Agreement And Plan Of Merger

AGREEMENT AND PLAN OF MERGER


BY AND AMONG


DLB OIL AND GAS, INC.,


BAYARD DRILLING TECHNOLOGIES, INC.,


BONRAY ACQUISITION CORP.


AND


BONRAY DRILLING CORPORATION


DATED AS OF OCTOBER 9, 1997


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TABLE OF CONTENTS


PAGE ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1


ARTICLE II - THE CLOSING; POST-CLOSING ADJUSTMENT . . . . . . . . . . . . . . 3
2.1 Date and Place . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . 4


ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY . 6
3.1 Existence and Qualification . . . . . . . . . . . . . . . . . 6
3.2 Capitalization; Ownership of Shares; Subsidiary . . . . . . . 6
3.3 Authority; Binding Effect . . . . . . . . . . . . . . . . . . 7
3.4 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Consents and Filings . . . . . . . . . . . . . . . . . . . . . 8
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 8
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . 9
3.9 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 9
3.10 Assets, Properties, etc. . . . . . . . . . . . . . . . . . . . 9
3.11 Absence of Certain Changes and Events . . . . . . . . . . . . 10
3.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Overtime, Back Wages, Vacation and Minimum Wages . . . . . . . 13
3.14 Contracts, Agreements, Plans and Commitments . . . . . . . . . 13
3.15 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . 14
3.16 Employment Matters; Labor Relations . . . . . . . . . . . . . 17
3.17 Environmental Compliance . . . . . . . . . . . . . . . . . . . 18
3.18 Improper Payments . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 19
3.20 Securities Law Matters . . . . . . . . . . . . . . . . . . . . 19
3.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3
PAGE
---- ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO . . . . . 20
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Authority; Binding Effect . . . . . . . . . . . . . . . . . . 21
4.3 Capitalization; Bayard Common Stock . . . . . . . . . . . . . 21
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . 21
4.5 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 22
4.6 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 22
4.7 Securities Law Matters . . . . . . . . . . . . . . . . . . . . 22
4.8 Consents and Filings . . . . . . . . . . . . . . . . . . . . . 23
4.9 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 23
4.10 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 24
4.13 Environmental Compliance . . . . . . . . . . . . . . . . . . . 24
4.14 Improper Payments . . . . . . . . . . . . . . . . . . . . . . 25


ARTICLE V - CERTAIN COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . 26
5.1 Access to Information . . . . . . . . . . . . . . . . . . . . 26
5.2 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . 26
5.3 Conduct of Business Pending Closing . . . . . . . . . . . . . 27
5.4 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Return of Informational Material . . . . . . . . . . . . . . . 28
5.7 Confidentiality of Information . . . . . . . . . . . . . . . . 29
5.8 Employment Matters. . . . . . . . . . . . . . . . . . . . . . 29
5.9 Access to and Maintenance of Records . . . . . . . . . . . . . 29
5.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 29


ARTICLE VI - CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . 30
6.1. Conditions to the Obligations of Each of the Parties . . . . . 30
6.2. Conditions to the Obligations of the Buyer and Newco . . . . . 30
6.3 Conditions to the Obligations of the Seller . . . . . . . . . 31


ARTICLE VII - TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Liability for Taxes; Indemnification and Control of Contests . 33
7.4 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . 35
7.5 Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . 35


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PAGE
----
7.6 Carrybacks and Carryovers . . . . . . . . . . . . . . . . . . 36
7.7 Termination of Existing Tax Sharing Agreements . . . . . . . . 36
7.8 Tax Matter Dispute Resolution . . . . . . . . . . . . . . . . 36
7.9 Survival for Tax Matters . . . . . . . . . . . . . . . . . . . 36


ARTICLE VIII - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Survival of Representations and Warranties . . . . . . . . . . 37
8.2 Indemnification by the Seller . . . . . . . . . . . . . . . . 37
8.3 Indemnification by the Buyer . . . . . . . . . . . . . . . . . 38
8.4 Indemnification for Third Party Claims . . . . . . . . . . . . 38


ARTICLE IX - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 40


ARTICLE X - DEFINITIONS AND MISCELLANEOUS . . . . . . . . . . . . . . . . . . 41
10.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3 Binding Effect; Assignability . . . . . . . . . . . . . . . . 46
10.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.5 Section Headings . . . . . . . . . . . . . . . . . . . . . . . 46
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 46
10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 46
10.8 Costs of Enforcement. . . . . . . . . . . . . . . . . . . . . 47
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 47


iii 5 EXHIBITS


Exhibit A - Form of Stockholders Agreement Exhibit B - Form of Registration Rights Agreement


