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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): December 16, 1997
(December 11, 1997)
GREY WOLF, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 1-8226 74-2144774
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042-4136
(Address of Registrant's principal executive offices)
(713) 435-6100
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
LETTER OF INTENT TO ACQUIRE MURCO DRILLING CORPORATION
GENERAL
On December 11, 1997, Grey Wolf, Inc. ("Grey Wolf") announced that it
had entered into a letter of intent with Murco Drilling Corporation ("Murco")
and its shareholders to acquire all the outstanding shares of common stock of
Murco. The letter of intent states that the parties will endeavor to negotiate
a definitive agreement pursuant to which it is anticipated that Grey Wolf
Drilling Company ("Grey Wolf Drilling"), a wholly-owned subsidiary of Grey
Wolf, will acquire all the outstanding common stock of Murco (the
"Acquisition"). The letter of intent also provides that there is no binding
obligation on any party to conclude the Acquisition. The Acquisition is
contingent on the satisfactory completion of due diligence investigations by
Grey Wolf and on the negotiation, execution and delivery of a definitive
agreement setting forth in detail the terms, provisions and conditions of the
Acquisition (the "Agreement"). The letter of intent provides that the
Agreement would contain such representations and warranties, covenants,
conditions, non-competition agreements and indemnities from Murco and its
shareholders as are customary and appropriate for this type of transaction.
MURCO DRILLING CORPORATION
Founded in 1958, Murco is engaged in the land drilling business in
Alabama, Louisiana, Mississippi, and East Texas. Its executive office is
located in Shreveport, Louisiana. Murco's current rig fleet consists of ten
fully-operational rigs, four of which are diesel electric, silicone controlled
rectifier ("SCR") rigs and six are mechanical rigs. The maximum rated depth
capacity of Murco's rigs ranges from approximately 10,000 feet to 20,000 feet.
Murco has advised Grey Wolf that it employs approximately 230 persons. Grey
Wolf expects that substantially all of Murco's employees will be offered
continued employment by Grey Wolf Drilling.
THE ACQUISITION
Purchase Price and Adjustments
It is presently anticipated that Grey Wolf Drilling will purchase all
of the outstanding shares of common stock of Murco Drilling (the "Murco Stock")
for a purchase price of $56.4 million consisting of (i) an amount in cash equal
to $56.4 million minus the value of Grey Wolf common stock ("Grey Wolf Stock")
not to exceed $10.0 million which Grey Wolf may elect to issue to the
shareholders of Murco plus (ii) up to $10.0 million in value of Grey Wolf
Stock, if any, that Grey Wolf may elect to issue to the shareholders of Murco.
The Grey Wolf common stock which may be issued in connection with the
Acquisitions is referred to in this Report as the "Stock Consideration." For
purposes of determining the purchase price, the deemed value of the Stock
Consideration, if any, is expected to be the product of the number of shares
Grey Wolf chooses to issue in the Acquisition multiplied by the average closing
price of Grey Wolf Stock on the American
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Stock Exchange for the ten trading days ending on the second business day prior
to the closing date of the Acquisition.
The total purchase price to be paid is expected to be subject to
adjustment for changes to Murco's Net Financial Assets to the extent that the
Net Financial Assets are greater or less than zero, excluding any net
liabilities associated with the creation of the below-mentioned Rabbi Trust.
"Net Financial Assets" is presently expected to be the book value of all assets
of Murco determined in accordance with generally accepted accounting
principles, excluding property, plant and equipment other than assets and
liabilities described in the first paragraph under "--Certain Conditions to
Closing" below. The total consideration would also be reduced by an amount
equal to the fair market value of any real estate assets required by Grey Wolf
Drilling to be disposed of or distributed to the shareholders prior to closing.
To the extent that Grey Wolf elects to pay a portion of the consideration in
Grey Wolf Stock, it is anticipated that Grey Wolf would agree to file a
Registration Statement on Form S-3 covering the resale of the Grey Wolf Stock.
The letter of intent provides that Grey Wolf Drilling will deposit
$2.5 million of earnest money with a national bank upon execution of the
Agreement.
Certain Conditions to Closing
The Agreement will provide that as a condition to closing, Murco must
have (i) redeemed all of its issued and outstanding preferred stock at its par
value, (ii) obtained cancellation of or exercise of all outstanding options to
purchase securities of Murco, (iii) distributed all of its oil and gas
properties, (iv) obtained a release of Murco from its current office lease, (v)
distributed three motor vehicles being used by Murco's shareholders, (vi)
distributed shareholder and non-employee life insurance policies, and (vii)
distributed office equipment and furnishings currently used by shareholders and
their support personnel. The letter of intent provides that all liabilities
relating to the distributed assets will be assumed by the shareholders of
Murco.
