,  reverse
         stock  splits,  stock  dividends,  recapitalizations  or other  similar
         transactions.  No  interest  shall  be paid on any  such  amounts.  All
         fractional  shares to which a single  record  holder  would be entitled
         shall be aggregated.

          (f)  Termination  of Exchange  Fund.  Any portion of the Exchange Fund
which remains  undistributed to the holders of Company Common Stock for one year
after the  Effective  Time shall be  delivered to Parent,  upon demand,  and any
holders of Company  Common Stock who have not then complied with this Article II
shall thereafter look only to Parent for the Merger  Consideration to which they
are entitled.

          (g) No Liability.  Neither Parent nor the Surviving  Corporation shall
be liable to any  holder of shares of  Company  Common  Stock for any  shares of
Parent  Common  Stock or cash in lieu of  fractional  shares  (or  dividends  or
distributions  with respect thereto)  delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.

          (h) Lost  Certificates.  In the event any Certificate  shall have been
lost,  stolen or destroyed,  upon the making of an affidavit of that fact by the
person  claiming  such  Certificate  to be lost,  stolen or  destroyed  and,  if
required by the Surviving  Corporation,  the posting by such person of a bond in
such  reasonable  amount as the  Surviving  Corporation  may direct as indemnity
against any claim that may be made against it with respect to such  Certificate,
the  Exchange  Agent will issue in exchange  for such lost,  stolen or destroyed
Certificate  the shares of Parent  Common  Stock and cash in lieu of  fractional
shares,  and unpaid dividends and distributions on shares of Parent Common Stock
as provided above, deliverable in respect thereof pursuant to this Agreement.

          2.3 Stock Transfer  Books.  At the Effective  Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of shares of Company Common Stock  thereafter on the records of the
Company.  On or after the  Effective  Time,  any  Certificates  presented to the
Exchange  Agent or Parent for any reason shall be canceled and exchanged for the
Merger Consideration.

          2.4  Absence of  Dissenters'  Rights.  Pursuant to the  provisions  of
Article  5.11(B) of the TBCA,  shareholders  of the Company are not  entitled to
exercise any rights to dissent from the Merger.

          2.5 Company Stock Options.

          (a) Each holder of an outstanding  Company Stock Option (as defined in
Section  4.2) to purchase  shares of Company  Common  Stock shall have the right
exercisable  no later than the third  business  day prior to the Closing Date to
elect either (i) by virtue of the Merger and without  further action on the part
of the Company or the holder of such  Company  Stock Option to have all (but not
part) of such holder's Company Stock Options  converted into options to purchase
Parent Common Stock ("Parent Stock Option") exercisable for that number of whole
shares of Parent  Common  Stock  equal to the product of the
number of shares of  Company  Common  Stock  covered by a Company  Stock  Option
immediately prior to the Effective Time multiplied by the Exchange Ratio rounded
up to the nearest  whole number of shares of Parent  Common  Stock,  and the per
share  exercise  price for the shares of Parent  Common Stock  issuable upon the
exercise of such Parent Stock Options shall be equal to the quotient  determined
by dividing (A) the exercise price per share of Company  Common Stock  specified
for such Company Stock Option under the applicable  Company Stock Option plan or
agreement  immediately  prior to the Effective  Time, by (B) the Exchange  Ratio
(rounding  the  resulting  exercise  price up to the  nearest  whole  cent) (the
alternative in this clause (i) being the "Roll-Over Alternative"); or (ii) to be
paid in cash  immediately  after the Effective Time in full  cancellation of all
(but not part) of such holder's  Company Stock Options in an amount equal to the
product  of (x) the  number  of  shares of  Company  Common  Stock for which the
Company Stock Options are exercisable  multiplied by (y) the difference  between
the per share  option  exercise  price  and the value of 1.025  shares of Parent
Common Stock based on the average closing price per share of Parent Common Stock
as  reported  by the  Wall  Street  Journal  (northeast  edition)  for  the  ten
consecutive  trading days ending on and including the fifth trading day prior to
the Closing Date,  appropriately  adjusted for any stock  splits,  reverse-stock
splits,   stock  dividends,   recapitalizations  or  similar  transactions  (the
alternative in this clause (ii) being the "Cash-Out Alternative").  With respect
to those holders of Company Stock  Options  electing the Roll-Over  Alternative,
the date of grant of the  Parent  Stock  Option  shall be the date on which  the
applicable  Company  Stock  Option  originally  was granted and the Parent Stock
Option  received  pursuant  to the  RollOver  Alternative  shall  expire  on the
expiration  date of the Company  Stock Option which it replaces,  shall be fully
vested,  and may be exercised by the holder thereof at any time on or before its
stated expiration date  notwithstanding the earlier termination of such holder's
employment with the Surviving Corporation or one of its Subsidiaries, or, in the
case of  non-employee  directors'  Company Stock  Options,  the cessation of the
holder's  service as a director.  As to those  holders  who elect the  Roll-Over
Alternative,  such election  shall  include as a condition  thereto the holder's
agreement relieving the Company, Parent and the Surviving Corporation of (A) any
and all  obligations to pay or to reimburse such holder for any excise tax under
Section  4999 of the Code or any  gross-up for taxes with respect to such excise
tax that arises in connection with, or is otherwise  related to, any incremental
value for purposes of Section 280G of the Code with respect to the Company Stock
Option or the Parent Stock Option for which it is exchanged  attributable to the
extension of the term during which the Parent Stock Option is exercisable beyond
that of the Company Stock Option that it replaces,  as contemplated  pursuant to
the Roll-Over  Alternative and (B) all other  liabilities,  if any,  relating to
such  incremental  value.  In  addition  to the  Roll-Over  Alternative  and the
Cash-Out  Alternative,  those  holders of Company  Options whole are eligible to
retire in accordance  with the Company's 1993 Employee Stock  Incentive Plan and
the  agreements  thereunder as of the Closing Date may also elect in lieu of the
Roll-Over Alternative or the Cash-Out Alternative, to have all (but not part) of
their  Company  Stock  Options  converted  into Parent Stock Options on the same
basis  as set  forth  above  with  respect  to  the  RollOver  Alternative  (the
"Retirement Roll-Over Alternative"), provided, however, the Parent Stock Options
received  pursuant  to such  election,  shall have a term equal to the lesser of
five years or the  remaining  term of the Company  Stock Options as to which the
Retirement  Roll-Over  Alternative  is  elected.  Any holder of a Company  Stock
Option  who  does not  elect  any of the  Roll-Over  Alternative,  the  Cash-Out
Alternative  or the  Retirement  Roll-Over  Alternative  shall be deemed to have
elected the Cash-Out Alternative.

          (b) By virtue of the Merger and without  further action on the part of
the Company or the holder of an Incentive Award,  such holder's  Incentive Award
shall be  converted  into the right to  receive  the  number of whole  shares of
Parent  Common  Stock  equal to the  product  of the number of shares of Company
Common Stock covered by an Incentive  Award  immediately  prior to the Effective
Time  multiplied by the Exchange Ratio rounded up to the nearest whole number of
shares of Parent Common Stock.

          (c) Parent  shall  reserve for issuance the number of shares of Parent
Common Stock that will become issuable upon the exercise of Parent Stock Options
pursuant to this Section 2.5. As soon as practicable  after the Effective  Time,
Parent shall file a registration  statement on Form S-8 (or any successor form),
or another  appropriate  form with respect to the shares of Parent  Common Stock
subject to Parent  Stock  Options and shall use its best efforts to maintain the
effectiveness of such registration  statement or registration  statements for so
long as such options remain outstanding.  Except as otherwise expressly provided
herein, the Parent Stock Options shall be subject to the terms and conditions of
Parent's 1998 Employee Stock Option Plan,  and except as otherwise  contemplated
by Parent and  consistent  with
this  Section  2.5(a),  the form of stock  option  agreement  shall be  Parent's
standard form as in effect on the date hereof.

          (d) The Company (i) shall take all  necessary  action  pursuant to the
Company's stock option plans or otherwise and (ii) to the extent necessary under
the terms of the  applicable  stock option plans and  agreements,  shall use its
best reasonable efforts to cause the holders of Company Stock Options to execute
any documents  necessary,  in each case, to  effectuate  the  provisions of this
Section 2.5.

                                   ARTICLE III
             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

          Except as set forth on the Disclosure  Schedule delivered by Parent to
the Company prior to the  execution of this  Agreement  (the "Parent  Disclosure
Schedule"),  each of Parent and Merger Sub jointly and severally  represents and
warrants to the Company that:

          3.1  Organization,  Qualification,  Etc. Parent is a corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware,  and Merger Sub is a corporation duly organized,  validly existing and
in good standing under the laws of the State of Texas. Each of Parent and Merger
Sub has the requisite  corporate  power and authority to own its  properties and
assets and to carry on its  business  as it is now being  conducted  and is duly
qualified to do business and is in good standing in each  jurisdiction  in which
the  ownership of its  properties  or the conduct of its business  requires such
qualification,  except for jurisdictions in which the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse  Effect (as defined  below) on Parent.  As used in this  Agreement,  any
reference  to any state of facts,  event,  change or effect  having a  "Material
Adverse Effect" on or with respect to Parent or the Company, as the case may be,
means  such  state of facts,  event,  change or  effect  that has had,  or would
reasonably  be  expected to have,  a material  adverse  effect on the  business,
results of operations or financial  condition of the  applicable  entity and its
Subsidiaries,  taken as a whole,  exclusive of such effects on general  economic
conditions or the oil and gas, contract  drilling,  workover service or oilfield
service  industries  in general.  A Material  Adverse  Effect shall be deemed to
exist if there shall occur any event which causes or may  reasonably be expected
to cause or  result in actual  monetary  loss not  covered  by  insurance  which
exceeds $30 million,  in the case of Parent, or $10 million,  in the case of the
Company.  The copies of  Parent's  Restated  Certificate  of  Incorporation  and
By-laws which have been delivered to the Company are complete and correct and in
full  force  and  effect  on the  date  of  this  Agreement.  Each  of  Parent's
Significant  Subsidiaries  (as defined in Section 9.3(f)) is a corporation  duly
organized,  validly existing and (if applicable) in good standing under the laws
of its jurisdiction of  incorporation  or organization,  has the requisite power
and  authority to own its  properties  and to carry on its business as it is now
being conducted,  and is duly qualified to do business and is (if applicable) in
good standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which the failure to be so qualified or (if  applicable)  in good standing would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
All the outstanding shares of capital stock of, or other ownership interests in,
Parent's   Significant   Subsidiaries   are  validly  issued,   fully  paid  and
non-assessable and are owned by Parent,  directly or indirectly,  free and clear
of all liens, claims, charges or encumbrances, except for restrictions contained
in credit  agreements  and similar  instruments to which Parent is a party under
which no event of default has occurred or arisen. There are no existing options,
rights  of  first  refusal,  preemptive  rights,  calls  or  commitments  of any
character  relating to the issued or unissued  capital stock or other securities
of, or other ownership interests in, any Significant Subsidiary of Parent.

          3.2  Capital  Stock.  The  authorized  stock  of  Parent  consists  of
200,000,000  shares of common stock,  par value $.10 per share  ("Parent  Common
Stock"), 10,000,000 shares of preferred stock, par value $.10 per share ("Parent
Preferred  Stock"),  and 8,000,000  shares of Class B Stock,  par value $.10 per
share ("Parent Class B Stock").  As of December 31, 1998,  100,808,778 shares of
Parent  Common  Stock  were  issued  and  outstanding  and no  shares  of Parent
Preferred  Stock or Parent  Class B Stock were  issued or  outstanding.  All the
outstanding shares of Parent Common Stock have been validly issued and are fully
paid and  non-assessable.  As of December  31, 1998,  there were no  outstanding
subscriptions,
convertible or exchangeable  securities,  options,  warrants,  calls,  rights or
other  arrangements or commitments  obligating Parent to issue,  deliver or sell
any shares of its capital  stock or debt  securities,  or any  securities of any
kind convertible into its capital stock, or obligating  Parent to grant,  extend
or enter  into any such  subscription,  option,  warrant,  call,  right or other
arrangement or commitment other than: (a) options and other rights to receive or
acquire 18,118,266 shares of Parent Common Stock granted on or prior to December
31,  1998  pursuant  to  employee  incentive  or  benefit  plans,  programs  and
arrangements and  non-employee  director plans; (b) warrants to purchase 200,000
shares of Parent Common Stock issued to the former  stockholders  of an acquired
entity;  (c) rights to acquire shares of Parent Common Stock upon  conversion of
Parent's  5%  Convertible   Subordinated   Notes  due  May  15,  2006;  and  (d)
approximately  6,825,000 shares of Parent Common Stock, options and other rights
to receive or acquire  approximately  486,000  shares of Parent Common Stock and
warrants to receive or acquire  approximately  142,000  shares of Parent  Common
Stock, all issuable in connection with the closing of that certain Agreement and
Plan of Merger dated October 19, 1998 between Parent,  Nabors  Acquisition Corp.
VII and Bayard  Drilling  Technologies,  Inc. (the "Bayard Merger  Agreement") .
Except for (i) the  issuance of shares of Parent  Common  Stock  pursuant to the
options and other rights referred to in clauses  3.2(a),  (b), (c) and (d), (ii)
any grants of options or other rights to acquire  shares of Parent  Common Stock
made to employees or  non-employee  directors in the ordinary course of business
after  December  31,  1998,  pursuant to employee  incentive  or benefit  plans,
programs or  arrangements  and  non-employee  director plans and (iii) potential
future issuances of Parent Common Stock, options,  warrants or similar rights to
acquire  Parent Common Stock for not less than fair value,  in  connection  with
acquisitions  by Parent,  since  December 31, 1998,  no shares of Parent  Common
Stock,  Parent  Preferred  Stock or Parent Class B Stock have been issued and no
options,  warrants or other securities  convertible into shares of capital stock
of Parent have been issued or granted.  The shares of Parent  Common Stock to be
issued as  consideration  in the Merger are duly  authorized and, when issued in
accordance with the terms of this Agreement,  will be validly issued, fully paid
and  nonassessable.  Except as  provided  in Section  5.5 of the  Bayard  Merger
Agreement,  Parent has not granted any  registration  rights with respect to its
securities that are currently exercisable.

          3.3 Corporate Authority Relative to this Agreement; No Violation. Each
of Parent and Merger Sub has the  corporate  power and  authority  to enter into
this Agreement and,  subject to the receipt of any required  Parent  Stockholder
Authorization  (as  defined  in  Section  3.13),  to carry  out its  obligations
hereunder.  The execution and delivery of this Agreement and the consummation of
the transactions  contemplated  hereby have been duly and validly  authorized by
the Boards of Directors of Parent and Merger Sub, and, subject to the receipt of
Parent Stockholder  Authorization (if required),  no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize the  consummation
of the transactions  contemplated  hereby. The Boards of Directors of Parent and
Merger Sub have determined that the transactions  contemplated by this Agreement
are in the best  interests of such entities and their  respective  stockholders.
This  Agreement  has been duly and validly  executed and delivered by Parent and
Merger  Sub  and,  assuming  this  Agreement  constitutes  a valid  and  binding
agreement  of the  Company  and  subject to the  receipt  of Parent  Stockholder
Authorization  (if  required),  this  Agreement  constitutes a valid and binding
agreement of Parent and Merger Sub,  enforceable against them in accordance with
its terms  (except  insofar  as  enforceability  may be  limited  by  applicable
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws  affecting
creditors'  rights  generally,  or by principles  governing the  availability of
equitable  remedies).  Neither  Parent nor Merger Sub is subject to or obligated
under any charter,  by-law or contract  provision  or any license,  franchise or
permit,  or subject to any order or decree,  which would be breached or violated
by its executing or, subject to the receipt of Parent Stockholder  Authorization
(if required),  carrying out the  transactions  contemplated  by this Agreement,
except for any breaches or violations  which would not,  individually  or in the
aggregate,  have a Material  Adverse Effect on Parent.  Other than in connection
with or in compliance  with the  provisions of the TBCA,  the  Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Hart-Scott-Rodino  Antitrust  Improvements Act
of 1976,  as  amended  (the "HSR  Act"),  Section  4043 of ERISA (as  defined in
Section 3.8), the regulations of the American Stock Exchange,  Inc. ("AMEX") and
the securities or blue sky laws of the various states (collectively, the "Parent
Required Approvals"), no authorization,  consent or approval of, or filing with,
any  governmental  body or authority is necessary for the consummation by Parent
of  the   transactions   contemplated  by  this   Agreement,   except  for  such
authorizations,  consents,  approvals or filings,  the failure to obtain or make
which  would not,  individually  or
in the  aggregate,  have a Material  Adverse  Effect on Parent or  substantially
impair or delay the consummation of the transactions contemplated hereby.