SCHEDULES


Schedule 3.2 - Certain Liens Schedule 3.4 - Company Conflicts Schedule 3.6 - Litigation Schedule 3.7 - Company Compliance with Laws Schedule 3.9 - Undisclosed Company Liabilities Schedule 3.10 - Title to Property and Assets Schedule 3.11 - Recent Changes Schedule 3.12(c) - Liens for Taxes Schedule 3.12(d) - Pending Audits, Disputes or Claims Schedule 3.12(e) - Third-Party Tax Liability Schedule 3.12(f) - Foreign Country Taxes Schedule 3.12(g) - State Income Tax Schedule 3.12(h) - State Sales or Use Tax Schedule 3.12(i) - Tax Allocation Agreements Schedule 3.12(m) - Requests for Tax Information Schedule 3.13 - Unpaid Wages Schedule 3.14 - Material Contracts Schedule 3.15 - ERISA Matters Schedule 3.16(a) - Employees Schedule 4.3 - Capitalization Schedule 4.5 - Undisclosed Buyer Liabilities Schedule 4.10 - Buyer Conflicts Schedule 8.2(c) - Limitation on Indemnification


iv 6
AGREEMENT AND PLAN OF MERGER


This AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of October 9, 1997, by and among DLB OIL AND GAS, INC., an Oklahoma corporation (the "Seller"), BAYARD DRILLING TECHNOLOGIES, INC., a Delaware corporation (the "Buyer"), BONRAY ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of Buyer ("Newco"), and BONRAY DRILLING CORPORATION, a Delaware corporation (the "Company").


WITNESSETH:


WHEREAS, as of the date hereof, the Seller owns all of the outstanding capital stock (the "Shares") of the Company; and


WHEREAS, subject to and in accordance with the terms and conditions of this Agreement, (i) the respective boards of directors of the Buyer, Seller, Newco and the Company and (ii) the respective stockholders of the Company and Newco have approved the merger of Newco with and into the Company (the "Merger"), and the Buyer, Seller, Newco and the Company desire to consummate the Merger in accordance with the terms and conditions set forth herein.


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


ARTICLE I


THE MERGER


1.1 The Merger. Subject to and in accordance with the terms and conditions of this Agreement and in accordance with the Delaware General Corporation Law (the "General Corporation Law"), at the Effective Time (as hereinafter defined), Newco shall be merged with and into the Company. The name, identity, existence, rights, privileges, powers, properties and assets of the Company shall continue unaffected and unimpaired by the Merger. As a result of the Merger, the separate corporate existence of Newco shall cease and the Company shall continue as the surviving corporation (sometimes referred to herein as the "Surviving Corporation") and shall succeed to and assume all of the rights and obligations of Newco in accordance with the General Corporation Law. 7
1.2 Consummation of the Merger. The Merger shall become effective upon the date and time specified in a properly executed Certificate of Merger filed with the Secretary of State of the State of Delaware as provided in Section 251 of the General Corporation Law. When used in this Agreement, the term "Effective Time" shall mean the date and time so specified in such Certificate of Merger.


1.3 Certificate of Incorporation; Bylaws. The Certificate of Incorporation of the Surviving Corporation shall be restated in its entirety as attached to the Certificate of Merger and the bylaws of the Surviving Corporation shall be the bylaws of the Company, as in effect immediately prior to the Effective Time, and thereafter such Certificate of Incorporation and bylaws shall continue to be the Surviving Corporation's Certificate of Incorporation and bylaws until amended as provided therein and under the General Corporation Law.


1.4 Directors and Officers. The directors of Newco immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and bylaws of the Surviving Corporation, and the officers of Newco immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified.


1.5 Conversion of Securities. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of the Company, Newco or their respective stockholders:


(a) Each share of the common stock, par value $0.001
per share, of the Company ("Bonray Common Stock") issued and outstanding
immediately prior to the Effective Time shall be canceled and be
converted into 30.15 shares of the common stock, par value $0.01 per
share, of the Buyer ("Bayard Common Stock"); provided, that if, after
the date hereof and prior to the Closing, Buyer shall have declared a
stock split (including a reverse stock split) of Bayard Common Stock or
a dividend payable in Bayard Common Stock to holders of Bayard Common
Stock with respect to their Bayard Common Stock, then the number of
shares of Bayard Common Stock into which the Bonray Common Stock shall
be converted shall be appropriately adjusted to reflect such stock split
or dividend or other distribution.


(b) Each share of Bonray Common Stock held in the
treasury of the Company, if any, shall be canceled and extinguished
without any conversion thereof.


2 8
(c) Each share of common stock, par value $.01 per
share, of Newco issued and outstanding immediately prior to the
Effective Time shall automatically without any action on the part of the
holder thereof be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.