The letter of intent further provides that, on or prior to the
closing, the shareholders of Murco will convey to Murco a tract of land of
approximately nine acres located in Shreveport, Louisiana currently being used
by Murco.
In addition, it is anticipated that the Agreement will provide that
the parties' obligations to close the transaction will be conditioned upon the
approval or consent of such persons or entities, including regulatory
authorities, as are necessary or appropriate.
Creation of Rabbi Trust by Murco
The letter of intent provides that at, or immediately prior to the
closing, Murco will establish a deferred compensation Plan (the "Plan")
acceptable to Grey Wolf Drilling for the benefit of a designated group of Murco
employees as compensation for service to Murco and an incentive to maintain
performance and to refrain from voluntarily terminating their employment for at
least the one year term of the Plan. Murco will be obligated to fund $8.6
million into a Rabbi Trust to be created contemporaneously with the adoption of
the Plan. Grey Wolf Drilling will assume the
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funding obligation upon closing. The amount so funded may be reduced by the
value of any stock options granted by Grey Wolf to any of such designated group
of employees.
The letter of intent provides that it may be terminated by either
party in the event the Agreement has not been executed on or before January 15,
1998. Both parties have agreed to use good faith efforts to execute the
Agreement by such date.
Anticipated Sources of Funding
Grey Wolf currently expects to fund substantially all of the cash
portion of the purchase price for the Acquisition from cash on hand and
borrowings under its revolving line of credit from its commercial banks.
FORWARD-LOOKING STATEMENTS
This Current Report contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, that address events, transactions and
developments that Grey Wolf intends, expects, believes or anticipates will or
may occur in the future are forward-looking statements. These forward-looking
statements include, without limitation: (i) the anticipated consummation of the
Acquisition; (ii) the terms and conditions of the proposed Agreement and Plan;
(iii) the anticipated purchase price for the Acquisition; and (iv) Grey Wolf's
expectations with respect to financing the cash portion of the purchase price
for the Acquisition.
The forward-looking statements contained in this Current Report are
subject to material risks and uncertainties. Important factors that can cause
actual results to differ materially from Grey Wolf's expectations include: (i)
unexpected adverse information discovered in the course of Grey Wolf's due
diligence investigations of Murco; (ii) unanticipated adverse developments with
respect to Murco's business and properties or the land drilling business as a
whole; (iii) unexpected breach by Murco of its contractual obligations or
termination by Murco of negotiations prior to signing of the Agreement; or (iv)
presently unforeseen circumstances that prevent Grey Wolf from financing the
cash portion of the purchase price through its line of credit or conditions in
the financial markets that render obtaining of such financing impractical or
financially prohibitive.
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EXHIBITS
Exhibit 99.1 Letter of intent by and between Murco
Drilling Corporation and Grey Wolf Drilling
Company dated as of December 3, 1997.
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.
Date: December 16, 1997
GREY WOLF, INC.
/s/ T. Scott O'Keefe
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T. Scott O'Keefe,
Senior Vice President and
Chief Financial Officer
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EXHIBIT 99.1
December 3, 1997
Murco Drilling Corporation
400 Travis Street, Suite 1900
Shreveport, Louisiana 71101-3188
Gentlemen:
We have been discussing with you the proposed acquisition (the
"Acquisition") of Murco Drilling Corporation (the "Company"). This letter,
when executed by the Company, you and the other signatories hereto, will
evidence (i) our mutual intent, as set forth in Section I of this letter, with
respect to the proposed Acquisition by Grey Wolf Drilling Company ("Buyer") a
wholly owned subsidiary of Grey Wolf, Inc. ("Grey Wolf"), of all the
outstanding shares of common stock of the Company (the "Shares"), and (ii)
certain binding agreements, as set forth in Section II of this letter, relating
to the proposed Acquisition. The Shares presently consist of 4,622.22 shares
of Common Stock, which constitute all of the currently outstanding shares of
common stock of the Company. Such Shares are owned by the shareholders of the
Company listed on the signature pages hereto, being the only shareholders of
common stock of the Company (collectively, the "Shareholders").
The matters set forth in Section I of this letter constitute an
expression of our mutual intent only and are contingent on the satisfactory
completion of Buyer's due diligence and the negotiation, execution and delivery
of a definitive agreement (the "Agreement") among Buyer, the Company and the
Shareholders setting forth in detail the terms, provisions and conditions for
the proposed Acquisition. As indicated in Paragraph 10 of Section II hereof,
this letter does not create any obligations of Grey Wolf, the Buyer, the
Company or the Shareholders with respect to such matters. The matters set
forth in Section II of this letter, however, constitute binding agreements
among Grey Wolf, the Buyer, the Company and the Shareholders.