          3.4 Reports and Financial Statements.  Parent has previously furnished
to the Company true and complete  copies of: (a) Parent's Annual Reports on Form
10-K filed with the Securities and Exchange  Commission  (the "SEC") for each of
the years ended September 30, 1995 through 1997; (b) Parent's  Quarterly Reports
on Form 10-Q filed with the SEC for the quarters ended December 31, 1997,  March
31, 1998,  June 30, 1998 and  September  30,  1998;  (c) each  definitive  proxy
statement filed by Parent
with the SEC since September 30, 1995; (d) each final prospectus filed by Parent
with the SEC since September 30, 1995, except any final prospectus  constituting
part of a Form S-8; and (e) all Current Reports on Form 8-K filed by Parent with
the SEC since October 1, 1997. As of their respective dates, such reports, proxy
statements  and  prospectuses  (collectively,  the  "Parent  SEC  Reports")  (i)
complied as to form in all material respects with the applicable requirements of
the Securities Act, the Exchange Act and the rules and  regulations  promulgated
thereunder  and (ii) did not contain any untrue  statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not  misleading.  Except to the extent that  information  contained in any
Parent SEC Report has been  revised or  superseded  by a later filed  Parent SEC
Report,  none of the Parent SEC  Reports  contains  any  untrue  statement  of a
material fact or omits to state any material fact required to be stated  therein
or  necessary  in  order  to  make  the  statements  therein,  in  light  of the
circumstances   under  which  they  were  made,  not  misleading.   The  audited
consolidated  financial statements and unaudited  consolidated interim financial
statements  included in the Parent SEC Reports  (including any related notes and
schedules)  have  been  prepared  in  accordance  with and  fairly  present  the
financial  position of Parent and its consolidated  Subsidiaries as of the dates
thereof  and the results of  operations  and cash flows for the periods or as of
the  dates  then  ended  (subject,   where   appropriate,   to  normal  year-end
adjustments),  in each case in  accordance  with  past  practice  and  generally
accepted  accounting  principles  in the  United  States  ("GAAP")  consistently
applied during the periods  involved  (except (i) as otherwise  disclosed in the
notes thereto, (ii) in the case of unaudited interim financial statements,  such
differences  in  presentation  or  omissions  as are  permitted by Rule 10-01 of
Regulation S-X promulgated by the SEC and (iii) the unaudited  interim financial
statements  do not contain all notes  required by GAAP).  Since October 1, 1996,
Parent has timely filed all material reports,  registration statements and other
filings  required to be filed by it with the SEC under the rules and regulations
of the SEC, and each such report, registration statement or other filing met the
standards set forth in the second sentence of this Section 3.4.

          3.5  No  Undisclosed  Liabilities.  Neither  Parent  nor  any  of  its
Subsidiaries  has any  liabilities or obligations of any nature,  whether or not
accrued,  contingent  or  otherwise,  of a type  required to be  reflected  on a
balance  sheet  prepared in  accordance  with GAAP,  except (a)  liabilities  or
obligations  reflected in the Parent SEC Reports filed after  September 30, 1997
but prior to the date hereof  ("Parent Filed SEC Reports"),  (b) liabilities and
obligations incurred under this Agreement and fees and expenses related thereto,
(c)  liabilities  and  obligations  incurred in the ordinary  course of business
after  September  30,  1998 and (d)  liabilities  or  obligations  which are not
reasonably  expected,  individually  or in the  aggregate,  to  have a  Material
Adverse Effect on Parent.

          3.6 No Violation of Law. The businesses of Parent and its Subsidiaries
are not being conducted in violation of any law,  ordinance or regulation of any
governmental  body or authority  (provided that no representation or warranty is
made in this  Section  3.6 with  respect to  Environmental  Laws (as  defined in
Section  3.7))  except (a) as  described in the Parent Filed SEC Reports and (b)
for violations or possible  violations  which would not,  individually or in the
aggregate, have a Material Adverse Effect on Parent.

          3.7  Environmental  Laws and  Regulations.  Except as described in the
Parent  Filed  SEC  Reports,  (a)  Parent  and each of its  Subsidiaries  are in
compliance with all applicable international,  federal, state, local and foreign
laws and regulations  relating to pollution or protection of human health or the
environment (including,  without limitation,  ambient air, surface water, ground
water, land surface or subsurface strata) (collectively,  "Environmental Laws"),
which compliance  includes,  but is not limited to, the possession by Parent and
its Subsidiaries of all material permits and other  governmental  authorizations
required under applicable  Environmental Laws, and compliance with the terms and
conditions thereof, except for noncompliance which would not, individually or in
the aggregate,  have a Material Adverse Effect on Parent; (b) neither Parent nor
any of its  Subsidiaries has received written notice of, or, to the knowledge of
Parent,   is  the  subject   of,  any   actions,   causes  of  action,   claims,
investigations,  demands or notices by any Person  asserting  an  obligation  to
conduct  investigations  or  clean-up  activities  under  Environmental  Laws or
alleging   liability  under  or  noncompliance   with  any  Environmental   Laws
(collectively,  "Environmental  Claims")  which  would,  individually  or in the
aggregate, have a Material Adverse Effect on Parent; and (c)
to the knowledge of Parent,  there are no facts,  circumstances or conditions in
connection  with the operation of the businesses of Parent and its  Subsidiaries
or any  currently  or formerly  owned,  leased or operated  facilities  that are
reasonably likely to lead to any such Environmental Claims in the future, except
for any such  Environmental  Claims  which  would  not,  individually  or in the
aggregate, have a Material Adverse Effect on Parent.

          3.8 No  Undisclosed  Employee  Benefit Plan  Liabilities  or Severance
Arrangements. Except as described in the Parent Filed SEC Reports, all "employee
benefit  plans," as defined in Section  3(3) of the Employee  Retirement  Income
Security Act of 1974,  as amended  ("ERISA"),  maintained or  contributed  to by
Parent or its Subsidiaries  are in compliance with all applicable  provisions of
ERISA and the Code, and Parent and its  Subsidiaries do not have any liabilities
or obligations with respect to any such employee benefit plans, whether accrued,
contingent  or  otherwise,  except  (a) as  described  in the  Parent  Filed SEC
Reports,  and (b) for instances of  noncompliance  or liabilities or obligations
that would not, individually or in the aggregate, have a Material Adverse Effect
on Parent. No employee of Parent will be entitled to any additional  benefits or
any  acceleration  of the time of payment or vesting of any  benefits  under any
employee  incentive or benefit plan, program or other arrangement as a result of
the transactions contemplated by this Agreement.

          3.9 Absence of Certain  Changes or Events.  Other than as disclosed in
the Parent Filed SEC Reports, since October 1, 1997 the businesses of Parent and
its  Subsidiaries  have been conducted in all material  respects in the ordinary
course  consistent  with  past  practice,  and  there  has not been  any  event,
occurrence,  development  or state of  circumstances  or facts that has had,  or
would have, a Material Adverse Effect on Parent.

          3.10 Litigation.  Except as described in the Parent Filed SEC Reports,
there are no actions,  suits or proceedings  pending (or, to Parent's knowledge,
threatened)  against or affecting  Parent or its  Subsidiaries,  or any of their
respective  properties at law or in equity, or before any federal,  state, local
or  foreign  governmental  body  or  authority,  which,  individually  or in the
aggregate,  are reasonably  likely to have a Material  Adverse Effect on Parent.
The Parent  Disclosure  Schedule  sets forth a complete  list of all  pending or
threatened  actions,  suits  or  proceedings  involving  amounts  in  excess  of
$250,000.

          3.11  Ownership  of  Company  Common  Stock.  As of the  date  of this
Agreement,  Parent and its  Subsidiaries  own 2,209,500 shares of Company Common
Stock or other securities convertible into shares of Company Common Stock.

          3.12 Tax Matters.

          (a) All federal,  state,  local and foreign Tax Returns (as defined in
Section  3.12(c))  required  to be filed by or on behalf of Parent,  each of its
Subsidiaries,  and each affiliated,  combined,  consolidated or unitary group of
which  Parent  or any of its  Subsidiaries  (i) is a member (a  "Current  Parent
Group") or (ii) has been a member  within six years prior to the date hereof but
is not currently a member,  but only insofar as any such Tax Return relates to a
taxable period ending on a date within the last six years (a "Past Parent Group"
and, together with Current Parent Groups, a "Parent Affiliated Group") have been
timely filed,  and all such Tax Returns are complete and accurate  except to the
extent  any  failure to file or any  inaccuracies  in filed  returns  would not,
individually or in the aggregate,  have a Material  Adverse Effect on Parent (it
being  understood  that the  representations  made in this Section  3.12, to the
extent that they relate to Past Parent  Groups,  or to any  Subsidiary of Parent
for periods prior to the time such  Subsidiary was acquired by Parent,  are made
to the knowledge of Parent).  All Tax Returns include any required disclosure of
all positions  taken therein that could give rise to a substantial  underpayment
penalty  within Section 6662 of the Code or similar  provision of state,  local,
foreign or other law. All Taxes (as defined in Section 3.12(c)) due and owing by
Parent,  any Subsidiary of Parent or any Parent Affiliated Group have been paid,
or adequately  reserved for,  except to the extent any failure to pay or reserve
would not,  individually or in the aggregate,  have a Material Adverse Effect on
Parent. There is no audit examination,  deficiency, refund litigation,  proposed
adjustment or matter in  controversy  with respect to any Taxes due and owing by
Parent,  any  Subsidiary of Parent or any Parent  Affiliated  Group which would,
individually or in the aggregate,  have a Material Adverse Effect on Parent. All
assessments  for Taxes due and owing by Parent,  any Subsidiary
of Parent or any Parent  Affiliated  Group with respect to completed and settled
examinations  or concluded  litigation  have been paid.  As soon as  practicable
after the public  announcement of the execution of this  Agreement,  Parent will
provide the Company  with written  schedules of (i) the taxable  years of Parent
for which the statutes of limitations  with respect to federal income Taxes have
not expired,  and (ii) with  respect to federal  income  Taxes,  those years for
which  examinations have been completed,  those years for which examinations are
presently being conducted,  and those years for which  examinations have not yet
been  initiated.  Parent  and  each of its  Subsidiaries  have  complied  in all
material  respects  with all rules and  regulations  relating to the payment and
withholding of Taxes, except to the extent any such failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.

          (b) None of Parent  nor any of its  Subsidiaries  knows of any fact or
has taken any action  that could  reasonably  be  expected to prevent the Merger
from qualifying as a reorganization  within the meaning of Section 368(a) of the
Code.

          (c) For  purposes of this  Agreement:  (i)  "Taxes"  means any and all
federal, state, local, foreign or other taxes of any kind (together with any and
all interest,  penalties,  additions to tax and additional  amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other  charges on or with  respect to income,  franchises,  windfall or
other profits,  gross receipts,  property,  sales, use, capital stock,  payroll,
employment,  social security, workers' compensation,  unemployment compensation,
or net worth,  and taxes or other charges in the nature of excise,  withholding,
ad valorem or value  added,  and (ii) "Tax Return"  means any return,  report or
similar statement  (including the attached  schedules) required to be filed with
respect to any Tax, including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.

          3.13 Required  Vote.  Assuming that Parent's  pending  acquisition  of
Bayard Drilling Technologies,  Inc. is consummated prior to the Closing Date, no
vote of the  stockholders  of Parent  ("Parent  Stockholder  Authorization")  is
required  by law,  the  charter or by-laws  of Parent or  otherwise  in order to
consummate the Merger and the transactions contemplated hereby. No other vote of
the  stockholders of Parent is required by law, the charter or by-laws of Parent
or otherwise in order for Parent to consummate  the Merger and the  transactions
contemplated hereby.

          3.14 Insurance. The Parent Disclosure Schedule sets forth all material
policies of  insurance or programs of  self-insurance  by which Parent or any of
its  Subsidiaries  or any of their  respective  properties or assets are covered
against  present losses,  all of which are now in full force and effect.  Parent
agrees to maintain such policies (or policies of substantially  the same nature)
in full  force and  effect at all times  until the  Effective  Time.  The Parent
Disclosure  Schedule  sets  forth for the  current  policy  year and each of the
preceding  five  policy  years (i) a summary of the loss  experience  under each
policy;  (ii) a statement  describing each claim under an insurance policy which
sets forth the name of the claimant, a description of the policy, and the amount
and a brief description of the claim; and (iii) a statement  describing the loss
experience  for all  claims  that were  self-insured,  including  the number and
aggregate cost of such claims.  Neither Parent nor any of its  Subsidiaries  has
received  any refusal of coverage or any notice that a defense  will be afforded
with reservation of rights.

          3.15 Intellectual Property. Parent and its Subsidiaries own or possess
adequate  licenses  or other valid  rights to use all  patents,  patent  rights,
trademarks, trademark rights and proprietary information used or held for use in
connection with their respective businesses as currently being conducted, except
where the failure to own or possess  such  licenses  and other  rights would not
have, individually or in the aggregate, a Material Adverse Effect on Parent, and
there  are no  assertions  or  claims  challenging  the  validity  of any of the
foregoing which are likely to have, individually or in the aggregate, a Material
Adverse  Effect  on  Parent.  The  conduct  of  Parent's  and its  Subsidiaries'
businesses as currently  conducted  does not conflict  with any patents,  patent
rights, licenses,  trademarks,  trademark rights, trade names, trade name rights
or  copyrights  of others  in any way  likely  to have,  individually  or in the
aggregate,  a Material  Adverse Effect on Parent.  The systems,  processes,  and
computer software and hardware used, operated, sold or licensed by Parent or its
Subsidiaries  that is material to its  business or its  internal  operations  is
capable  of  providing  or is being or will be  adapted,  or is capable of being
replaced,  to provide uninterrupted  millennium  functionality to record, store,
process  and  present  calendar  dates  falling  on or after  January 1, 2000 in
substantially the same manner and with  substantially the same  functionality as
such systems,  processes,  software and hardware records,  stores, processes and
presents such calendar dates falling on or before  December 31, 1999,  except as
would not have a Material Adverse Effect on Parent. The costs of the
adaptations and  replacements  referred to in the prior sentence will not have a
Material Adverse Effect on Parent.

          3.16 Material  Contracts.  The Parent  Disclosure  Schedule  lists the
following  contracts  and  other  agreements  to  which  Parent  or  any  of its
Subsidiaries is a party (other than  intercompany  arrangements)  as of the date
hereof (collectively, the "Parent Contracts"):

          (a) any  agreement (or group of related  agreements)  for the lease of
personal  property to or from any person  providing for lease payments in excess
of $5,000,000 per annum and a term of more than one year;

          (b) any agreement (or group of related agreements) for the purchase or
sale of raw  materials,  commodities,  supplies,  products,  or  other  personal
property, or for the furnishing or receipt of services, the performance of which
has a term  more  than six  months,  and  involves  consideration  in  excess of
$5,000,000;

          (c) any partnership or joint venture agreement;

          (d) any agreement (or group of related  agreements) under which it has
created,  incurred,  assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation,  in excess of $5,000,000, or under which it
has imposed a lien, security interest or other encumbrance on any of its assets,
tangible or intangible, to secure such indebtedness or obligations;

          (e) any agreement which purports to limit in any material  respect the
manner in which, or the localities in which,  all or any material portion of the
business of Parent and its  Subsidiaries,  taken as a whole,  or the Company and
its Subsidiaries, taken as a whole, is conducted;

          (f) any  agreement  with any of the  stockholders  of Parent and their
affiliates  relating  to  the  voting,   transfer  or  disposition  of  Parent's
securities;

          (g)  any  profit  sharing,   stock  option,   stock  purchase,   stock
appreciation,  deferred  compensation,  severance  or  other  material  plan  or
arrangement (including any employee benefit plan) for the benefit of its current
or former directors, officers and employees;

          (h) any collective bargaining agreement;

          (i) all  turnkey  and  footage  drilling  contracts  and  all  daywork
drilling  contracts  for  amounts  in  excess  of  $2,000,000  or  that  are not
terminable or subject to completion within 90 days;

          (j) any  agreement  under  which  the  consequences  of a  default  or
termination could have a Material Adverse Effect on Parent; and

          (k)  any  other  agreement  (or  group  of  related   agreements)  the
performance of which involves  consideration  in excess of $5,000,000 other than
agreements entered into in the ordinary course.

There is no contract or agreement  that is material to the  business,  financial
condition or results of  operations of Parent and its  Subsidiaries,  taken as a
whole, that is not set forth in the Parent Disclosure  Schedule.  Neither Parent
nor any of its  Subsidiaries  is in violation  or default  under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause a  violation  or  default  under)  any  Parent  Contract,  other than such
violations or defaults as would not have a Material Adverse Effect on Parent. To
the knowledge of Parent, none of the other parties to the Parent Contracts is in
violation of or in default under (nor does there exist any condition  which upon
the passage of time or the giving of notice  would cause a violation  or default
under) any Parent Contract,  other than such violations or defaults as would not
have a Material Adverse Effect on Parent.

          3.17  Ownership  of Merger Sub; No Prior  Activities.  Merger Sub is a
direct, wholly owned
subsidiary  of  Parent.  Except  for  obligations  or  liabilities  incurred  in
connection  with  its   incorporation   or  organization  and  the  transactions
contemplated  by this  Agreement  and  except for this  Agreement  and any other
agreements or arrangements  contemplated  by this Agreement,  Merger Sub has not
and will not have incurred,  directly or  indirectly,  through any Subsidiary or
affiliate,  any obligations or liabilities or engaged in any business activities
of any type or kind  whatsoever or entered into any  agreements or  arrangements
with any person.

          3.18  Brokers.  Other  than  Merrill  Lynch,  Pierce,  Fenner  & Smith
Incorporated,  no  broker,  finder  or  investment  banker  is  entitled  to any
brokerage,   finder's  or  other  fee  or  commission  in  connection  with  the
transactions  contemplated by this Agreement based upon  arrangements made by or
on behalf of Parent or Merger Sub.

          3.19 Property.  Parent and each of the  Subsidiaries,  as the case may
be, have sufficient  title or leaseholds to property to conduct their respective
businesses as currently  conducted with only such  exceptions as individually or
in the aggregate would not have a Material Adverse Effect on Parent.

          3.20 Parent Equipment. Parent and its Subsidiaries have such ownership
of or such rights by license,  lease or other agreement to all equipment used or
necessary to conduct their  respective  businesses as currently  conducted  (the
"Parent  Equipment")  with  only  such  exceptions  as  individually  or in  the
aggregate  would not have a  Material  Adverse  Effect  on  Parent.  The  Parent
Equipment  that is currently  under  contract or is being  actively  marketed by
Parent or a Subsidiary  is in good  operating  condition and repair and adequate
for the uses to which it is being put.