ARTICLE II


THE CLOSING;
POST-CLOSING ADJUSTMENT


2.1 Date and Place. The closing of the Merger (the "Closing") shall be held at the offices of Baker & Botts, L.L.P., 2001 Ross Avenue, Dallas, Texas, 75201 (or at such other place as the parties may mutually agree) on October 13, 1997 (or, if the conditions to the obligations of the parties set forth in Article VI hereof shall not be fulfilled as of such date, as promptly as practicable after the fulfilment of such conditions). The date of the Closing is hereinafter referred to as the "Closing Date."


2.2 Certain Actions. At the Closing, the parties hereto will cause to be filed with the Secretary of State of the State of Delaware, as provided in Section 251 of the General Corporation Law, a Certificate of Merger.


2.3 Closing Deliveries.


(a) At the Closing, the Seller shall deliver the following to the Buyer and Newco:


(i) stock certificates representing the Shares, free
and clear of any Liens;


(ii) the officer's certificate referred to in Section
6.2(c);


(iii) the opinions of counsel to the Seller referred to
in Section 6.2(d);


(iv) counterparts of the Stockholders Agreement (as
hereinafter defined) and the Registration Rights Agreement (as
hereinafter defined) each duly executed by the Seller and the Broker;
and


3 9
(v) a letter executed by the Broker covering certain
customary investment representations.


(b) At the Closing, the Company shall deliver the following to the Buyer and Newco:


(i) the officer's certificate referred to in Section
6.2(c).


(c) At the Closing, the Buyer shall deliver the following to the Seller:


(i) 3,015,000 shares of Bayard Common Stock (as
appropriately adjusted pursuant to Section 1.5) issued in the name of
the Seller or a wholly-owned subsidiary of the Seller, as designated by
the Seller at the Closing; provided, however, that 60,000 of such shares
shall be issued in the name of the Broker;


(ii) the officer's certificate referred to in Section
6.3(c);


(iii) the opinion of counsel to the Buyer referred to in
Section 6.3(d); and


(iv) duly executed counterparts of the Stockholders
Agreement and the Registration Rights Agreement.


(d) At the Closing, Newco shall deliver the following to the Seller:


(i) the officer's certificate referred to in Section
6.3(c).


(e) At the Closing, the Seller shall deliver to the Buyer a certified or official bank check or checks in New York Clearing House or other similar next day funds in the amount of $1,000,000.


2.4 Post-Closing Adjustment.


(a) On the Post-Closing Adjustment Date (as hereinafter defined), the Buyer shall pay to the Seller, or the Seller shall pay to the Buyer, an amount in cash (the "Working Capital Adjustment Amount") equal to the amount by which the sum of (i) any capital contributions from the Seller to the Company made after June 30, 1997 but on or prior to the Closing Date plus (ii) the current assets of the Company as of the Closing Date (such sum of (i) and (ii) being the "Adjusted Current Assets") less (iii) the current liabilities of the Company as of such date (the "Current Liabilities"), in each case calculated in accordance with GAAP, is (x) greater than $1,000,000, in which case the Buyer shall pay the


4 10 Working Capital Adjustment Amount to the Seller, or (y) less than $1,000,000, in which case the Seller shall pay the Working Capital Adjustment Amount to the Buyer. The Working Capital Adjustment Amount shall be paid to the Buyer or the Seller, as the case may be, by delivery of a certified or official bank check or checks in New York Clearing House or other similar next day funds.


(b) The Buyer shall deliver to the Seller, within 40 days after the Closing Date, a schedule (the "Working Capital Schedule") which sets forth the amounts of the Adjusted Current Assets and Current Liabilities, sets forth in reasonable detail how the Adjusted Current Assets and the Current Liabilities were determined, and sets forth the resulting Working Capital Adjustment Amount.


(c) If within ten days after the Buyer delivers the Working Capital Schedule to the Seller (the "Objection Period"), the Seller notifies the Buyer of any objections to the calculation of the Adjusted Current Assets, the Current Liabilities or the Working Capital Adjustment Amount set forth on the Working Capital Schedule, the Buyer and the Seller shall attempt in good faith to agree by the day which is 60 days after the Closing Date upon the Adjusted Current Assets, the Current Liabilities and the resulting Working Capital Adjustment Amount.


(d) If the Buyer and the Seller agree by the day which is 60 days after the Closing Date to a Working Capital Adjustment Amount which is different from that shown on the Working Capital Schedule, the payment described in subparagraph (a) will be of the agreed upon amount.