SECTION I.
PROPOSED ACQUISITION
1. The Acquisition would be consummated as a purchase of all of
the outstanding common stock of the Company. Under the terms
of the Agreement, the Shareholders would receive an aggregate
consideration of $56,400,000 (the "Consideration") consisting
of (i) an amount in cash equal to $56,400,000 minus, the value
of Grey Wolf Common Stock ("Grey Wolf Stock") not to exceed
$10,000,000 which Grey Wolf may elect to issue to the
Shareholders plus (ii) up to $10,000,000 in value of Grey Wolf
Stock, if any, that Grey Wolf may elect to issue to the
Shareholders (the "Stock Consideration"). The purchase price
would be subject to adjustment for
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changes to the Company's Net Financial Assets to the extent
the Net Financial Assets are greater or less than zero. For
the purpose hereof "Net Financial Assets" shall mean the book
value of all assets of Company determined in accordance with
GAAP excluding property, plant and equipment other than as
specified in Paragraph 2, Section I. The value of the Stock
Consideration shall be the product of number of shares of Grey
Wolf Stock times the average of the closing price of Grey Wolf
Stock (as reported on Amex) for the ten trading days ending on
the second business day prior to the Closing Date. The
Consideration would be subject to reduction by an amount equal
to the fair market value of any real estate assets required by
Buyer to be disposed of or distributed to the Shareholders
prior to Closing.
To the extent Grey Wolf elects to pay a portion of the
Consideration in Grey Wolf Stock, Grey Wolf would agree to
file a Registration Statement on Form S-3 covering the resale
Grey Wolf Stock.
2. As a condition to Closing, the Company shall have (i) redeemed
all of its issued and outstanding preferred stock at its par
value, (ii) obtained cancellation of or exercise of all
outstanding options to purchase securities of the Company,
(iii) distributed all of its oil and gas properties, (iv)
obtained a release of the Company from its current office
lease, (v) distributed three motor vehicles being used by the
Shareholders, (vi) distributed shareholder and non-employee
life insurance policies and (vii) distributed office equipment
and furnishing currently used by shareholders and their
support personnel. It will be agreed that all liabilities
relating to the distributed assets will be assumed by the
Shareholders.
3. Upon acceptance of this letter by the Company and the
Shareholders, Buyer's counsel will commence the drafting of
the Agreement for submission to the Company, the Shareholders
and their counsel for review. The Agreement shall contain
such representations and warranties, covenants, conditions,
non-competition agreements and indemnities from the Company
and from the Shareholders as are customary and appropriate for
this type of transaction. Buyer would deposit $2,500,000 as
earnest money upon execution of the Agreement at Whitney
National Bank located in New Orleans, Louisiana.
The Agreement shall also contain a provision that the parties'
obligation to close the transaction shall be conditioned upon
the approval or consent of such persons or entities, including
regulatory authorities, as are necessary or appropriate. The
parties will use good faith efforts to execute the Agreement
as soon as practical but prior to January 15, 1998. It is the
intention of Buyer, the Company and the Shareholders to engage
in further negotiations regarding the detailed terms,
provisions and conditions of the proposed Acquisition and the
Agreement.
4. At, or immediately prior to Closing, the Company would
establish a Deferred Compensation Plan ("Plan") acceptable to
Buyer for the benefit of a designated group of Company
employees as compensation for service to the Company and an
incentive
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to maintain their performance and to refrain from voluntarily
terminating their employment for at least the one year term of
the Plan. The Company will be obligated to fund $8,600,000
into a Rabbi Trust to be created contemporaneously with the
adoption of the Plan, said obligation of the Company shall be
assumed by Buyer. The amount funded may be reduced by the
value of any stock options granted by Grey Wolf to any of such
designated group of employees.
5. The Shareholders would, on or prior to Closing, convey a tract
of land of approximately 9 acres located in Shreveport,
Louisiana currently being used by the Company, to the Company.
SECTION II
BINDING AGREEMENT
6. Grey Wolf shall have such access to the books and records of
the Company and its subsidiaries and other information
pertaining to the business and assets of the Company and its
subsidiaries as is necessary in connection with the proposed
Acquisition. Grey Wolf agrees to treat all information
concerning the Company and its subsidiaries furnished, or to
be furnished, to Grey Wolf on behalf of the Company, in
accordance with the provisions of this paragraph
(collectively, the "Information"), and to take, or abstain
from taking, the other actions as set forth in this paragraph.