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

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except  as set  forth  on the  Disclosure  Schedule  delivered  by the
Company  to  Parent  prior to the  execution  of this  Agreement  (the  "Company
Disclosure Schedule"),  the Company represents and warrants to Parent and Merger
Sub that:

          4.1  Organization,  Qualification,  Etc. The Company is a  corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Texas and has the  requisite  corporate  power and authority to own its
properties and assets and to carry on its business as it is now being  conducted
and  is  duly  qualified  to  do  business  and  is in  good  standing  in  each
jurisdiction  in which the  ownership  of its  properties  or the conduct of its
business  requires such  qualification,  except for  jurisdictions  in which the
failure to be so qualified or in good standing would not, individually or in the
aggregate,  have a Material  Adverse  Effect on the  Company.  The copies of the
Company's Articles of Incorporation,  as amended, and Bylaws, as amended,  which
have been  delivered  to Parent are  complete  and correct and in full force and
effect  on the  date  of  this  Agreement.  Each  of the  Company's  Significant
Subsidiaries  is duly  organized,  validly  existing and (if applicable) in good
standing under the laws of its  jurisdiction of  incorporation  or organization,
has the power and authority to own its  properties  and to carry on its business
as it is now being  conducted,  and is duly  qualified to do business and is (if
applicable) in good standing in each  jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification,  except for
jurisdictions in which the failure to be so qualified or (if applicable) in good
standing would not,  individually or in the aggregate,  have a Material  Adverse
Effect on the Company.  All the outstanding shares of capital stock of, or other
ownership  interests  in, the  Company's  Significant  Subsidiaries  are validly
issued, fully paid and non-assessable and are owned by the Company,  directly or
indirectly, free and clear of all liens, claims, charges or encumbrances, except
for restrictions contained in credit agreements and similar instruments to which
the Company is a party  under which no event of default has  occurred or arisen.
There are no existing options, rights of first refusal, preemptive rights, calls
or commitments of any character relating to the issued or unissued capital stock
or other  securities  of,  or other  ownership  interests  in,  any  Significant
Subsidiary of the Company.

          4.2  Capital  Stock.  The  authorized  capital  stock  of the  Company
consists  of  40,000,000  shares of  Company  Common  Stock and 1,000  shares of
preferred stock, without par value ("Company Preferred Stock"). As of January 8,
1999, 21,114,655 shares of Company Common Stock were issued and outstanding,  no
shares of Company  Common  Stock were held in the  Company's  treasury and 1,000
shares of Company  Preferred Stock were held in the Company's  treasury.  All of
the  shares  of  Company  Common  Stock and  Company  Preferred  Stock  (whether
outstanding  or in  treasury)  have been  validly  issued and are fully paid and
nonassessable.  As of January 8, 1999, there were no outstanding  subscriptions,
convertible or  exchangeable  securities,  options,  warrants,  or other rights,
arrangements or commitments obligating the Company to issue, deliver or sell any
shares of its capital stock or debt  securities,  or any  securities of any kind
convertible  into its capital stock, or obligating the Company to grant,  extend
or  enter  into  any  such  subscription,   option,  warrant,  or  other  right,
arrangement or commitment,  other than: (a) rights ("Company Rights") to acquire
shares of the Company Common Stock pursuant to the Rights Agreement, dated as of
June 7, 1994,  between the Company  and The First  National  Bank of Boston (the
"Company  Rights Plan") and (b) options to acquire  1,431,754  shares of Company
Common  Stock  granted  on or prior to  January 8,  1999,  (the  "Company  Stock
Options")  and  incentive  awards  and other  similar  rights to receive up to a
maximum of 174,954  shares of the Company  Common  Stock  granted on or prior to
January 8, 1999 ("Incentive Awards"),  pursuant to employee incentive or benefit
plans,  programs and arrangements and nonemployee director plans. Except for the
issuance of shares of the Company Common Stock  pursuant to the options,  awards
and other rights  referred to in clauses (a) and (b) of this Section 4.2,  since
January 8, 1999, no shares of Company  Common Stock or Company  Preferred  Stock
have been issued and no options,  awards or other  securities  convertible  into
shares of capital  stock of the Company  have been  issued,  awarded or granted.
Section 4.2 of the Company  Disclosure  Schedule  sets forth a true and complete
list of all Company Stock Options and Incentive Awards,  showing for each holder
the number and type of Company Stock Options held, the exercise  prices thereof,
and the dates of grant,  expiration  and vesting  thereof.  The Company has made
available to Parent complete and correct copies of all agreements evidencing the
Company  Stock  Options and  Incentive  Awards.  The Company has not granted any
registration   rights  with  respect  to  its  securities   that  are  currently
exercisable.

          4.3 Corporate Authority Relative to this Agreement; No Violation.  The
Company has the requisite  corporate  power and authority to execute and deliver
this Agreement and, subject to the receipt of the Company  Shareholder  Approval
(as  defined in Section  4.14),  to  consummate  the  transactions  contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions  contemplated  hereby have been duly and validly  authorized by the
Board of  Directors  of the  Company  and,  subject  to the  receipt  of Company
Shareholder  Approval, no other corporate proceedings on the part of the Company
are necessary to authorize the  consummation  of the  transactions  contemplated
hereby  and  thereby.  The  Board of  Directors  of the  Company  has  taken all
appropriate  action so that none of the  Company,  Parent or Merger  Sub will be
subject to the limitations on "business combinations" set forth in Part Thirteen
of the TBCA by virtue of the Company,  Parent and Merger Sub entering  into this
Agreement and consummating the transactions  contemplated  hereby.  The Board of
Directors of the Company has determined  that the  transactions  contemplated by
this  Agreement are advisable and in the best  interests of the Company and that
it will recommend to the Company's  shareholders that they adopt this Agreement.
Neither the Company nor any  affiliate  or  associate of the Company has, at any
time during the last three  years,  owned in excess of 15% of the Parent  Common
Stock.  This  Agreement has been duly and validly  executed and delivered by the
Company and,  assuming this Agreement  constitutes a valid and binding agreement
of the other parties  hereto and the Company  Shareholder  Approval is received,
this  Agreement  constitutes  a valid  and  binding  agreement  of the  Company,
enforceable  against the Company in accordance with its terms (except insofar as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium  or  similar  laws  affecting   creditors'   rights
generally,  or by principles  governing the availability of equitable remedies).
Neither the Company nor any of its Subsidiaries is subject to or obligated
under any charter,  by-law,  joint venture or partnership  agreement or contract
provision  or any  license,  franchise  or  permit,  or  subject to any order or
decree,  which would be breached or violated by its executing or, subject to the
receipt  of  Company  Shareholder   Approval,   carrying  out  the  transactions
contemplated  by this  Agreement,  except for any breaches or  violations  which
would not,  individually or in the aggregate,  have a Material Adverse Effect on
the Company.  The execution and delivery of this Agreement and the  consummation
of the transactions  contemplated  hereby will not (a) cause a change in control
to occur under the Shareholders Agreement by and between Pool International Inc.
and Arabian Petroleum Services Company ("Petroserv"),  dated as of September 20,
1974,  as amended  to the date of this  Agreement  or under any other  governing
documents related thereto  (collectively,  the "Saudi Joint Venture Agreement"),
(b)  result in  Petroserv  having  the right to acquire in excess of 65% of Pool
Arabia,  Ltd. or (c) result in Petroserv  obtaining  management  control of Pool
Arabia,  Ltd. Other than in connection with or in compliance with the provisions
of the TBCA, the Securities Act, the Exchange Act, the HSR Act,  Section 4043 of
ERISA and the securities or blue sky laws of the various  states  (collectively,
the "Company Required Approvals"), no authorization,  consent or approval of, or
filing  with,  any   governmental   body  or  authority  is  necessary  for  the
consummation by the Company of the transactions  contemplated by this Agreement,
except for such authorizations,  consents,  approvals or filings, the failure to
obtain  or make  which  would  not,  individually  or in the  aggregate,  have a
Material  Adverse  Effect on the  Company or  substantially  impair or delay the
consummation of the transactions contemplated hereby.

          4.4  Reports and  Financial  Statements.  The  Company has  previously
furnished  to Parent  true and  complete  copies  of: (a) the  Company's  Annual
Reports on Form 10-K filed with the SEC for each of the years ended December 31,
1995 through 1997; (b) the Company's  Quarterly  Reports on Form 10-Q filed with
the SEC for the quarters  ended March 31, 1998,  June 30, 1998 and September 30,
1998;  (c) each  definitive  proxy  statement  filed by the Company with the SEC
since December 31, 1995; (d) each final prospectus filed by the Company with the
SEC since December 31, 1995, except any final prospectus  constituting part of a
Form S-8; and (e) all Current  Reports on Form 8-K filed by the Company with the
SEC since January 1, 1998. As of their  respective  dates,  such reports,  proxy
statements and prospectuses  (collectively,  "Company SEC Reports") (i) complied
as to form in all material  respects  with the  applicable  requirements  of the
Securities  Act, the Exchange  Act,  and the rules and  regulations  promulgated
thereunder  and (ii) did not contain any untrue  statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not  misleading.  Except to the extent that  information  contained in any
Company SEC Report has been revised or  superseded  by a later filed Company SEC
Report,  none of Company SEC Reports contains any untrue statement of a material
fact or omits to state  any  material  fact  required  to be stated  therein  or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.  The audited consolidated  financial
statements and unaudited  consolidated  interim financial statements included in
the Company SEC Reports  (including any related notes and  schedules)  have been
prepared in accordance  with and fairly  present the  financial  position of the
Company  and its  consolidated  Subsidiaries  as of the  dates  thereof  and the
results of their  operations  and their cash flows for the  periods or as of the
dates then ended (subject,  where appropriate,  to normal year-end adjustments),
in each case in  accordance  with past  practice and GAAP  consistently  applied
during the periods  involved  (except (i) as  otherwise  disclosed  in the notes
thereto,  (ii) in the  case of  unaudited  interim  financial  statements,  such
differences  in  presentation  or  omissions  as are  permitted by Rule 10-01 of
Regulation S-X promulgated by the SEC and (iii) the unaudited  interim financial
statements  do not contain all notes  required by GAAP).  Since January 1, 1996,
the Company has timely filed all material reports,  registration  statements and
other  filings  required  to be filed by it with the SEC  under  the  rules  and
regulations  of the SEC, and each such report,  registration  statement or other
filing met the standards set forth in the second sentence of this Section 4.4.

          4.5 No  Undisclosed  Liabilities.  Neither  the Company nor any of its
Subsidiaries  has any  liabilities or obligations of any nature,  whether or not
accrued,  contingent  or  otherwise,  of a type  required to be  reflected  on a
balance  sheet  prepared in  accordance  with GAAP,  except (a)  liabilities  or
obligations  reflected in Company SEC Reports filed after  December 31, 1997 but
prior to the date hereof  ("Company  Filed SEC Reports"),  (b)  liabilities  and
obligations incurred under this Agreement and fees and expenses related thereto,
(c)  liabilities  and  obligations  incurred in the ordinary  course of business
after  September  30,  1998 and (d)  liabilities  or  obligations  which are not
reasonably  expected,  individually  or in the  aggregate,
to have a Material Adverse Effect on the Company.

          4.6 No  Violation  of  Law.  The  businesses  of the  Company  and its
Subsidiaries  are not being  conducted  in  violation  of any law,  ordinance or
regulation   of  any   governmental   body  or  authority   (provided   that  no
representation  or  warranty  is  made in  this  Section  4.6  with  respect  to
Environmental Laws) except (a) as described in the Company Filed SEC Reports and
(b) for violations or possible  violations  which would not,  individually or in
the aggregate, have a Material Adverse Effect on the Company.

          4.7  Environmental  Laws and  Regulations.  Except as described in the
Company Filed SEC Reports,  (a) the Company and each of its  Subsidiaries are in
compliance with all applicable  Environmental  Laws, which compliance  includes,
but is not limited to, the possession by the Company and its Subsidiaries of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof, except
for  non-compliance  which would not,  individually or in the aggregate,  have a
Material  Adverse Effect on the Company;  (b) neither the Company nor any of its
Subsidiaries  has  received  written  notice  of,  or, to the  knowledge  of the
Company, is the subject of, any Environmental  Claims which would,  individually
or in the aggregate,  have a Material Adverse Effect on the Company;  and (c) to
the knowledge of the Company, there are no facts, circumstances or conditions in
connection  with  the  operation  of the  businesses  of  the  Company  and  its
Subsidiaries or any currently or formerly owned,  leased or operated  facilities
that are  reasonably  likely  to lead to any such  Environmental  Claims  in the
future,  except for any such Environmental Claims which would not,  individually
or in the aggregate, have a Material Adverse Effect on the Company.

          4.8 Employee Benefit Matters.

          (a) The Company Disclosure Schedule sets forth a complete and accurate
list of:

                  (i) each  "employee  welfare  benefit  plan"  (as such term is
         defined in Section 3(1) of the ERISA) (the "Company Welfare Plans");

                  (ii) each  "employee  pension  benefit  plan" (as such term is
         defined in Section 3(2) of ERISA) (the "Company Pension Plans");

                  (iii)  all  other  material  employee  benefit  agreements  or
         arrangements,  including,  without  limitation,  deferred  compensation
         plans,  incentive  plans,  bonus plans or  arrangements,  stock  option
         plans, stock purchase plans, golden parachute agreements, severance pay
         plans,  dependent  care plans,  cafeteria  plans,  employee  assistance
         programs,   scholarship  programs,   employment   contracts,   vacation
         policies,  supplemental  income  arrangements  and other similar plans,
         agreements and  arrangements  (collectively,  with the Company  Welfare
         Plans and the Company Pension Plans, the "Company Benefit Plans"), that
         are in effect  on the date of this  Agreement,  or have  been  approved
         before the date of this  Agreement but are not yet  effective,  for the
         benefit of directors, officers, employees or former employees (or their
         respective  beneficiaries  or consultants)  of the Company,  any of its
         Subsidiaries  incorporated  in the United  States  (the  "Company  U.S.
         Subsidiaries") or any corporation,  trade, business or entity that is a
         member of a controlled  group,  affiliated  service  group or otherwise
         under common  control  with the Company  (within the meaning of Section
         414(b),  (c),  (m) or (o) of the  Code)  and  that is  incorporated  or
         domiciled in the United States (collectively, the "Company Group"). The
         Company  and U.S.  Subsidiaries  will  provide  to  Parent,  as to each
         Company Benefit Plan, as applicable,  access to a complete and accurate
         copy of (i) each such plan,  agreement or arrangement;  (ii) the trust,
         group annuity  contract or other document that provides the funding for
         such  plan;  (iii)  the most  recent  annual  Form  5500,  990 and 1041
         reports;  (iv) the most recent actuarial report or valuation statement;
         (v) the  most  current  summary  plan  description,  handbook  or other
         booklet that  describes any Company  Benefit  Plan,  and any summary of
         material   modifications   prepared   after  each  such   summary  plan
         description;  (vi) the most recent  Internal  Revenue  Service  ("IRS")
         determination  letter and all rulings or determinations  requested from
         the IRS subsequent to the date of such determination  letter; and (vii)
         all other  pending  correspondence  from the IRS or the  Department  of
         Labor  received by any member
of the Company Group that relates to such plan; and

                  (iv) all amendments or  modifications  to any Company  Benefit
         Plan  (including  any  increase  in  salary  or  bonus)  authorized  or
         implemented  since  October  1, 1998  which  increase  the cost of such
         Company Benefit Plan to the Company.

          (b) Each  Company  Welfare  Plan and  Company  Pension  Plan (i) is in
compliance  with  ERISA,  including,   without  limitation,  all  reporting  and
disclosure  requirements  of Part 1 of  Subtitle  B of Title I of ERISA  and the
Code; (ii) has not engaged in any transaction described in Section 406 or 407 of
ERISA or  Section  4975 of the Code  unless it  received  or is  entitled  to an
exemption under Section 408 of ERISA or Section 4975 of the Code, as applicable,
or unless such  transaction  has been corrected and all applicable  excise taxes
paid or waived;  (iii) has no issue,  action,  suit or claim pending (other than
the payment of benefits in the normal  course or the  qualification  of the plan
pursuant  to an  application  pending  before  the IRS) nor any  issue  resolved
adversely to the Company  Group that,  in either  case,  may subject the Company
Group to the payment of a penalty,  interest,  tax or other amount; and (iv) can
be unilaterally terminated or amended on no more than 90 days' notice. No notice
has been  received by the Company  Group of an increase or proposed  increase in
any premium  relative to any  Company  Benefit  Plan,  and no  amendment  to any
Company  Benefit  Plan  within  the last 12  months  has  increased  the rate of
employer  contributions  thereunder.  (i) The  Company  Group has  substantially
performed all  obligations,  whether arising by operation of law or by contract,
required to be performed by it in  connection  with the Company  Benefit  Plans,
(ii) each Company  Benefit Plan has been  administered  in  compliance  with its
governing  documents and applicable  law, (iii) no act,  omission or transaction
has occurred which would result in imposition on any member of the Company Group
of (A) breach of fiduciary  duty  liability  damages under Section 409 of ERISA,
(B) a civil penalty assessed  pursuant to subsections (c), (i) or (l) of Section
502 of ERISA or (C) a tax  imposed  pursuant  to Chapter 43 of Subtitle D of the
Code.

          (c) Each  Company  Benefit  Plan that is  intended  to be a  voluntary
employee  benefit  association  has been submitted to and approved by the IRS as
exempt  from  federal  income  tax under  Section  501(c)(9)  of the Code or the
applicable submission period relating to any such plan will not have ended prior
to the Closing.  No Company  Benefit  Plan will cause the Company  Group to have
liability for severance pay as a result of this Agreement.