(e) If the Seller objects to the calculation of the Adjusted Current Assets, the Current Liabilities or the resulting Working Capital Adjustment Amount during the Objection Period and the Buyer and the Seller do not agree by the day which is 60 days after the Closing Date to a Working Capital Adjustment Amount, the matters in dispute (but no other matters) will be submitted to Coopers & Lybrand L.L.P., or, if that firm declines to act as provided in this paragraph, another firm of independent certified accountants mutually acceptable to the Buyer and the Seller (in either case, the "Accounting Arbiter"), which firm will make a final and binding determination as to the matters in dispute within 45 days after its appointment. The Accounting Arbiter will send its written determination to the Buyer and the Seller, together with a calculation of the Working Capital Adjustment Amount which results from that determination, at which point the determination of the Accounting Arbiter, and the resulting calculation of the Working Capital Adjustment Amount, will be binding on the Buyer and the Seller, absent fraud or manifest error. The fees and expenses of the Accounting Arbiter will be borne equally by the Buyer and the Seller.


5 11
(f) The date (the "Post-Closing Adjustment Date") upon which the payment described in paragraph (a) is to be made shall be the day which is three days after the earliest of (i) the day during the Objection Period when the Buyer receives the Seller's written acceptance of the Working Capital Adjustment Schedule, (ii) the last day of the Objection Period if the Buyer has not received the Seller's written objection to any item on the Working Capital Schedule, (iii) the day when the Buyer and the Seller agree upon the Working Capital Adjustment Amount or (iv) the day on which the Accounting Arbiter delivers its written determination to the Buyer and the Seller.


ARTICLE III


REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE COMPANY


The Seller and the Company, jointly and severally, represent and warrant to the Buyer as follows:


3.1 Existence and Qualification.


(a) The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma and is duly qualified to do business in each jurisdiction where it conducts business, except where the failure to so qualify would not have a Seller Material Adverse Effect. The Seller has all requisite corporate power and authority to own the Shares, and to conduct its business and to own or lease its properties, as now conducted, owned or leased.


(b) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business in each jurisdiction where it conducts business, except where the failure to so qualify would not have a Company Material Adverse Effect. The Company has all requisite corporate power and authority to conduct its business and to own or lease its properties, as now conducted, owned or leased.


3.2 Capitalization; Ownership of Shares; Subsidiary. The authorized capital stock of the Company consists of 100,000 shares of Bonray Common Stock, of which 100,000 shares are issued and outstanding. All of the issued and outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and nonassessable. None of the issued shares of capital stock have been issued in violation of preemptive or similar rights. There are no outstanding subscriptions, convertible or exchangeable securities, warrants, options, contracts, calls, or other rights of any kind


6 12 committing or obligating the Company to issue or sell any issued or unissued shares of its capital stock, or any securities or obligations of any kind convertible into its capital stock. All of the Shares are owned beneficially and of record by the Seller, free and clear of all Liens, except as set forth in Schedule 3.2. The Company owns no interest in any corporation, partnership, limited liability company or other incorporated or unincorporated entity.


3.3 Authority; Binding Effect.


(a) Seller has all necessary power and authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement have been duly and validly authorized by the Seller's Board of Directors, which constitutes all necessary corporate action on the part of the Seller for such authorization. No vote of the Seller's stockholders is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and constitutes a valid and binding agreement of the Seller, enforceable against the Seller in accordance with its terms. All agreements required hereunder to be executed and delivered by the Seller at the Closing, upon execution and delivery in accordance with the provisions hereof, will constitute valid and binding agreements enforceable against the Seller in accordance with their terms.


(b) The Company has all necessary power and authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement have been duly and validly authorized by the Company's Board of Directors and stockholder, which constitutes all necessary corporate action on the part of the Company for such authorization. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. All agreements required hereunder to be executed and delivered by the Company at the Closing, upon execution and delivery in accordance with the provisions hereof, will constitute valid and binding agreements enforceable against the Company in accordance with their terms.


3.4 No Conflicts. Except as set forth in Schedule 3.4 hereto, the execution and delivery by the Seller and the Company of this Agreement, and the performance by the Seller and the Company of the transactions contemplated hereby, will not: (i) conflict with, or result in a violation or breach of, any provision of the charter documents or by-laws of the Seller or the Company, (ii) conflict with, or result in any violation or breach of, or constitute a default under, any term or provision of any Material Agreement to which the Seller or the Company is a party or by which their respective


7 13 properties or assets are bound, (iii) conflict with, or result in any violation of, any law, ordinance, statute, rule or regulation of any Governmental Authority or of any order, writ, injunction, judgment or decree of any court, arbitrator or Governmental Authority applicable to the Seller or the Company, except, in the case of clauses (ii) and (iii), for any conflicts, violations, breaches or defaults that would not (a) reasonably be expected to have a Company Material Adverse Effect or (b) prevent the Seller ...