The Information will be used solely for the purpose of
evaluating the Acquisition, and will be kept confidential by
Grey Wolf and its officers, directors, employees,
representatives, agents and advisors; provided that (i) any of
such Information may be disclosed to Grey Wolf's officers,
directors, employees, representatives, agents, and advisers
who need to know such Information for the purpose of
evaluating the Acquisition, (ii) any disclosure of such
Information may be made to which the Company consents in
writing and (iii) such Information may be disclosed if so
required by law. Any such Information may also be disclosed
by Grey Wolf to the extent such Information is (x) now
publicly known or hereafter becomes public knowledge other
than by any action of Grey Wolf, (y) known by Grey Wolf at the
time of disclosure by the Company independent of any
investigation by Grey Wolf in connection with this transaction
or (z) hereafter obtained by Grey Wolf in a non-confidential
manner from a third party not under a confidentiality
obligation to the Company. If the Acquisition is not
consummated, Grey Wolf will return to the Company all material
containing or reflecting the confidential Information and will
not retain any copies, extracts, or other reproduction
thereof. Grey Wolf will be entitled to conduct environmental
studies and examination and surveys of the Company's assets as
Grey Wolf deems necessary.
7. Buyer shall pay its own costs and expenses incurred in
connection with the proposed Acquisition. The Shareholders
shall pay the costs and expenses of the Shareholders and the
Company incurred by them in connection with the proposed
Acquisition, including without limitation, any investment
banking fees of any investment banker
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hired by the Company or the Shareholders in connection with
the sale of the business of the Company.
8. The parties hereto agree that neither they nor any of their
respective officers, directors, employees or agents shall
disclose to any third party or publicly announce the proposed
Acquisition until such time as the parties agree to make such
disclosure or announcement or unless otherwise required by
law, regulation or rules of the appropriate securities
exchanges. Any public announcement concerning the proposed
Acquisition shall be approved in advance by appropriate
officers of the Company and Grey Wolf.
9. To encourage Grey Wolf to proceed immediately with its due
diligence activity relating to the proposed Acquisition, and
in reliance on Grey Wolf's representation set forth in
Paragraph 3 above, from the date hereof through January 15,
1998, the Company and the Shareholders will not, and they will
use reasonable efforts to insure that the affiliates and
representatives of the Company do not, directly or indirectly,
solicit, entertain or encourage inquiries or proposals to
enter into an agreement or negotiate with any other party, to
sell, or enter into any merger or consolidation with respect
to, all or substantially all of the business and/or assets of
the Company or its subsidiaries or any shares of any class of
capital stock thereof, and the Company will not engage in any
material transaction not in the ordinary course of business
which adversely affects the value of such business or assets.
The Company and the Shareholders will terminate any pending
negotiations or agreements with any third party with respect
to transactions described in this Paragraph.
10. It is understood by the parties hereto that Section I of this
letter merely constitutes a statement of the mutual intentions
of the parties with respect to the proposed Acquisition
outlined herein and does not contain all matters upon which
agreement must be reached in order for the proposed
Acquisition to be consummated. A binding commitment with
respect to the proposed Acquisition will result only from
execution and delivery of the Agreement. The provisions of
Section II of this letter, however, are agreed to be fully
binding on the parties hereto upon the execution of this
letter, unless and until such provisions are superseded by the
Agreement.
11. Without prejudice to the non-binding nature of Section I
hereof, this letter may be terminated and the proposed
Acquisition may be abandoned:
(a) at any time, by mutual consent of the parties hereto;
or
(b) by any party hereto at any time after January 15,
1998, if the Agreement has not been executed and
delivered by the parties thereto by such date.
If this letter is terminated in accordance with the foregoing
provisions of this Paragraph 11, it shall become void and of
no further force and effect, except for the provisions of
Paragraphs 6, 7 and 8 which shall survive such termination;
provided
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that the foregoing shall not relieve any party from liability
for damages actually incurred as a result of any breach of
Section II of this letter.
If the foregoing correctly sets forth the understanding between us
with respect to the proposed Acquisition outlined herein, please sign and
return the enclosed copy of this letter. This letter may be executed in
multiple counterparts, each of which shall be deemed to be an original.
Very truly yours,
GREY WOLF, INC.
By: /s/ Thomas P. Richards
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Thomas P. Richards
President and CEO
ACCEPTED AND AGREED TO: GREY WOLF DRILLING COMPANY
MURCO DRILLING CORPORATION
By: /s/ Thomas H. Murphy By: /s/ Thomas P. Richards
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Thomas H. Murphy Thomas P. Richards
President and CEO President and CEO
SHAREHOLDERS:
/s/ Thomas H. Murphy
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Thomas H. Murphy - 1,734.22 shares
/s/ Alan W. Murphy
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Alan W. Murphy - 1,733 shares
/s/ Edith M. Murphy Shepley
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Edith M. Murphy Shepley - 1,155 shares
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