          (d) Each Company  Pension Plan that is intended to be qualified  under
Section  401(a) of the Code has been  submitted  to and  approved as  qualifying
under Section 401(a) of the Code by the IRS or the applicable remedial amendment
period  relating to such plan will not have ended prior to the  Closing.  To the
knowledge  of the Company,  no facts have  occurred  that,  if known by the IRS,
could cause  disqualification  of any Company  Pension  Plan.  As to any Company
Pension Plan that is intended to be qualified  under Section 401(a) of the Code,
there has been no  termination  or partial  termination  of such plan within the
meaning of Section  411(d)(3) of the Code.  Each  Company  Pension Plan to which
Section 302 of ERISA or Section  412 of the Code is  applicable  fully  complies
with the  funding  requirements  of that  Section  and there is no  "accumulated
funding  deficiency" as defined in Section  302(a)(2) of ERISA or Section 412 of
the Code  (whether or not waived) in any such plan.  The Company  Group has paid
all premiums (including, without limitation, interest, charges and penalties for
late payment) due the Pension  Benefit  Guaranty  Corporation  (the "PBGC") with
respect to each Company Pension Plan for which premiums are required. No Company
Pension Plan has been terminated, and there has been no event or condition which
presents the material risk of termination, under circumstances that would result
in any material  liability to the PBGC or the Company  Group.  There has been no
"reportable  event" (as defined in Section  4043(c) of ERISA and the regulations
under that Section) with respect to any Company Pension Plan subject to Title IV
of ERISA.  With  respect to each  Company  Pension  Plan  subject to Title IV of
ERISA,  (i) no  notice  of intent to  terminate  the plan has been  given  under
Section 4041 of ERISA, (ii) no proceeding has been instituted under Section 4042
of ERISA to terminate the plan, (iii) no liability to the PBGC has been incurred
and (iv) the Company Group has not (A) ceased  operations at a facility so as to
become subject to the provisions of Section 4062(e) of ERISA, (B) withdrawn as a
substantial  employer so as to become  subject to the provisions of Section 4063
of ERISA or (C) ceased making contributions on or before the Closing Date to any
such plan  subject to Section  4064(a) of ERISA to which the Company  Group made
contributions  at any time during the six years prior to the  Closing  Date.  No
member of the Company  Group  contributes  to or has an obligation to contribute
to,  and  has not at any
time  within  six  years  prior to the  Closing  Date  contributed  to or had an
obligation to contribute  to, from a  multiemployer  plan (as defined in Section
3(37) of ERISA).

          (e) The  Company  Disclosure  Schedule  sets forth the  amounts of all
severance  payments  or similar  obligations,  including  but not limited to any
increased employee compensation or additional benefits, vested rights or service
credits  under any Company  Benefit Plan  (whether or not some other  subsequent
action or event  would be  required  to cause such  payment or  provision  to be
triggered),  that will be owed by Company or any of its  Subsidiaries  to any of
their  respective  employees,   officers,  directors  or  consultants,  and  all
increases in severance  payments or other  benefits to which any of such persons
will be entitled, as a result of the Merger or the transactions  contemplated by
this Agreement.  Except as set forth in the Company Disclosure Schedule, no such
payments shall be due and payable as a result of the Merger or the  transactions
contemplated  hereby.  Company  has made  available  to Parent (i) copies of all
employment agreements with officers of Company and its Subsidiaries; (ii) copies
of all  agreements  with  consultants  obligating  Company to make  annual  cash
payments in an amount  exceeding  $100,000 or with a term greater than one year;
(iii) a schedule  listing all officers of Company and its  Subsidiaries who have
executed a  non-competition  agreement  with Company or its  Subsidiaries;  (iv)
copies of all  severance  agreements,  programs  and policies of Company with or
relating to its employees; and (v) copies of all plans, programs, agreements and
other  arrangements  of Company with or relating to its employees  which contain
change in  control  provisions.  Except as set forth in the  Company  Disclosure
Schedule,  in connection with the consummation of the transactions  contemplated
by this  Agreement,  no payments  of money or other  property,  acceleration  of
benefits,  or provisions of other rights have or will be made  hereunder,  under
the Company  Benefit Plans or under any other agreement that would be reasonably
likely to result in imposition  of the sanctions  imposed under Section 280G and
4999 of the Code,  whether or not some other subsequent action or event would be
required to cause such payment, acceleration or provision to be triggered.

          (f)  Since  January  1,  1996,  neither  the  Company  nor  any of its
Subsidiaries  has  been a party to any  collective  bargaining  or  other  labor
contract.  Since  January 1, 1997,  there has not been,  there is not  presently
pending or existing, and to the Company's knowledge there is not threatened, (i)
any strike,  slowdown,  picketing,  work stoppage or employee grievance process;
(ii) any proceeding  against or affecting the Company or any of its Subsidiaries
relating to the alleged violation of any legal  requirement  pertaining to labor
relations or employment  matters,  including any charge or complaint filed by an
employee or union with the National Labor Relations  Board, the Equal Employment
Opportunity Commission or any comparable governmental authority,  organizational
activity or other labor or employment  dispute  against or affecting  Company or
any of its  Subsidiaries  or  their  premises;  or  (iii)  any  application  for
certification of a collective  bargaining agent. To the Company's knowledge,  no
event has occurred or  circumstance  exists that could provide the basis for any
work  stoppage or other labor  dispute.  There is no lockout of any employees by
Company  or any of its  Subsidiaries,  and no such  action  is  contemplated  by
Company or any of its  Subsidiaries.  To the  knowledge of Company,  Company and
each of its  Subsidiaries  has complied in all material  respects with all legal
requirements   relating   to   employment,    equal   employment    opportunity,
nondiscrimination,  immigration,  wages, hours, benefits, collective bargaining,
the  payment of social  security  and  similar  taxes,  occupational  safety and
health, and plant closing. To the knowledge of Company,  neither Company nor any
of its Subsidiaries is liable for the payment of compensation,  damages,  taxes,
fines,  penalties, or other amounts,  however designated,  for failure to comply
with any of the foregoing legal requirements.

          (g) Except as otherwise  required by law, (i) no Company  Benefit Plan
provides retiree medical or retiree life insurance  benefits to any person,  and
(ii) none of Company or its Subsidiaries is contractually  obligated (whether or
not in writing) to provide any person with life  insurance  or medical  benefits
upon retirement or termination of employment. The Company Group has not made any
representations,  agreements,  covenants or commitments to provide such coverage
or benefits.

          4.9 Absence of Certain  Changes or Events.  Other than as disclosed in
the Company  Filed SEC  Reports,  since  January 1, 1998 the  businesses  of the
Company and its Subsidiaries have been
conducted in all material  respects in the ordinary course  consistent with past
practice, and there has not been any event, occurrence,  development or state of
circumstances or facts that has had, or would have, a Material Adverse Effect on
the Company.

          4.10 Litigation.  Except as described in the Company Filed SEC Reports
or  previously  disclosed in writing to Parent,  there are no actions,  suits or
proceedings  pending (or, to the  Company's  knowledge,  threatened)  against or
affecting the Company or its Subsidiaries, or any of their respective properties
at law or in equity, or before any federal, state, local or foreign governmental
body or authority which, individually or in the aggregate, are reasonably likely
to have a  Material  Adverse  Effect  on the  Company.  The  Company  Disclosure
Schedule sets forth a complete list of all pending or threatened actions,  suits
or proceedings involving amounts in excess of $250,000.

          4.11 Company Rights Plan.  Under the terms of the Company Rights Plan,
as amended on the date of this  Agreement,  the  execution  and delivery of this
Agreement, the performance of the transactions contemplated by this Agreement in
accordance  with the terms  hereof  will not  (except  to the  extent  caused by
Parent's becoming the beneficial owner of any Company Common Stock other than in
accordance with this Agreement)  cause (i) Company Rights to become  exercisable
under the Company Rights Plan or (ii) a "Distribution  Date", "Share Acquisition
Date",  "Triggering Event", "Flip-In Event" or "Flip- Over Event" (as such terms
are defined in the Company  Rights Plan) to occur upon the  consummation  of any
such transactions.  In addition,  the Company has taken all actions necessary to
cause the  Company  Rights  Plan to be amended so that the  Company  Rights will
expire immediately prior to the Closing Date.

          4.12 Lack of Ownership of Parent Common Stock. Neither the Company nor
any of its  Subsidiaries  owns  any  shares  of  Parent  Common  Stock  or other
securities convertible into shares of Parent Common Stock.

          4.13 Tax Matters.

          (a) All federal,  state,  local and foreign Tax Returns required to be
filed  by or on  behalf  of the  Company,  each of its  Subsidiaries,  and  each
affiliated,  combined, consolidated or unitary group of which the Company or any
of its Subsidiaries (i) is a member (a "Current Company Group") or (ii) has been
a member  within  six years  prior to the date  hereof  but is not  currently  a
member,  but only  insofar  as any such Tax Return  relates to a taxable  period
ending on a date within the last six years (a "Past Company Group" and, together
with Current  Company  Groups,  a "Company  Affiliated  Group") have been timely
filed,  and all such Tax Returns are complete and accurate  except to the extent
any failure to file or any inaccuracies in filed returns would not, individually
or in the  aggregate,  have a Material  Adverse  Effect on the Company (it being
understood  that the  representations  made in this Section  4.13, to the extent
that they relate to Past Company Groups, or to any Subsidiary of the Company for
periods prior to the time such Subsidiary was acquired by the Company,  are made
to the  knowledge  of  the  Company).  All  Tax  Returns  include  any  required
disclosure of all positions  taken therein that could give rise to a substantial
underpayment  penalty  within  Section 6662 of the Code or similar  provision of
state, local,  foreign or other law. All Taxes due and owing by the Company, any
Subsidiary  of the Company or any Company  Affiliated  Group have been paid,  or
adequately  reserved  for,  except to the extent  any  failure to pay or reserve
would not,  individually or in the aggregate,  have a Material Adverse Effect on
the  Company.  There is no audit  examination,  deficiency,  refund  litigation,
proposed  adjustment or matter in controversy  with respect to any Taxes due and
owing by the Company,  any  Subsidiary of the Company or any Company  Affiliated
Group which would,  individually  or in the aggregate,  have a Material  Adverse
Effect on the Company.  All  assessments for Taxes due and owing by the Company,
any  Subsidiary of the Company or any Company  Affiliated  Group with respect to
completed and settled  examinations  or concluded  litigation have been paid. As
soon as  practicable  after the public  announcement  of the  execution  of this
Agreement,  the Company  will provide  Parent with written  schedules of (i) the
taxable years of the Company for which the statutes of limitations  with respect
to federal  income  Taxes  have not  expired,  and (ii) with  respect to federal
income Taxes,  those years for which  examinations  have been  completed,  those
years for which examinations are presently being conducted,  and those years for
which  examinations  have not yet been  initiated.  The  Company and each of its
Subsidiaries  have  complied  in  all  material  respects  with  all  rules  and
regulations  relating  to the payment and  withholding
of  Taxes,  except  to  the  extent  any  such  failure  to  comply  would  not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Neither the Company nor any  Subsidiary is (nor has it ever been) a party to any
tax sharing  agreement and has not assumed the tax liability of any other person
under a contract;  has ever filed a consent under Section 341(f) of the Code; is
required to make any  adjustment  under  Section  481(a) of the Code for any tax
year  ending  after  the  Effective  Time by  reason  of a change  in  method of
accounting  or  otherwise;  or is required to make a payment with respect to the
remuneration  of an  employee  which  would  result  in  non-deductible  expense
pursuant to Section  162(m) of the Code.  Neither the Company nor any Subsidiary
is (nor has it ever been) a United  States  real  property  holding  corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii).

          (b) None of the Company nor any of its Subsidiaries  knows of any fact
or has taken any action that could  reasonably be expected to prevent the Merger
from qualifying as a reorganization  within the meaning of Section 368(a) of the
Code.

          4.14 Required  Vote. The  affirmative  vote of the holders of at least
two-thirds of the  outstanding  shares of the Company Common Stock (the "Company
Shareholder Approval") is required to adopt the Merger Agreement.  No other vote
of the  shareholders of the Company is required by law, the charter or bylaws of
the Company or otherwise in order for the Company to  consummate  the Merger and
the transactions contemplated hereby.

          4.15  Insurance.  The  Company  Disclosure  Schedule  sets  forth  all
material  policies  of  insurance  or programs  of  self-insurance  by which the
Company or any of its  Subsidiaries  or any of their  respective  properties  or
assets are covered against  present  losses,  all of which are now in full force
and  effect.  The Company  agrees to  maintain  such  policies  (or  policies of
substantially  the same  nature) in full force and effect at all times until the
Effective  Time.  The  Company  Disclosure  Schedule  sets forth for the current
policy year and each other  policy year since  January 1996 (i) a summary of the
loss experience under each policy; (ii) a statement  describing each claim under
an insurance  policy;  and (iii) a statement  describing the loss experience for
all claims that were  self-insured,  including the number and aggregate  cost of
such claims.  Neither the Company nor any of its  Subsidiaries  has received any
refusal of coverage or any notice of reservation of rights.

          4.16  Intellectual  Property.  The Company and its Subsidiaries own or
possess  adequate  licenses or other  valid  rights to use all  patents,  patent
rights,  trademarks,  trademark rights and proprietary  information used or held
for use in  connection  with their  respective  businesses  as  currently  being
conducted,  except where the failure to own or possess  such  licenses and other
rights would not have,  individually  or in the  aggregate,  a Material  Adverse
Effect on the Company,  and there are no  assertions or claims  challenging  the
validity of any of the foregoing  which are likely to have,  individually  or in
the  aggregate,  a Material  Adverse  Effect on the Company.  The conduct of the
Company's  and its  Subsidiaries'  businesses  as currently  conducted  does not
conflict  with any  patents,  patent  rights,  licenses,  trademarks,  trademark
rights, trade names, trade name rights or copyrights of others in any way likely
to have,  individually  or in the  aggregate,  a Material  Adverse Effect on the
Company.  The  systems,  processes,  and computer  software  and hardware  used,
operated,  sold or licensed by the Company or its Subsidiaries  that is material
to its business or its internal  operations  is capable of providing or is being
or will be adapted,  or is capable of being replaced,  to provide  uninterrupted
millennium  functionality to record,  store,  process and present calendar dates
falling on or after  January 1, 2000 in  substantially  the same manner and with
substantially the same  functionality as such systems,  processes,  software and
hardware records,  stores, processes and presents such calendar dates falling on
or before December 31, 1999,  except as would not have a Material Adverse Effect
on the Company. The costs of the adaptations and replacements referred to in the
prior sentence will not have a Material Adverse Effect on the Company.

          4.17 Material  Contracts.  The Company  Disclosure  Schedule lists the
following  contracts  and other  agreements  to which the  Company or any of its
Subsidiaries is a party (other than  intercompany  arrangements)  as of the date
hereof (collectively, the "Company Contracts"):
(a) any agreement (or group of related  agreements) for the lease
          of  personal  property  to or from  any  person  providing  for  lease
          payments in excess of  $500,000  per annum and a term of more than one
          year;

               (b) any  agreement  (or  group  of  related  agreements)  for the
          purchase or sale of raw materials, commodities, supplies, products, or
          other personal property, or for the furnishing or receipt of services,
          the performance of which has a term more than six months, and involves
          consideration in excess of $500,000;

               (c) any partnership or joint venture agreement;

               (d) any agreement (or group of related agreements) under which it
          has created,  incurred,  assumed,  or guaranteed any  indebtedness for
          borrowed  money,  or any capitalized  lease  obligation,  in excess of
          $500,000,  or under which it has imposed a lien,  security interest or
          other  encumbrance on any of its assets,  tangible or  intangible,  to
          secure such indebtedness or obligations;

          (e) any agreement which purports to limit in any material  respect the
manner in which, or the localities in which,  all or any material portion of the
business of the Company and its  Subsidiaries,  taken as a whole,  or Parent and
its Subsidiaries, taken as a whole, is conducted;

          (f) any  agreement  with any of the  shareholders  of the  Company and
their  affiliates  relating  to  the  voting,  transfer  or  disposition  of the
Company's securities;

               (g) all turnkey and footage  drilling  contracts  and all daywork
          drilling contracts for amounts in excess of $2,000,000 or that are not
          terminable or subject to completion within 90 days;

               (h) any agency, representation or similar agreement;

               (i) any  agreement  for the  construction  or  modification  of a
          drilling  rig or  vessel  where  total  costs are  expected  to exceed
          $500,000;

               (j) any  agreement  having  any  "change in  control"  or similar
          provision;

               (k) any agreement  under which the  consequences  of a default or
          termination could have a Material Adverse Effect on the Company; and

          (l)  any  other  agreement  (or  group  of  related   agreements)  the
performance of which involves  consideration  in excess of $500,000,  other than
agreements entered into in the ordinary course.

There is no contract or agreement  that is material to the  business,  financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, that is not set forth in the Company Disclosure  Schedule.  Neither the
Company nor any of its  Subsidiaries  is in violation or default under (nor does
there exist any condition which upon the passage of time or the giving of notice
would cause a violation or default under) any Company Contract,  other than such
violations  or  defaults  as would  not have a  Material  Adverse  Effect on the
Company.  To the  knowledge  of the  Company,  none of the other  parties to the
Company  Contracts is in violation of or in default  under (nor does there exist
any condition which upon the passage of time or the giving of notice would cause
a violation or default under) any Company  Contract,  other than such violations
or defaults as would not have a Material Adverse Effect on the Company.

          4.18  Vessels.  All vessels  owned or chartered by the Company are set
out in the Company Disclosure Schedule (the "Vessels"). Except as set out in the
Company  Disclosure  Schedule,  each  of the  Vessels  is,  and  will  be at the
Effective Time, owned by the Company or one of its  Subsidiaries  free and clear
of all liens,  charges and rights of others and duly  documented  under the laws
and flag of the
U.S. entitling the Vessels to engage in the coastwise trade in the United States
and to  operate  on a  worldwide  basis in  support  of the  offshore  petroleum
industry.  Except as set out in the  Company  Disclosure  Schedule,  none of the
equipment  on board any of the  Vessels or held for use on any of the Vessels is
leased to the  Company or one of its  Subsidiaries.  All logs (deck and  engine)
shall be onboard the Vessels at the Effective Time.

          4.19 Brokers.  Other than Morgan Stanley & Co.  Incorporated  ("Morgan
Stanley"),  no broker, finder or investment banker is entitled to any brokerage,
finder's  or  other  fee or  commission  in  connection  with  the  transactions
contemplated by this Agreement based upon  arrangements  made by or on behalf of
the Company.  A copy of the Company's  engagement letter with Morgan Stanley has
been provided to Parent.

          4.20  Opinion of  Financial  Advisor.  The  Company has  received  the
opinion of Morgan  Stanley (a copy of which has been delivered to Parent) to the
effect that, as of the date of this Agreement, the Exchange Ratio is fair to the
holders of Company Common Stock from a financial point of view.

          4.21 Property.  The Company and each of the Subsidiaries,  as the case
may be,  have  sufficient  title or  leaseholds  to  property  to conduct  their
respective  businesses  as  currently  conducted  with only such  exceptions  as
individually or in the aggregate would not have a Material Adverse Effect on the
Company.

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

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

          4.24 Financial Condition.  As of December 31, 1998, the Company had at
least $30 million in cash or  short-term  investments  of a duration of not more
than seven days and no more than $174 million in funded debt.

                                    ARTICLE V
                                    COVENANTS

          5.1 Affirmative Covenants of the Company. The Company hereby covenants
and  agrees  that,  prior to the  Effective  Time,  unless  otherwise  expressly
contemplated by this Agreement or consented to in writing by Parent, the Company
will and will cause its Subsidiaries to:

          (a)  operate  its  business  only in the  usual  and  ordinary  course
consistent  with past practices and in compliance in all material  respects with
all applicable laws and regulations;

          (b) use its commercially  reasonable efforts to preserve substantially
intact its business  organizations,  maintain its rights and franchises,  retain
the  services of its  officers  and key  employees  and
maintain its material relationships with its customers, suppliers, creditors and
joint venture or other business partners;

          (c) use its commercially  reasonable  efforts to maintain and keep its
properties  and assets in as good repair and condition in all material  respects
as at present, ordinary wear and tear excepted; and

          (d) use its commercially  reasonable efforts to keep in full force and
effect  insurance  and bonds  comparable in amount and scope of coverage to that
currently maintained;

          provided,  however,  that, in the event the Company deems it necessary
to take certain  actions that would  otherwise be proscribed  by clauses  5.1(a)
through (c), the Company shall consult with Parent and Parent shall  consider in
good faith the  Company's  request  to take such  actions  and not  unreasonably
withhold its consent.

          5.2  Negative   Covenants   of  the   Company.   Except  as  expressly
contemplated by this Agreement,  as set forth in the Company Disclosure Schedule
or otherwise  consented to in writing by Parent, from the date of this Agreement
until the Effective Time, the Company will not directly or indirectly,  and will
not permit any of its  Subsidiaries  to  directly or  indirectly,  do any of the
following:

          (a) (i) increase the compensation payable to, or to become payable to,
any  director,  executive  officer  or  employee;  (ii) grant any  severance  or
termination  pay  (other  than in  accordance  with the  terms of the  severance
agreements  set forth on the  Company  Disclosure  Schedule,  as the same may be
amended  pursuant  to this  Agreement)  to,  or  enter  into any  employment  or
severance agreement with, any director, officer or employee; or (iii) establish,
adopt,  enter into,  amend or otherwise  increase,  or accelerate the payment or
vesting of the amounts payable under,  any employee  benefit plan or arrangement
except as may be required by applicable law;

          (b) declare or pay any dividend on, or make any other  distribution in
respect of,  outstanding  shares of capital  stock,  except for  dividends  by a
Subsidiary of the Company to the Company or another  wholly owned  Subsidiary of
the Company;

          (c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its Subsidiaries' capital stock or any securities or obligations  convertible
into or exchangeable  or exercisable for any shares of its or its  Subsidiaries'
capital stock including, but not limited to, options,  warrants and other rights
to acquire securities (other than any such acquisition  directly from any wholly
owned  Subsidiary of the Company in exchange for capital  contributions or loans
to such Subsidiary),  (ii) effect any recapitalization;  or (iii) split, combine
or reclassify any of its or its respective  Subsidiaries' capital stock or issue
or authorize or propose the issuance of any other  securities  in respect of, in
lieu of or in substitution  for,  shares of its or its respective  Subsidiaries'
capital stock;

          (d) (i) issue, deliver,  award, grant or sell, or authorize or propose
the  issuance,  delivery,  award,  grant  or sale  (including  the  grant of any
security interests, liens, claims, pledges or other encumbrances) of, any shares
of any class of its or its Subsidiaries' capital stock (including shares held in
treasury),  any securities  convertible  into or exercisable or exchangeable for
any other shares, or any rights, warrants or options to acquire, any such shares
(except for the issuance of shares upon the exercise of Company Stock Options or
pursuant  to  Incentive  Awards  outstanding  on the date of this  Agreement  in
accordance with their terms or issuances by any Subsidiary of the Company to the
Company or any other Subsidiary of the Company);  (ii) amend or otherwise modify
the terms of any such  rights,  warrants or options the effect of which shall be
to make such terms more  favorable to the holders  thereof  (including,  without
limitation,  declaring a "change of control" or similar  event  thereunder);  or
(iii) take any action to accelerate the vesting of any Company Stock Options;

          (e) acquire or agree to acquire,  by merging or consolidating with, by
purchasing an equity  interest  valued in excess of $1 million or portion of the
assets  (for a  purchase  price in  excess  of $1  million)  of, or by any other
manner,   any   corporation,   partnership,   association  or  other   business,
organization
or division (other than a wholly owned Subsidiary) thereof, or otherwise acquire
or agree to acquire any assets of any other  person  (other than the purchase of
assets  from  suppliers  or  vendors  in the  ordinary  course of  business  and
consistent  with past  practice)  which  are  material,  individually  or in the
aggregate, to the Company and its Subsidiaries, taken as a whole;

          (f) other than (i) dispositions or proposed  dispositions set forth on
the Company Disclosure Schedule,  (ii) as may be necessary or required by law to
consummate the  transactions  contemplated  hereby or (iii)  dispositions in the
ordinary course of business consistent with past practice not to exceed $150,000
individually or $1 million in the aggregate,  sell, lease,  exchange,  mortgage,
pledge,  transfer or otherwise  dispose of, or agree to sell,  lease,  exchange,
mortgage,  pledge,  transfer or otherwise dispose of, any of its material assets
or any material assets of any of the Company's Significant Subsidiaries;

          (g) propose or adopt any amendments to its Articles of  Incorporation,
as amended, or to its Bylaws;

          (h) (i) change any of its methods of  accounting in effect at December
31,  1997 or (ii) make or rescind  any  express or deemed  election  relating to
Taxes, settle or compromise any claim,  action,  suit,  litigation,  proceeding,
arbitration, investigation, audit or controversy relating to Taxes (except where
the  amount  of  such  settlements  or  controversies,  individually  or in  the
aggregate,  does not exceed $500,000), or change any of its methods of reporting
income or deductions  for federal income tax purposes from those employed in the
preparation  of the  federal  income  tax  returns  for the  taxable  year ended
December 31, 1997,  except,  in the case of clause (i) or clause (ii), as may be
required by law or GAAP;

          (i) (A) spend or commit to spend more than $2 million in the aggregate
on the purchase of new or used  equipment,  supplies  (including  drill pipe and
other capital  expenditures  not referred to in (ii) below)  (provided  that the
Company shall inform Parent prior to committing to make capital  expenditures in
excess of  $750,000  in the  aggregate),  except  for (i)  capital  expenditures
heretofore  approved by the  Company's  Board of Directors  and described in the
Company  Disclosure  Schedule;  and (ii)  sustaining  capital  expenditures  for
Company Equipment and Vessels in the ordinary course of business consistent with
past practice; or (B) except for draw downs on the existing working capital line
of  credit,   incur  any   obligation  for  borrowed  money  or  purchase  money
indebtedness,  whether or not  evidenced by a note,  bond,  debenture or similar
instrument,  except in the  ordinary  course of  business  consistent  with past
practice;

          (j) enter into any contract, agreement or other arrangement that would
have been  required to be  disclosed as a Company  Contract  had such  contract,
agreement or other arrangement been in effect on the date of this Agreement;

          (k) pay,  discharge or satisfy any claims,  liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the  payment,  discharge or  satisfaction  of any such  claims,  liabilities  or
obligations,  (x) in the ordinary  course of business and  consistent  with past
practice,  properly reflected or reserved against in, the consolidated financial
statements  (or the notes  thereto) as of and for the fiscal year ended December
31, 1997 of the Company and its  consolidated  Subsidiaries,  (y) incurred since
December 31, 1997 in the ordinary  course of business and  consistent  with past
practice or (z) which are legally  required to be paid,  discharged or satisfied
(provided that if such claims,  liabilities  or obligations  referred to in this
clause (z) are legally required to be paid and are also not otherwise payable in
accordance  with  clauses (x) or (y) above,  the Company  will notify  Parent in
writing if such claims,  liabilities or obligations  exceed,  individually or in
the aggregate, $250,000 in value, reasonably in advance of their pay ment);

          (l) (i) incur or assume any long-term  debt, or except in the ordinary
course of business,  incur or assume any short-term  indebtedness in amounts not
consistent  with past  practice;  (ii) assume,  guarantee,  endorse or otherwise
become liable or responsible  (whether directly,  contingently or otherwise) for
the  obligations of any other person,  except in the ordinary course of business
and  consistent  with past practice;  (iii) make any loans,  advances or capital
contributions  to, or  investments  in, any other
person  (other than to wholly  owned  Subsidiaries  of the Company or  customary
loans or advances to employees in accordance  with past practice or with respect
to Pool International Argentina S. A. not in an amount in excess of $2 million);
or (iv) enter into any material  commitment or transaction  (including,  but not
limited to, any borrowing,  capital  expenditure  or purchase,  sale or lease of
assets);

          (m)  take or  agree to take any  action  that  would or is  reasonably
likely to result in any of the  Company's  representations  and  warranties  set
forth in this  Agreement  being  untrue  as of the  Closing  Date  (unless  such
representations  and warranties speak as of an earlier date, in which case as of
such date) or in any of the conditions to the Merger not being satisfied; or

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

provided,  that,  in the event the Company  deems it  necessary  to take certain
actions  that would  otherwise  be  proscribed  by this Section 5.2, the Company
shall consult with Parent and Parent shall  consider in good faith the Company's
request to take such actions.

          5.3 Negative Covenants of Parent. Except as expressly  contemplated by
this  Agreement  or otherwise  consented to in writing by the Company,  from the
date of this Agreement until the Effective  Time,  Parent will not, and will not
permit Merger Sub to, do any of the following:

          (a) amend any of the material terms or provisions of the Parent Common
Stock;

          (b)  knowingly  take any  action  which  would  result in a failure to
maintain the trading of Parent Common Stock on the AMEX;

          (c) declare or pay any  dividends  or other  distribution  (whether in
cash, stock or other property) on outstanding shares of capital stock;

          (d)  take or  agree to take any  action  that  would or is  reasonably
likely  to  result  in any of  Parent's  or  Merger  Sub's  representations  and
warranties  set forth in this  Agreement  being  untrue as of the  Closing  Date
(unless such  representations  and  warranties  speak as of an earlier  date, in
which case as of such date) or in any of the  conditions to the Merger not being
satisfied; or

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

          5.4 Access and Information.  Subject to confidentiality  agreements to
which the Company or Parent or any of their respective  Subsidiaries is a party,
each of the Company and Parent shall,  and shall cause its  Subsidiaries to, (a)
afford to the other party and its officers, directors,  employees,  accountants,
consultants, legal counsel, agents and other representatives (collectively,  the
"Representatives")  reasonable  access at reasonable times upon reasonable prior
notice  to its  officers,  employees,  agents,  properties,  offices  and  other
facilities  and its  Subsidiaries  and to the books and records  thereof and (b)
furnish  promptly to the other party and its  Representatives  such  information
concerning   its  business,   properties,   contracts,   records  and  personnel
(including,  without  limitation,   financial,  operating  and  other  data  and
information)  as may be reasonably  requested,  from time to time, by such other
party. In connection with the foregoing, the Company hereby consents to Parent's
use of the  services  and  advice of  William J Myers from and after the date of
this  Agreement in  conducting  its inquiry into the business and affairs of the
Company.  Notwithstanding  the foregoing,  no party shall be required to provide
any  information  which it  reasonably  believes it may not provide to the other
party by reason of  applicable  law,  rules or  regulations,  which  constitutes
information protected by attorney/client  privilege,  or which it is required to
keep  confidential  by reason of contract or agreement with third  parties.  The
parties  hereto  will make  reasonable  and  appropriate  substitute  disclosure
arrangements  under  circumstances  in which the  restrictions  of the preceding
sentence apply. Each of Parent and the Company agrees that (i) it will, and will
cause its Representatives to, treat any information obtained hereunder in strict
accordance  with Section 5.6 and (ii) it will not, and will cause its respective
Representatives  not to, use any information  obtained  pursuant
to this  Section  5.4 for  any  purpose  unrelated  to the  consummation  of the
transactions contemplated by this Agreement. The Company shall permit Parent and
its  representatives to confirm, on reasonable notice and on the basis of agreed
methods, with the Company's and Subsidiaries'  principal vendors,  customers and
trade  affiliates,  that  the  acquisition  by  Parent  of the  Company  will be
acceptable  to such  vendors,  customers  and  trade  affiliates  and  that  the
acquisition  will  not  adversely  affect  the  relationship  of  such  vendors,
customers or trade affiliates with the Company or its Subsidiaries.  The Company
agrees  that such  access by Parent and its  representatives  shall  include the
right to perform a soil and  groundwater  analysis of any real  estate  owned or
leased by the Company or its  Subsidiaries  as Parent  shall deem  necessary  or
appropriate to determine  on-site  conditions and the presence or absence of any
hazardous materials,  provided,  however,  such analysis shall only be performed
after  good   faith   consultation   by  Parent   with  the   Company   and  its
Representatives.  In  connection  with such  environmental  investigations,  the
Company  will  provide to or make  available  for  inspection  by Parent and its
Representatives  (i) all  records  relating to the  disposal of waste  materials
generated at any real estate owned or leased by the Company or its Subsidiaries;
(ii) all  environmental  permits and records  relating to  compliance  with such
permits;  (iii)  all  records  of  spills or other  releases;  (iv) all  records
relating  to  employee  exposure  to  workplace  chemicals;   (v)  all  chemical
inventories  and  reports  of  chemical  emissions;  (viii)  all  correspondence
relating to pending or  threatened  environmental  claims;  and (ix) all records
obtained  from prior  owners or  operators of the real estate owned or leased by
the Company or its Subsidiaries relating to environmental conditions.

          5.5 No Solicitation.

          (a) Except as pursuant  this Section 5.5 or otherwise  consented to in
writing by Parent,  from and after the date of this Agreement  until the earlier
of the Effective Time or the date of termination of this Agreement in accordance
with its terms, the Company will not directly or indirectly, and will not permit
any of its  Subsidiaries,  or its  or  its  Subsidiaries'  directors,  officers,
employees,  representatives  and agents,  to, directly or indirectly,  initiate,
solicit or encourage (including by way of furnishing information or assistance),
or take any other action to  facilitate,  any Company  Acquisition  Proposal (as
defined below), or enter into discussions or negotiate with any person or entity
in furtherance of such Company Acquisition  Proposal, or enter into an agreement
with respect to any Company Acquisition  Transaction (as defined below) or agree
to or endorse any Company  Acquisition  Proposal,  or authorize or permit any of
the officers,  directors or employees of the Company or any of its  Subsidiaries
or any  investment  banker,  financial  advisor,  attorney,  accountant or other
representative  retained by the Company or any of its  Subsidiaries  to take any
such action,  and the Company  shall  notify  Parent of all terms of any Company
Acquisition  Proposal  received by the Company or any of its  Subsidiaries or by
any such officer,  director,  investment  banker,  financial advisor or attorney
within two business days after receipt thereof,  and if such inquiry or proposal
is in writing,  the Company  shall  deliver or cause to be delivered to Parent a
copy of such inquiry or proposal;  provided,  however, that nothing contained in
this  Agreement  shall  prohibit  the Board of Directors of the Company from (i)
complying  with Rule 14e-2  promulgated  under the Exchange Act with regard to a
Company Acquisition  Proposal;  or (ii) at any time prior to the satisfaction of
the  condition  set  forth in  Section  7.1(b),  furnishing  information  to, or
entering  into  discussions  or  negotiations  with,  any  person  or  entity in
connection with an unsolicited, bona fide, written Company Acquisition Proposal,
recommending the same to the Company's  shareholders or otherwise  communicating
with the Company's shareholders regarding such proposal in a manner permitted by
law,  if, and only to the extent that (A) the Board of Directors of the Company,
after  consultation  with legal counsel (which may include its regularly engaged
legal  counsel),  determines  in good faith that such action is required for the
Board of  Directors  of the  Company  to  comply  with its  fiduciary  duties to
shareholders  imposed by the TBCA and other  applicable  Texas law; (B) prior to
furnishing  such  information  to, or entering into  discussions or negotiations
with,  such person or entity the Company (x) provides two business days' written
notice to Parent to the effect that it is furnishing information to, or entering
into  discussions or  negotiations  with,  such person or entity and (y) obtains
from such person or entity a customary  confidentiality  agreement;  and (C) the
Board of Directors of the Company  determines in good faith (after  consultation
with its financial  advisor) that, in light of the  information  furnished to it
relating to such Company Acquisition Proposal is a Superior Proposal (as defined
below).  The  Company  will  immediately  cease and cause to be  terminated  any
existing  activities,  discussions or negotiations  with any parties  heretofore
conducted  which are  prohibited  pursuant to this Section  5.5(a).  The Company
agrees that it will take the necessary  steps to promptly inform the individuals
or entities  referred to in the first  sentence
of this Section 5.6(a) of the obligations undertaken in this Section 5.5(a).

          (b) "Company Acquisition  Proposal" means an inquiry or proposal which
relates to or contemplates a Company Acquisition Transaction.

          (c)  "Company  Acquisition  Transaction"  means  any of the  following
transactions:

               (i) any merger,  consolidation,  share exchange or other business
          combination  involving  the Company or any  Subsidiary  of the Company
          (other  than any such  arrangement  between the Company and any of its
          Subsidiaries or among any of its Subsidiaries);

               (ii) any sale,  exchange,  transfer or other disposition (whether
          in the form of an asset  sale,  merger  or  otherwise)  to any  person
          (other than Parent or any of its Subsidiaries) of properties or assets
          of the Company or any of its Subsidiaries  which constitute (i) all or
          substantially  all of the properties  and assets of the Company,  (ii)
          all  or  substantially  all  of  the  properties  and  assets  of  any
          Significant Subsidiary,  or a material division or other business unit
          of the Company or any Significant Subsidiary,  or (iii) properties and
          assets which are material to the business or operations of the Company
          at its Subsidiaries, taken as a whole;

               (iii) any tender  offer or  exchange  offer by any person  (other
          than the  Parent  or any of its  Subsidiaries)  for 15% or more of the
          outstanding shares of Company Common Stock; or

               (iv) any  acquisition  of shares of Company  Common  Stock by any
          person or group (other than Parent or any of its  Subsidiaries)  which
          would require an amendment,  waiver,  termination or alteration of the
          Company Rights Plan so that such acquisition  would not result in such
          person  becoming an "Acquiring  Person" under the terms of the Company
          Rights Plan.

          (d)  "Superior  Proposal"  means any Company  Acquisition  Proposal on
terms which,  if  consummated  pursuant  thereto,  the Board of Directors of the
Company  determines in good faith in the exercise of its fiduciary  duties to be
more favorable to the Company and its  shareholders  than the Merger taking into
account  such  factors  as the  Board  deems  relevant  (based  on advice of the
Company's financial advisor that the value of the consideration  provided for in
such proposal is superior to the value of the consideration  provided for in the
Merger),  for which  financing,  to the extent  required,  is then  committed or
which, in the good faith  reasonable  judgment of the Board of Directors,  after
receiving  advice from its financial  advisor,  is  reasonably  capable of being
financed by such third party.

          5.6  Confidentiality.  Between  the  date  of this  Agreement  and the
Effective  Time, the parties hereto will maintain in confidence,  and will cause
its Representatives to maintain in confidence, and not use to the detriment of a
party to this Agreement any information  obtained from a party to this Agreement
or its  Subsidiaries  in  connection  with this  Agreement  or the  transactions
contemplated  hereby  (regardless of whether such information was obtained prior
to, on or after the date of this  Agreement),  unless  (a) such  information  is
already  known to such  receiving  party  or to  others  not  bound by a duty of
confidentiality or such information  becomes publicly available through no fault
of such receiving party, (b) use of such information is necessary or appropriate
in making any filing or  obtaining  any  consent or  approval  required  for the
consummation of the  transactions  contemplated  hereby or (c) the furnishing or
use of such  information  is required by legal  proceedings or applicable law or
requirement of the AMEX. Upon any termination of this Agreement, each party will
return or  destroy  all  confidential  information  provided  to it by the other
party.

          5.7 Inspection of Vessels.  Parent shall have the right to inspect the
Vessels at any reasonable  time and from time to time prior to the Closing Date,
provided  that such  inspection  shall be  conducted  in a manner  that does not
unreasonably  interfere with the operation of the Vessels.  Any such  inspection
may include the opening up of machinery and equipment  and, at Parent's  option,
may be conducted by drydocking  any Vessel  (subject to obtaining the consent of
the user of such Vessel).  The Company shall keep Parent advised of the location
and whereabouts of each Vessel to facilitate such an
inspection.

          5.8 Company  Rights Plan.  Except for the amendments  contemplated  by
this  Agreement or  amendments  approved in writing by Parent,  the Company will
not, following the date of this Agreement,  amend the Company Rights Plan in any
manner. In addition the Company covenants and agrees that it will not redeem the
Company Rights unless such redemption is consented to in writing by Parent prior
to such redemption.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

          6.1 Meetings of Shareholders.

          (a) The Company shall  promptly  after the date of this Agreement take
all action  necessary  in  accordance  with  applicable  law and its Articles of
Incorporation,  as amended,  and Bylaws, as amended, to convene a meeting of its
shareholders  to consider and vote upon the approval of this  Agreement  and the
Merger,  and the Company  shall  consult  with Parent in  connection  therewith;
provided  that the Company  shall use its  reasonable  best  efforts to hold the
special  meeting  of  shareholders  within 40 days  after  effectiveness  of the
Registration Statement (as defined in Section 6.2(a)). The Company,  through its
Board of Directors,  shall  recommend  approval of such matters,  subject to the
terms and conditions set forth in Section 5.5. The Company, through its Board of
Directors, shall vote the 769,231 shares of Company Common Stock subject to that
certain Voting Agreement dated as of March 31, 1998,  between the Company and Al
A. Gonsoulin in favor of this Agreement and the Merger.

          (b) If  required,  Parent  shall  promptly  after  the  date  of  this
Agreement take all action  necessary in accordance  with  applicable law and its
Restated Certificate of Incorporation and Bylaws to convene a special meeting of
its stockholders to consider and vote on the Parent  Stockholder  Authorization;
and Parent  shall  consult  with the Company in  connection  therewith.  Parent,
through  its  Board  of  Directors,  shall  recommend  approval  of  the  Parent
Stockholder Authorization.

          6.2 Registration Statement; Proxy Statement

          (a) Parent  promptly shall prepare and shall file with the SEC and the
AMEX a  registration  statement  on Form  S-4  under  the  Securities  Act  (the
registration  statement,   together  with  the  amendments  thereto,  being  the
"Registration   Statement"),   containing  a  proxy   statement/prospectus,   in
connection with the  registration of the Parent Common Stock to be issued in the
Merger.  The  Company  promptly  shall  prepare  and  file  with the SEC a proxy
statement  that will be the same  proxy  statement/prospectus  contained  in the
Registration  Statement,  and a form of proxy with respect to the meeting of the
shareholders  of the  Company  in  connection  with  the  Merger  and the  other
transactions  contemplated by this Agreement  (such proxy  statement/prospectus,
together with any amendments thereof or supplements thereto, in each case in the
form or forms mailed to such shareholders, being the "Proxy Statement"). Each of
Parent and the Company shall use its best efforts to (i) cause the  Registration
Statement to become  effective as promptly as practicable  after such filing and
(ii) cause the Proxy  Statement to be mailed to  shareholders  of the Company at
the earliest practicable date. Parent shall take any action required to be taken
under any applicable  federal or state  securities  laws in connection  with the
issuance of shares of Parent Common Stock in the Merger.  Each of Parent and the
Company  shall  furnish  all  information  concerning  it and the holders of its
capital  stock as the other  may  reasonably  request  in  connection  with such
actions. As promptly as practicable after the Registration  Statement shall have
become   effective,   the  Company  shall  mail  the  Proxy   Statement  to  its
shareholders.  The Proxy Statement shall include the unanimous recommendation of
the Board of  Directors  of the  Company in favor of the  Merger  subject to the
terms and conditions set forth in Section 5.5.

          (b) The  information  supplied  by the Company  for  inclusion  in the
Registration  Statement  shall not, at the time the  Registration  Statement  is
declared  effective,  contain any untrue statement of a material fact or omit to
state any material fact  required to be stated  therein or necessary in order to
make
the statements therein not misleading.  The information  supplied by the Company
for inclusion in the Proxy Statement to be sent to the Company's shareholders in
connection with the special meeting of shareholders to consider the Merger shall
not, at the date the Proxy  Statement  (or any  amendment  thereof or supplement
thereto)  is  first  mailed  to  shareholders,   at  the  time  of  the  special
shareholders'  meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or  necessary  in order  to make the  statements  therein,  in the  light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event or  circumstance  relating to the Company or any of
its  affiliates,  or its or their  respective  officers or directors,  occurs or
exists which should be set forth in an amendment to the  Registration  Statement
or a supplement to the Proxy Statement, the Company shall promptly inform Parent
and the Company shall cooperate with Parent in the prompt filing with the SEC of
any  necessary   amendment  or  supplement  to  the  Proxy   Statement  and  the
Registration Statement and, as required by law, in disseminating the information
contained in such  amendment or supplement to the  shareholders  of the Company.
All  documents  that the  Company  is  responsible  for  filing  with the SEC in
connection with the transactions  contemplated herein will comply as to form and
substance in all  material  respects  with the  applicable  requirements  of the
Securities Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder.

          (c)  The   information   supplied  by  Parent  for  inclusion  in  the
Registration  Statement  shall not, at the time the  Registration  Statement  is
declared  effective,  contain any untrue statement of a material fact or omit to
state any material fact  required to be stated  therein or necessary in order to
make the statements therein not misleading.  The information  supplied by Parent
for inclusion in the Proxy Statement to be sent to the Company's shareholders in
connection  with the special  shareholders'  meeting  shall not, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to  shareholders,  at the time of the meeting or at the Effective Time,  contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in the light of the  circumstances  under  which  they are  made,  not
misleading.   If  at  any  time  prior  to  the  Effective  Time  any  event  or
circumstances relating to Parent or any of its respective affiliates,  or to its
or their respective officers or directors,  occurs or exists which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement,  Parent shall promptly  inform the Company and Parent shall cooperate
with the Company in the prompt filing with the SEC of any necessary amendment or
supplement  to the  Proxy  Statement  and the  Registration  Statement  and,  as
required by law, in disseminating the information contained in such amendment or
supplement to the  shareholders  of the Company.  All  documents  that Parent is
responsible  for  filing  with  the  SEC  in  connection  with  the  transaction
contemplated  herein  will  comply  as to form  and  substance  in all  material
respects with the  applicable  requirements  of the Securities Act and the rules
and  regulations  thereunder and the Exchange Act and the rules and  regulations
thereunder.

          (d) (i) The Company  shall use its  reasonable  efforts to cause to be
delivered  to Parent a letter of Deloitte & Touche LLP dated as of a date within
five business  days before the date on which the  Registration  Statement  shall
become  effective  and  addressed  to  Parent in form and  substance  reasonably
satisfactory  to Parent  and  customary  in scope and  substance  for  "comfort"
letters  delivered  by  independent   public   accountants  in  connection  with
registration  statements  and  proxy  statements  similar  to  the  Registration
Statement and Proxy Statement;  and (ii) Parent shall use its reasonable efforts
to cause to be delivered to the Company a letter of  PricewaterhouseCoopers  LLP
dated as of a date  within  five  business  days  before  the date on which  the
Registration  Statement  shall become  effective and addressed to the Company in
form and substance reasonably satisfactory to the Company and customary in scope
and substance for "comfort" letters delivered by independent  public accountants
in connection with registration  statements and proxy statements  similar to the
Registration Statement and Proxy Statement.

          6.3 Appropriate Action; Consents; Filings.

          (a) The Company and Parent each shall use its reasonable  best efforts
to (i) take, or cause to be taken, all appropriate  action,  and do, or cause to
be done,  all things  necessary,  proper or advisable  under  applicable  law or
otherwise to consummate and make effective the transactions contemplated by this
Agreement;  (ii) obtain the Parent Required  Approvals and the Company  Required
Approvals;  and (iii) make all necessary filings,  and thereafter make any other
required  submissions,  with respect to this  Agreement and the Merger  required
under (A) the  Securities  Act (in the case of Parent) and the  Exchange Act and
the rules and regulations thereunder,  and any other applicable federal or state
securities laws, (B) the HSR Act and (C) any other applicable law; provided that
Parent and the Company shall  cooperate  with each other in connection  with the
making of all such filings,  including providing copies of all such documents to
the  non-filing  party and its  advisors  prior to  filing  and,  if  requested,
accepting all reasonable additions, deletions or changes suggested in connection
therewith;  and provided,  further,  that, unless otherwise agreed by Parent, in
its sole  discretion,  the  reasonable  efforts of Parent  shall not include (a)
proffering Parent's willingness to accept an order providing for the divestiture
of such of the properties,  assets, operations or business of the Company or any
of its Subsidiaries (or, in lieu thereof, such properties, assets, operations or
business of Parent or any of Parent's affiliates) as are necessary to permit the
consummation of the  transactions  contemplated by this Agreement,  including an
offer to hold separate such properties, assets, operations or businesses pending
any such divestiture,  (b) proffering  Parent's  willingness to accept any other
conditions, restrictions, limitations or agreements affecting the full rights of
ownership  of the  Company's or any of its  Subsidiary's  assets (or any portion
thereof) as may be  necessary  to permit the  consummation  of the  transactions
contemplated by this Agreement or (c) entering into or continuing any litigation
relating to this Agreement or the transactions  contemplated hereby. The Company
and Parent shall furnish all  information  required for any application or other
filing to be made pursuant to the rules and  regulations  of any  applicable law
(including all  information  required to be included in the Proxy  Statement and
the Registration Statement) in connection with the transactions  contemplated by
this  Agreement.  If (x) necessary  approvals  under the HSR Act are conditioned
solely upon Parent taking one or more actions  described in clauses (a), (b) and
(c) of this Section  6.3(a),  which  condition may not be waived,  appealed,  or
modified,  (y)  Parent  has  conclusively  decided  not to take  such  action or
actions,  and (z) the Company has fulfilled its  obligations  under this Section
6.3(a),  then  Parent  shall  notify the  Company of its intent not to take such
action or actions (the "HSR Act Termination Notice").  Delivery by Parent to the
Company of the HSR Act  Termination  Notice  shall  constitute  a failure of the
condition contained in Section 7.1(e) of this Agreement.

               (b) (i) Each of the Company and Parent shall give (or shall cause
          each of their  respective  Subsidiaries  to give) any notices to third
          parties,   and  shall  use,   and  cause  each  of  their   respective
          Subsidiaries  to use, its reasonable  best efforts to obtain any third
          party  consents (A)  necessary,  proper or advisable to consummate the
          transactions contemplated in this Agreement, (B) disclosed or required
          to be  disclosed  in the  Company  Disclosure  Schedule  or the Parent
          Disclosure  Schedule,  (C)  otherwise  required  under any  contracts,
          licenses,   leases  or  other   agreements  in  connection   with  the
          consummation of the transactions  contemplated  herein or (D) required
          to prevent a Company  Material  Adverse Effect from occurring prior to
          or after the Effective Time or a Parent  Material  Adverse Effect from
          occurring  after the Effective  Time.  Without in any way limiting the
          foregoing,  each of the Company and Parent agrees to use  commercially
          reasonable efforts to maintain the business  relationship and goodwill
          of Petroserv  and to obtain an  amendment  to the Saudi Joint  Venture
          Agreement  or  other  arrangement  so that  (A) the  operation  in the
          Kingdom of Saudi Arabia of Pool Arabia, Ltd. and Nadrico Saudi Company
          Limited,  immediately after the Effective Time, will not be materially
          adversely  affected  by the  Merger  and (B)  the  change  in  control
          provisions thereof will not be triggered as a result of the Merger.

               (ii) In the event  that  either  party  shall  fail to obtain any
          third party consent described in Section  6.3(b)(i),  such party shall
          use its  reasonable  best  efforts,  and shall  take any such  actions
          reasonably  requested  by the other  party  hereto,  to  minimize  any
          adverse  effect  upon  the  Company  and  Parent,   their   respective
          Subsidiaries,  and their  respective  businesses  resulting,  or which
          could  reasonably be expected to result after the Effective Time, from
          the failure to obtain such consent.

          6.4 Tax Treatment; Affiliates.

          (a) From and after the date hereof and until the Effective  Time, none
of Parent,  the Company or any of their respective  Subsidiaries shall knowingly
(i) take any action, or fail to take any reasonable action, as a result of which
the  Merger  would fail to qualify  as a  reorganization  within the
meaning  of  Section  368(a)  of the  Code  or (ii)  enter  into  any  contract,
agreement,  commitment or  arrangement  to take or fail to take any such action.
Each of the parties shall use its reasonable  best efforts to obtain the opinion
of counsel referred to in Section 7.1(d).

          (b) The Company  shall use its best  efforts to obtain from any person
who may be deemed to have become an affiliate  of the Company  after the date of
this  Agreement  and on or  prior  to the  Effective  Time a  written  agreement
substantially in the form of Exhibit 6.4 as soon as practicable  after attaining
such status.

          (c) The Company shall deliver to Parent a statement dated no more than
30 days prior to the  Effective  Time in form and  substance  as is described in
Treas. Reg. Section 1.1445-2(c)(3)(i).

          6.5 Public  Announcements.  Parent and the Company will agree upon the
timing and  content of the initial  press  release to be issued  describing  the
transactions  contemplated  by this  Agreement,  and will  not  make any  public
announcement  thereof prior to reaching such agreement  unless required to do so
by  applicable  law or  regulation.  Thereafter,  unless  otherwise  required by
applicable law or stock exchange  requirements  (and in that event, only if time
does not permit),  Parent and the Company  shall  consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Merger or the Stock Option  Agreement  and shall not issue any such press
release or make any such public statement prior to such consultation.

          6.6 AMEX  Listing.  Parent  shall  use its best  efforts  to cause the
shares of Parent  Common  Stock to be issued in the  Merger to be  approved  for
listing on the AMEX prior to the Effective Time.

          6.7 Indemnification of Directors and Officers.

          (a)  The  Articles  of  Incorporation  and  Bylaws  of  the  Surviving
Corporation  shall contain the provisions  with respect to  indemnification  set
forth in Exhibit 1.4A and Exhibit 1.4B,  which  provisions shall not be amended,
repealed or  otherwise  modified  for a period of six years after the  Effective
Time in any  manner  that  would  adversely  affect  the  rights  thereunder  of
individuals  who at any time  prior to the  Effective  Time  were  directors  or
officers of the Company in respect of actions or omissions occurring at or prior
to  the  Effective  Time  (including,   without  limitation,   the  transactions
contemplated  by this  Agreement),  unless  such  modification  is  required  by
applicable law.  Parent  covenants and agrees that, from and after the Effective
Time, it will cause the Surviving  Corporation to perform its obligations  under
the   Indemnification   Agreements   between  the  Company  and  its   directors
substantially  in the form  filed as  Exhibit  10.1 to the  Company's  Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998.

          (b) For a period  of six  years  following  the  Effective  Time,  the
Surviving  Corporation and Parent (each, an "Indemnifying  Party") shall jointly
and  severally  indemnify,  defend  and hold  harmless  the  present  and former
officers and directors of the Company or any of its Subsidiaries  (collectively,
the  "Indemnified  Parties")  against all  losses,  expenses,  claims,  damages,
liabilities  or amounts  that are paid in  settlement  of (with the  approval of
Parent and the Surviving  Corporation  (which approval shall not unreasonably be
withheld or delayed)), or otherwise in connection with, any threatened or actual
claim, action, suit, proceeding or investigation (a "Claim"),  based in whole or
in part on the fact that such  person is or was a  director  or  officer  of the
Company or any of its  Subsidiaries  and  arising  out of  actions or  omissions
occurring at or prior to the Effective Time (including,  without limitation, the
transactions  contemplated by this  Agreement),  in each case to the full extent
permitted   under  the  TBCA  (and  shall  pay  expenses   (including  fees  and
disbursements of counsel),  as incurred,  in advance of the final disposition of
any such action or proceeding to each  Indemnified  Party to the fullest  extent
permitted  under the  TBCA,  upon  receipt  from the  Indemnified  Party to whom
expenses are advanced of the undertaking to repay such advances  contemplated by
the TBCA).

          (c) Without limiting the foregoing,  in the event any Claim is brought
against any  Indemnified  Party  (whether  arising before or after the Effective
Time)  after the  Effective  Time (i) the  Indemnified  Parties  may  retain the
Company's  regularly  engaged  independent  legal counsel,  or other independent
legal  counsel  satisfactory  to them  provided that such other counsel shall be
reasonably
acceptable to the Surviving  Corporation,  (ii) the  Indemnifying  Parties shall
jointly and severally pay all  reasonable  fees and expenses of such counsel for
the Indemnified  Parties promptly as statements  therefor are received and (iii)
the Indemnifying Parties will use their reasonable best efforts to assist in the
vigorous defense of any such matter,  provided that no Indemnifying  Party shall
be liable for any settlement of any Claim effected  without its written consent,
which consent shall not be  unreasonably  withheld or delayed.  Any  Indemnified
Parties wishing to claim  indemnification  under this Section 6.7, upon learning
of any such Claim,  shall notify the Indemnifying  Parties (although the failure
so to notify the Indemnifying Parties shall not relieve the Indemnifying Parties
from any liability  which the  Indemnifying  Parties may have under this Section
6.7 except to the extent such failure prejudices the Indemnifying  Parties), and
shall,  if  requested,  deliver  to the  Indemnifying  Parties  the  undertaking
contemplated by the TBCA. The Indemnified  Parties as a group may retain one law
firm (in addition to local  counsel) to represent them with respect to each such
matter unless there is, under applicable  standards of professional  conduct (as
determined by counsel to the Indemnified Parties), a conflict on any significant
issue between the  positions of any two or more  Indemnified  Parties,  in which
event,  such  additional  counsel  as may be  required  may be  retained  by the
Indemnified Parties.

          (d)  Commencing at the Effective  Time,  the directors and officers of
the Surviving  Corporation  shall be insured under the policies of directors and
officers insurance currently or hereafter maintained by Parent. In addition, for
a period of six years after the Effective  Time,  Parent shall use  commercially
reasonable  efforts to maintain in effect the current policies of directors' and
officers'  liability  insurance  maintained by the Company and its  Subsidiaries
(provided  that  Parent may  substitute  therefor  policies of at least the same
coverage  and  amounts  containing  terms that are no less  advantageous  in any
material  respect to the persons covered thereby) with respect to claims arising
from facts or events which  occurred  before the Effective  Time;  provided that
Parent  shall not be required to pay an annual  premium  for such  insurance  in
excess of two times the last annual  premium  paid by the  Company  prior to the
date hereof,  but in such case shall  purchase as much  coverage as possible for
such amount.

          (e) This  Section  6.7 is intended to be for the benefit of, and shall
be  enforceable   by,  the  Indemnified   Parties,   their  heirs  and  personal
representatives  and shall be binding on  Parent,  Merger Sub and the  Surviving
Corporation and their  representative  successors and assigns. No termination or
modification of the obligations of the  Indemnifying  Parties under this Section
6.7  that  adversely  affects  the  rights  of any  Indemnified  Party  shall be
effective  against  such  Indemnified  Party  without  his or her prior  written
consent.

          (f) The rights granted to the Indemnified  Parties  hereunder shall be
in addition to, and not in limitation of, any other rights that the  Indemnified
Parties may have by contract, the TBCA, or otherwise.

          (g) In the event  Parent,  the Surviving  Corporation  or any of their
respective  successors or assigns (i) consolidates with or merges into any other
person and shall not be the  continuing  or surviving  corporation  or entity in
such  consolidation or merger or (ii) transfers all or substantially  all of its
properties  and  assets to any  person,  then and in either  such  case,  proper
provision  shall be made so that the  successors  and  assigns  of Parent or the
Surviving  Corporation,  as the case may be,  shall assume the  obligations  set
forth in this Section 6.7.

          6.8  Agreement  to  Defend.  In the event  any  claim,  action,  suit,
investigation or other  proceeding by any  governmental  body or other person or
other  legal or  administrative  proceeding  is  commenced  that  questions  the
validity or legality of the transactions contemplated hereby or seeks damages in
connection  therewith,  whether before or after the Effective  Time, the parties
hereto agree to cooperate and use their reasonable efforts to defend against and
respond thereto.

          6.9 Obligations of Merger Sub. Parent shall take all action  necessary
to cause  Merger  Sub to  approve  and  adopt  the  Agreement,  to  perform  its
obligations  hereunder and to consummate  the Merger on the terms and conditions
set forth in this Agreement.
6.10  Accounting  for Merger.  The Merger shall be accounted for under
the purchase method.

          6.11 Takeover Statutes.  If any "fair price",  "moratorium",  "control
share  acquisition"  or other form of  antitakeover  statute or  regulation  (in
addition  to  Part  Thirteen  of  the  TBCA)  shall  become  applicable  to  the
transactions contemplated hereby, each of Parent and the Company and the members
of their respective Boards of Directors shall grant such approvals and take such
actions as are reasonably necessary so that the transactions contemplated hereby
may be consummated as promptly as practicable on the terms  contemplated  hereby
and  otherwise  act to  eliminate  or minimize  the  effects of such  statute or
regulation on the transactions contemplated hereby.

          6.12 Board of Directors of Parent. At the Effective Time, the Board of
Directors of Parent shall be expanded to add one  additional  member to Class I,
which member shall be designated  by mutual  agreement of Parent and the Company
from the current independent members of the Company's Board of Directors. If the
individual so selected consents to serve as a director, such individual shall be
elected as a director of Parent,  effective as of the Effective Time, for a term
expiring at Parent's next annual meeting of shareholders following the Effective
Time at which  the term of the class to which  such  director  belongs  expires,
subject to being  renominated  as a director at the discretion of Parent's Board
of Directors.

          6.13 Transition  Employment.  The Surviving Corporation shall continue
to employ five (the  "Transition  Employees")  of the persons  listed on Exhibit
6.13 for a period of between three and nine months after the Effective Time at a
salary for each  Transition  Employee equal to two times his current annual base
salary on the date of this  Agreement,  pro  rated  for the  number of days such
person is so employed.  Parent shall select the Transition Employees in its sole
discretion, and shall notify the Company at least 20 days prior to the Effective
Time of the names of the Transition Employees selected by Parent. In the event a
person  listed on Exhibit 6.13 leaves his  employment  with the Company prior to
the  Effective  Time or any such  Transition  Employee  notifies  Parent and the
Company  prior to the  Effective  Time  that he is  unwilling  to  continue  his
employment  with  the  Surviving   Corporation,   the  Company  shall  have  the
opportunity  to  provide  the  name  of a  substitute  employee  having  similar
credentials and experience for Parent to consider.

          6.14 Additional Agreements. Subject to the terms and conditions herein
provided,  each of the parties  hereto agrees to use all  reasonable  efforts to
take,  or cause to be taken,  all  action  and to do,  or cause to be done,  all
things necessary,  proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement.

          6.15  Notification of Certain  Matters.  The Company shall give prompt
notice to Parent and Parent shall give prompt notice to the Company,  of (i) the
occurrence,  or non-occurrence of any event the occurrence, or non-occurrence of
which would cause any  representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect (unless such  representation  or
warranty is qualified by materiality in which case notice shall be given if such
representation  or warranty  would become untrue or inaccurate in any respect as
so qualified) at or prior to the Effective Time and (ii) any material failure of
the  Company  or  Parent,  as the case may be, to  comply  with or  satisfy  any
covenant,  condition  or  agreement  to be  complied  with  or  satisfied  by it
hereunder;  provided,  however, that the delivery of any notice pursuant to this
Section  6.16  shall  not  limit or  otherwise  affect  the  remedies  available
hereunder to the party receiving such notice.

          6.16  Post-Closing  Employee  Benefits.   After  the  Effective  Time,
employees of the Surviving Corporation and its Subsidiaries shall be entitled to
benefits that are comparable to those in effect from time to time  applicable to
comparably  located and situated  employees of Parent and its  Subsidiaries  and
each  employee  shall be  entitled  to  receive
severance on the same basis as  currently  applies to employees of Parent or its
Subsidiaries. For all purposes other than benefit plan accrual,  post-retirement
medical plans and vacation policies,  employees of the Surviving Corporation and
its  Subsidiaries  shall  be  credited  for  service  with the  Company  and its
Subsidiaries  and each  employee  shall be entitled to receive  severance on the
same basis as currently applies to employees of Parent or its Subsidiaries.  For
purposes of this Section 6.16,  employees of the Surviving  Corporation  and its
Subsidiaries,  (i)  shall  not  include  persons  (a)  subject  to a  collective
bargaining  agreement,  (b) on  long-term  disability  (which  persons  shall be
terminated  prior to the  Effective  Time) or (c) on  short-term  disability  in
excess of 90 days (which  persons  shall be  terminated  prior to the  Effective
Time) but (ii) shall include any employee on short-term disability for less than
90 days,  absent as a result of a workers'  compensation  claim or on authorized
leave (such as  maternity,  military,  family and  medical  leave or other leave
where return to work is subject to statutory requirements).  Notwithstanding the
foregoing, in no respect shall this Section 6.16 be interpreted to provide for a
duplication of benefits.

          6.17 Parent Stockholder Authorization.  Each of Parent, Merger Sub and
the Company agrees that, in the event the Parent Stockholder Authorization shall
be  required  in  connection  with the  Merger,  such  parties  shall amend this
Agreement to provide that (a)  obtaining  the Parent  Stockholder  Authorization
shall be a condition to each party's  obligation to consummate  the Merger,  (b)
either Parent or the Company shall have a right to terminate  this  Agreement if
the  required  Parent  Stockholder  Authorization  is not  obtained at a special
meeting of Parent  stockholders held for that purpose,  (c) Parent shall pay the
Company a fee of $1 million,  plus all actual,  documented Third Party Costs (as
defined in Section 8.5(b)), at the time of a termination  pursuant to clause (b)
of this Section 6.17,  in cash by wire transfer to an account  designated by the
Company and (d) Parent shall have the equivalent obligations with respect to its
special meeting of stockholders  and the proxy statement  related thereto as the
Company to the extent relevant.

                                   ARTICLE VII
                               CLOSING CONDITIONS

          7.1 Conditions to Obligations of Each Party Under this Agreement.  The
respective  obligations  of each  party  to  effect  the  Merger  and the  other
transactions  contemplated  herein  shall be subject to the  satisfaction  at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:

          (a)  Effectiveness  of the  Registration  Statement.  The Registration
Statement  shall have been  declared  effective by the SEC under the  Securities
Act. No stop order suspending the  effectiveness  of the Registration  Statement
shall have been issued by the SEC and no proceedings for that purpose shall have
been initiated by the SEC.

          (b) Shareholder Approval.  The Company Shareholder Approval shall have
been obtained and, if required, the Parent Stockholder  Authorization shall have
been obtained.

          (c) No Order.  No  governmental  entity or federal  or state  court of
competent  jurisdiction  shall have enacted,  issued,  promulgated,  enforced or
entered any statute,  rule, regulation,  executive order, decree,  injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the  effect of making  the Merger  illegal  or  otherwise  prohibiting
consummation of the Merger.

          (d) Tax  Opinions.  The Company  shall have received an opinion of its
tax counsel and Parent shall have  received an opinion of its tax counsel,  each
dated as of the Closing Date,  substantially  to the effect that the Merger will
qualify as a  reorganization  within the meaning of Section  368(a) of the Code.
The issuance of such opinions shall be conditioned  upon the receipt by such tax
counsel of customary representation letters from each of the Company, Parent and
Merger Sub, in each case, in form and substance reasonably  satisfactory to such
tax counsel. The specific provisions of each such representation letter shall be
in form and substance reasonably satisfactory to such tax counsel, and each such
representation  letter  shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect.

          (e) HSR Act.  The  applicable  waiting  period under the HSR Act shall
have expired or been terminated.
(f) AMEX. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on the AMEX, subject to notice of issuance.

          7.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations  of  Parent  to  effect  the  Merger  and  the  other   transactions
contemplated in this Agreement,  unless  otherwise  waived in writing,  are also
subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
of the Company  contained in this Agreement  shall be true and correct when made
and on and as of the  Effective  Time as if made on and as of such date,  except
where failure to be so true and correct would not have a Material Adverse Effect
on the  Company,  and except that those  representations  and  warranties  which
address matters only as of a particular date shall remain true and correct as of
such date,  except where the failure to be so true and correct  would not have a
Material  Adverse  Effect on the  Company.  Solely for  purposes of this Section
7.2(a) and in determining  compliance with the conditions set forth herein,  any
representation  and warranty made by the Company in this Agreement shall be read
and  interpreted  as  if  the  qualification  stated  therein  with  respect  to
materiality  or the Material  Adverse  Effect on the Company were not  contained
therein.  Parent  shall have  received a  certificate  of the  President  of the
Company to such effect.

          (b)  Agreements  and  Covenants.  The Company shall have  performed or
complied in all material respects with all agreements and covenants  required by
this  Agreement  to be  performed  or  complied  with by it on or  prior  to the
Effective  Time.  Parent shall have received a  certificate  of the President or
Chief Financial Officer of the Company to such effect.

          (c) Affiliate Agreements.  The affiliate agreements to be entered into
prior to the Effective  Time, as  contemplated  by Section 6.4, shall be in full
force and effect.

          (d) Company Material Adverse Effect. Since the date of this Agreement,
there shall not have  occurred any Material  Adverse  Effect or  combination  of
state of facts, events,  changes or effects that has had, or would reasonably be
expected to have, a Material Adverse Effect on the Company.

          (e) Saudi Joint Venture.  The Saudi Joint Venture Agreement shall have
been amended or other  arrangement  shall be made prior to the Effective Time so
that, as of and after the Effective Time,  Parent shall be reasonably  satisfied
in its good faith judgment that the operations of Pool Arabia,  Ltd. and Nadrico
Saudi Company  Limited will not be materially  adversely  affected by the Merger
and that the Merger shall not result in a change in control of Pool Arabia, Ltd.
under the provisions of the Saudi Joint Venture Agreement.

          7.3  Additional   Conditions  to  Obligations  of  the  Company.   The
obligation  of the  Company  to effect  the  Merger  and the other  transactions
contemplated  in this Agreement,  unless  otherwise  waived in writing,  is also
subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this  Agreement  shall be true and correct
when made and on and as of the Effective Time as if made on and as of such date,
except  where the  failure to be so true and  correct  would not have a Material
Adverse Effect on Parent, and except that those  representations  and warranties
which address matters only as of a particular date shall remain true and correct
as of such date,  except  where the failure to be so true and correct  would not
have a Material  Adverse  Effect on Parent.  Solely for purposes of this Section
7.3(a) and in determining  compliance with the conditions set forth herein,  any
representation  and warranty made by the Parent in this Agreement  shall be read
and  interpreted  as  if  the  qualification  stated  therein  with  respect  to
materiality or Material Adverse Effect on Parent were not contained therein. The
Company  shall have  received a  certificate  of the President of Parent to such
effect.

          (b) Agreements and Covenants. Each of Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this  Agreement to be
performed or complied with by such party on or prior to the Effective  Time. The
Company shall have received a certificate  of the President of Parent and Merger
Sub to that effect.

          (c) Parent Material Adverse Effect.  Since the date of this Agreement,
there shall not have  occurred any Material  Adverse  Effect or  combination  of
state of facts, events,  changes or effects that has had, or would reasonably be
expected to have, a Material Adverse Effect on Parent.

                                  ARTICLE VIII
                        TERMINATION, AMENDMENT AND WAIVER

          8.1 Termination.

          (a)  This  Agreement  may be  terminated  at  any  time  prior  to the
Effective  Time,  whether  before or after  approval of this  Agreement  and the
Merger by the shareholders of the Company, only in the following ways:

               (i) by mutual written consent of Parent and the Company;

               (ii) by Parent, upon a breach of any covenant or agreement on the
          part  of  the  Company  set  forth  in  this  Agreement,   or  if  any
          representation  or  warranty  of the  Company  shall be or shall  have
          become  untrue,  in either case such that the  conditions set forth in
          Section   7.2(a)  or  Section   7.2(b)   would  not  be  satisfied  (a
          "Terminating  Company  Breach"),  provided  that if  such  Terminating
          Company  Breach is curable by the Company  through the exercise of its
          reasonable  best  efforts and for so long as the Company  continues to
          exercise such reasonable  best efforts,  Parent may not terminate this
          Agreement under this Section 8.1(a)(ii);

               (iii) by the Company,  upon a breach of any covenant or agreement
          on the part of Parent or Merger Sub set forth in this Agreement, or if
          any  representation  or  warranty  of Parent or Merger Sub shall be or
          shall have become untrue,  in either case such that the conditions set
          forth in Section  7.3(a) or Section  7.3(b)  would not be satisfied (a
          "Terminating Parent Breach"), provided that if such Terminating Parent
          Breach is curable by Parent or Merger Sub through the  exercise of its
          reasonable  best  efforts  and for so long as  Parent  or  Merger  Sub
          continues to exercise such  reasonable  best efforts,  the Company may
          not terminate this Agreement under this Section 8.1(a)(iii);

               (iv) by  either  Parent  or the  Company,  if there  shall be any
          order, decree or ruling of any United States federal or state court of
          competent  jurisdiction,   or  any  United  States  federal  or  state
          governmental,  regulatory or administrative authority,  which is final
          and  nonappealable,  permanently  restraining,  enjoining or otherwise
          preventing the consummation of the Merger;

               (v) by either Parent or the Company, if the Merger shall not have
          been consummated before September 30, 1999,  provided,  however,  that
          such date shall be extended for up to an additional  six months if the
          applicable  waiting period under the HSR Act shall not have expired or
          been  terminated  by such date (unless the failure to  consummate  the
          Merger by the applicable date shall be due to the action or failure to
          act of the party seeking to terminate this Agreement);

               (vi)  by  either  Parent  or the  Company,  if the  shareholders'
          meeting  provided  for in  Section  6.1  shall  have been held and the
          Agreement  shall fail to receive the  requisite  shareholder  approval
          required by Section 7.1(b) at such meeting (including any adjournments
          and postponements thereof);

               (vii) by Parent,  if, (A) the Board of  Directors  of the Company
          withdraws,   or  materially  modifies  or  materially   changes,   its
          recommendation  of this Agreement or the Merger in a manner adverse to
          Parent  or  Merger  Sub  or  shall  have  resolved  to do  any  of the
          foregoing;  (B) the Board of  Directors  of the Company (i) shall have
          recommended to the  shareholders of the Company a Company  Acquisition
          Proposal or (ii) after the  expiration of ten business days  following
          the
commencement  of any  Company  Acquisition  Proposal  that is a tender
          offer,  shall  have (1) failed to  recommend  against  accepting  such
          tender offer or (2) taken no position  with  respect  thereto or (iii)
          resolved to do any of the  foregoing;  or (C) the  Company  shall have
          effected an amendment,  waiver, termination or other alteration of the
          provisions of the Company Rights Plan in such a manner that any person
          (other than Parent or Merger Sub) shall have been permitted to acquire
          "beneficial  ownership" or the right to acquire  beneficial  ownership
          of, or any "group" (as such terms are defined  under  Section 13(d) of
          the   Exchange   Act  and  the  rules  and   regulations   promulgated
          thereunder),  shall have been formed which  beneficially  owns, or has
          the right to acquire  beneficial  ownership  of,  more than 15% of the
          then outstanding  shares of Company Common Stock, in each case without
          triggering the Company Rights Plan or shall have resolved to do any of
          the foregoing;

               (viii) by the  Company,  if the Board of Directors of the Company
          shall have  withdrawn,  or modified or changed in a manner  adverse to
          Parent or Merger Sub, its approval or recommendation of this Agreement
          or the Merger in order to approve  and permit the Company to execute a
          definitive agreement providing for a Superior Proposal,  and elects to
          terminate this Agreement  effective  prior to the  satisfaction of the
          condition set forth in Section  7.1(b);  provided that the Company may
          not effect  such  termination  pursuant to this  Section  8.1(a)(viii)
          unless and until (A) Parent  receives  at least  five  business  days'
          prior written  notice from the Company of its intention to effect such
          termination  pursuant  to  this  Section  8.1(a)(viii),  which  notice
          specifies the material terms and conditions of such Superior  Proposal
          and  identifies the person making such Superior  Proposal;  (B) during
          such  period,  the  Company  shall,  and shall  cause  its  respective
          financial and legal  advisors to,  negotiate in good faith with Parent
          to make such adjustments in the terms and conditions of this Agreement
          that  would  enable  the  Company  to  proceed  with the  transactions
          contemplated by this Agreement on such adjusted  terms;  and provided,
          further,  that any  termination  of this  Agreement  pursuant  to this
          Section 8.1(a)(viii) shall not be effective until the Company has made
          the termination payment required by Section 8.5(b); or

               (ix) by the  Company,  if  Parent  shall  have  delivered  to the
          Company the HSR Act Termination Notice.

          (b)  Notwithstanding  any of the  foregoing,  the  right of any  party
hereto to  terminate  this  Agreement  pursuant to Section  8.1(a)  shall remain
operative and in full force and effect regardless of any  investigation  made by
or on behalf of any party hereto,  any person  controlling any such party or any
of their  respective  officers  or  directors,  whether  prior  to or after  the
execution of this Agreement.

          8.2  Effect of  Termination.  Except as  provided  in  Section  8.5 or
Section  9.1,  in the event of the  termination  of this  Agreement  pursuant to
Section 8.1(a),  this Agreement shall forthwith  become void,  there shall be no
liability  on the part of  Parent,  Merger  Sub or the  Company  or any of their
respective  officers or directors to the other and all rights and obligations of
any party hereto shall cease.

          8.3 Amendment.  This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time;  provided,  however,  that,  after approval of this
Agreement and the Merger by the shareholders of the Company,  no amendment shall
be made which by the TBCA requires the further  approval of  shareholders.  This
Agreement may not be amended  except by an  instrument in writing  signed by the
parties hereto.

          8.4 Waiver.  At any time prior to the Effective Time, any party hereto
may (a) extend the time for the  performance of any of the  obligations or other
acts  of  the  other  parties  hereto,   (b)  waive  any   inaccuracies  in  the
representations  and  warranties of the other party  contained  herein or in any
document delivered pursuant hereto and (c) waive compliance by the other parties
with any of the  agreements  or  conditions  contained  herein (other than those
required to be complied with by applicable  law).  Any such  extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
or parties to be bound thereby.

          8.5 Fees; Expenses and Other Payments.
(a) Except as provided  in clauses  (b),  (c) and (d) of this  Section
8.5,  each party shall bear its own costs and expenses in  connection  with this
Agreement and the transactions contemplated hereby, provided,  however, that the
allocable  share of each of Parent and the  Company  for all costs and  expenses
related to printing, filing and mailing the Registration Statement and the Proxy
Statement  and all SEC and other  regulatory  filing fees incurred in connection
with the  Registration  Statement  and the Proxy  Statement  shall be  one-half.
Notwithstanding  anything  to the  contrary,  all of the costs and  expenses  in
connection with this Agreement and the transactions contemplated hereby incurred
by the Company and the Parent shall,  upon the  consummation  of the Merger,  be
borne by the Surviving Corporation.

          (b) If this Agreement is terminated for any reason pursuant to Section
8.1(a)(ii),  (vii) or  (viii),  then the  Company  shall pay Parent a fee of $15
million,  plus all actual,  documented  third party  costs,  including,  but not
limited to, filing fees and costs for attorneys,  accountants and other advisors
("Third Party Costs")  incurred by Parent,  at the time of such  termination  in
cash by wire transfer to an account designated by Parent.

          (c) If this Agreement is terminated by the Company pursuant to Section
8.1(a)(iii),  then Parent shall pay the Company a fee of $15  million,  plus all
actual, documented Third Party Costs, at the time of such termination in cash by
wire transfer to an account designated by the Company.

          (d) If this Agreement is terminated by Parent or the Company  pursuant
to Section  8.1(a)(vi),  the Company shall pay Parent a fee of $1 million,  plus
all actual,  documented  Third Party Costs,  at the time of such  termination in
cash by wire  transfer to an account  designated by Parent,  provided,  however,
that if at or prior to the time the  shareholders'  meeting  has been held there
has  been  announced   (whether  or  not  rejected  or  withdrawn)  any  Company
Acquisition Proposal and within 18 months thereafter the Company enters into any
agreement  with respect to any Company  Acquisition  Proposal,  then the Company
shall pay  Parent an  additional  fee of $14  million,  upon  execution  of such
agreement in cash by wire transfer to an account designated by Parent.

          (e) The parties  agree that the amounts  provided in clauses  (b), (c)
and (d) of this Section 8.5 payable upon the occurrence of the events  specified
therein have been  determined by negotiation and reflect their best estimate and
judgment  of the  monetary  value of the losses and  damages to be  incurred  in
connection with, and time,  effort,  expense and cost of opportunity  associated
with, the transactions  contemplated in this Agreement, and the parties agree to
accept  payment  of such  amount  as  liquidated  damages  in full and  complete
satisfaction  of all claims and  expenses  arising from the  occurrence  of such
events (including,  but not limited to, claims for specific  performance and not
as a penalty payment).

                                   ARTICLE IX
                               GENERAL PROVISIONS

          9.1 Effectiveness of Representations, Warranties and Agreements.

          (a)  Except  as set  forth in  Section  9.1(b),  the  representations,
warranties  and  agreements  of each party hereto shall remain  operative and in
full force and effect  regardless of any  investigation  made by or on behalf of
any other party hereto,  any person  controlling  any such party or any of their
officers  or  directors,  whether  prior  to or  after  the  execution  of  this
Agreement.

          (b) The  representations,  warranties and agreements in this Agreement
shall  terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII,  except that the agreements set forth in Article I and
II, and  Sections  6.4(a),  6.7,  6.8,  6.10,  6.13 and 6.16 shall  survive  the
Effective  Time and those set forth in  Sections  5.6,  8.2,  8.5 and Article IX
shall survive the termination of this Agreement.

          9.2  Notices.  All  notices  and  other  communications  given or made
pursuant  hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or
transmitted,  and shall be effective upon receipt, if delivered personally, sent
by expedited  courier or messenger  service,  mailed by  registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses  (or at such other  address for a party as shall be  specified by like
changes of address) or sent by electronic  transmission to the telecopier number
specified below:

(a)       If to Parent or Merger Sub:

          Nabors  Industries,  Inc.
          515 West Greens Road,  Suite 1200
          Houston, Texas 77067
          Attention:  Anthony G. Petrello, President and Chief Operating Officer
          Telecopier No.: (281) 775-8188
 
          with a copy to:

          Nabors Corporate Services, Inc.
          515 West Greens Road, Suite 1200
          Houston, Texas   77067
          Attention:  Legal Department
          Telecopier No.: (281) 775-8431

(b)      If to the Company:

         Pool Energy Services Co.
         10375 Richmond Avenue
         Houston, Texas  77042
         Attention:  J.T. Jongebloed, Chairman, President and
         Chief Executive Officer
         Telecopier No.:  (713) 954-3037

         with a copy to:

         Bracewell & Patterson, L.L.P.
         2900 South Tower Pennzoil Place
         711 Louisiana Street
         Houston, Texas  77002-2781
         Attention:  Edgar J. Marston III
         Telecopier No.:  (713) 221-1212

          Notice to a "copy to" address  shall be  provided  as a courtesy,  but
shall not be deemed to be actual notice received by a party for any purpose. Any
party may change the address to which  notices,  requests,  demands,  claims and
other  communications  hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.

          9.3 Certain Definitions. For purposes of this Agreement, the term:

          (a)  "affiliate"  means a person that directly or indirectly,  through
one or more  intermediaries,  controls,  is  controlled  by, or is under  common
control with, the first mentioned person.

          (b)  "business  day" means any day other than a day on which  banks in
the State of Texas are authorized or obligated to be closed.

          (c) "control"  (including the terms "controlled,"  "controlled by" and
"under common control with") means the  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  stock,  by  contract  or  credit
arrangement or otherwise.
(d)  "knowledge" or "known" shall mean,  with respect to any matter in
question,  if an executive officer of the Company or Parent, as the case may be,
has actual knowledge of such matter.

          (e)   "person"   means  an   individual,   corporation,   partnership,
association,  trust,  unincorporated  organization,  other  entity  or group (as
defined in Section 13(d) of the Exchange Act).

          (f) "Significant  Subsidiary" or "Significant  Subsidiaries" means any
Subsidiary of the Company or Parent, as the case may be, that would constitute a
Significant  Subsidiary  of such  party  within  the  meaning  of  Rule  1-02 of
Regulation S-X of the SEC.

          (g)  "Subsidiary"  or  "Subsidiaries"  of  the  Company,  Parent,  the
Surviving  Corporation or any other person, means any corporation,  partnership,
limited  liability  company,  joint  venture or other legal  entity of which the
Company, Parent, the Surviving Corporation or such other person, as the case may
be (either  alone or  through  or  together  with any other  Subsidiary),  owns,
directly  or  indirectly,  50% or more of the  capital  stock  or  other  equity
interests the holders of which are  generally  entitled to vote for the election
of the board of directors or other  governing body of such  corporation or other
legal entity.

          9.4  Headings.  The  headings  contained  in  this  Agreement  are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

          9.5 Severability.  If any term or other provision of this Agreement is
determined to be invalid,  illegal or incapable of being enforced by any rule of
law or public  policy,  all other  conditions  and  provisions of this Agreement
shall  nevertheless  remain in full force and effect so long as the  economic or
legal substance of the transactions  contemplated  hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid,  illegal or incapable of being enforced, the parties
hereto shall  negotiate  in good faith to modify this  Agreement so as to effect
the  original  intent of the  parties as closely as  possible  in an  acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.

          9.6 Entire  Agreement.  This  Agreement  (together  with the Exhibits)
constitutes  the  entire  agreement  of the  parties  and  supersedes  all prior
agreements and undertakings,  both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.

          9.7  Assignment.  This Agreement shall not be assigned by operation of
law or otherwise except Merger Sub may, without the Company's  approval,  assign
its interests to any wholly owned Subsidiary of Parent.

          9.8 Parties in  Interest.  This  Agreement  shall be binding  upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied  (other than the  provisions  of Article II and Sections 6.7,
6.13 and 6.16),  is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.

          9.9 Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure
or delay on the part of any party hereto in the exercise of any right  hereunder
shall impair such right or be construed to be a waiver of, or  acquiescence  in,
any breach of any  representation,  warranty or agreement herein,  nor shall any
single or partial  exercise of any such right preclude other or further exercise
thereof or of any other right. Except as set forth in Section 8.5(c), all rights
and remedies existing under this Agreement are in addition to, and not exclusive
of, any rights or remedies otherwise available.

          9.10 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas,  regardless of the laws that
might otherwise govern under  applicable  principles of conflicts of law, except
to the extent that the General Corporation Law of the State of Delaware shall be
mandatorily  applicable  to the shares of Parent  Common  Stock  issuable in the
Merger.
9.11  Jurisdiction.  Each  party  hereby  irrevocably  submits  to the
exclusive  jurisdiction  of the United  States  District  Court for the Southern
District of Texas, Houston Division,  or any court of the State of Texas located
in the City of Houston in any action,  suit or proceeding  arising in connection
with this Agreement,  and agrees that any such action,  suit or proceeding shall
be  brought  only in such court (and  waives  any  objection  based on forum non
conveniens or any other objection to venue  therein);  provided,  however,  that
such  consent to  jurisdiction  is solely for the  purpose  referred  to in this
Section  9.11  and  shall  not  be  deemed  to be a  general  submission  to the
jurisdiction  of said  Courts  or in the  State  of  Texas  other  than for such
purpose. PARENT, MERGER SUB AND THE COMPANY HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.

          9.12  Counterparts.  This  Agreement  may be  executed  in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed  shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS  WHEREOF,  Parent,  Merger Sub and the Company  have caused
this  Agreement  to be  executed  as of the date  first  written  above by their
respective officers thereunto duly authorized.

                            NABORS INDUSTRIES, INC

                            By:  /s/ Anthony G. Petrello 
                                 ----------------------- 
                                 Anthony G. Petrello
                                 President and Chief Operating Officer

                            STARRY ACQUISITION CORP.

                            By:  /s/ Anthony G. Petrello  
                                 ------------------------ 
                                 Anthony G. Petrello
                                 President

                            POOL ENERGY SERVICES CO.

                            By:  /s/ J. T. Jongebloed     
                                 ------------------------ 
                                 J. T. Jongebloed
                                 Chairman, President and
                                 Chief Executive Officer