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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
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GREY WOLF, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2144774
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042-4136
(Address of principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
If this form relates to the registration of a class of securities
pursuant to Section 12(b) of the Exchange Act and is effective pursuant to
General Instruction A.(c), check the following box. [ ]
If this form relates to the registration of a class of securities
pursuant to Section 12(g) of the Exchange Act and is effective pursuant to
General Instruction A.(d), check the following box. [ X ]
Securities Act registration statement file number to which this form
relates: ___________ (if applicable)
Securities to be registered pursuant to Section 12(g) of the Act:
Title of Class
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Rights to Purchase Junior Participating Preferred Stock,
$1.00 Par Value Per Share
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Item 1. Description of Registrant's Securities to be Registered.
On September 18, 1998, the Board of Directors of Grey Wolf, Inc. (the
"Company") declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $0.10 per share
(the "Common Shares"), of the Company. The dividend is payable on October 9,
1998 (the "Record Date") to the shareholders of record on that date. Each
Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series B Junior Participating Preferred Stock,
$1.00 par value per share (the "Preferred Shares"), of the Company at a price
of $11.00 per one one-thousandth of a Preferred Share (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth
in a Rights Agreement dated as of September 21, 1998, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
American Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 15% or more of the
outstanding Common Shares, or (ii) 10 business days (or such later date as may
be determined by action of the Board of Directors prior to such time as any
person or group of affiliated persons becomes an Acquiring Person) following
the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding as of
the Record Date will also constitute the transfer of the Rights associated with
the Common Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on September 18, 2008 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
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The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a preferential quarterly
dividend payment equal to the greater of (i) $1 per share, and (ii) 1,000 times
the dividend declared per Common Share. In the event of liquidation, the
holders of the Preferred Shares will be entitled to a preferential liquidation
payment equal to the greater of (i) $100 per share, and (ii) 1,000 times the
payment made per Common Share. Each Preferred Share will have 1,000 votes,
voting together with the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 1,000 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares, dividend and
liquidation rights, the value of the one one- thousandth interest in a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Common Share.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, unless the event causing the 15% threshold
to be crossed is an acquisition of Common Shares pursuant to a tender offer or
an exchange offer for all outstanding Common Shares at a price and on terms
determined by at least a majority of the directors to be in the best interests
of the Company and its shareholders (a "Qualifying Offer"), the Rights
Agreement provides that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of Common Shares having a
market value of two times the exercise price of the Right. At any time after
any person or group becomes an Acquiring Person and prior to the acquisition by
such person or group of 50% or more of the outstanding Common Shares, the Board
of Directors of the Company may exchange the Rights (other than Rights owned by
such person or group, which will have become void), in whole or in part, at an
exchange ratio of one Common Share, or one one-thousandth of a Preferred Share
(or of a share of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges), per Right (subject to
adjustment).
The Rights Agreement provides that none of the Company's directors,
officers or financial advisers shall be deemed to beneficially own any Common
Shares owned by any other director, officer or financial adviser by virtue of
such persons acting in their capacities as such, including in connection with
the formulation and publication of the Board of Directors recommendation of its
position, and actions taken in furtherance thereof, with respect to an
acquisition proposal relating to the Company or a tender or exchange offer for
the Common Shares.
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold after any person or group becomes an Acquiring Person,
except when such Acquiring Person became an Acquiring Person pursuant to a
Qualifying Offer, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
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With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to ten days after the first public announcement that
any person or group of affiliated or associated persons becomes an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.001 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time on such basis with
such conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The Rights Agreement provides that neither Somerset Drilling
Associates L.L.C. nor Siem Industries, Inc. shall be deemed to be an Acquiring
Person unless they, together with their respective affiliates, acquire 20% or
more of the outstanding Common Shares.
The terms of the Rights Agreement may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
including, prior to the time any person or group becomes an Acquiring Person,
an amendment to (a) specifically exempt any person or group of affiliated or
associated persons from being or being deemed to be an "Acquiring Person,"
subject to such terms and conditions as the Company deem appropriate, (b)
extend the Final Expiration Date, or (c) increase the Purchase Price. From and
after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person, no such amendment may adversely affect the
interests of the holders of the Rights (other than the Acquiring Person and its
affiliates and associates).
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The Rights will not prevent a takeover of the Company. However, the
Rights may cause substantial dilution to a person or group that acquires 15% or
more of the Common Shares unless the Rights are first redeemed by the Board of
Directors. Nevertheless, the Rights should not interfere with any merger or
other business combination approved by the Board of Directors since the Rights
may be redeemed by the Company as described above.
THIS SUMMARY DESCRIPTION OF THE RIGHTS DOES NOT PURPORT TO BE COMPLETE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT, FORM OF
CERTIFICATE OF DESIGNATION OF JUNIOR PARTICIPATING PREFERRED STOCK, FORM OF
RIGHT CERTIFICATE AND THE FORM OF THE SUMMARY OF RIGHTS, ALL FILED AS EXHIBITS
HERETO AND INCORPORATED BY REFERENCE HEREIN.
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Item 2. Exhibits.
<TABLE>
<S> <C>
1. Rights Agreement dated as of September 21, 1998 by and between the Company and American Stock
Transfer & Trust Company as Rights Agent, including Certificate of Designation of Junior Participating
Preferred Stock as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C.
2. Form of Certificate of Designation of Junior Participating Preferred Stock (Exhibit A to the Rights
Agreement)
3. Form of Right Certificate (Exhibit B to the Rights Agreement).
4. Form of Summary of Rights to Purchase Preferred Shares (Exhibit C to the Rights Agreement).
</TABLE>
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
GREY WOLF, INC.
Date: September 21, 1998 By: /s/ DAVID W. WEHLMANN
------------------------------------
David W. Wehlmann, Senior
Vice President, Chief Financial
Officer and Secretary
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EXHIBIT INDEX
<TABLE>
<S> <C>
1. Rights Agreement dated as of September 21, 1998 by and between
the Company and American Stock Transfer & Trust Company as
Rights Agent, including Certificate of Designation of Junior
Participating Preferred Stock as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Rights to Purchase
Preferred Shares as Exhibit C.
2. Form of Certificate of Designation of Junior Participating Preferred Stock (Exhibit A to the Rights
Agreement)
3. Form of Right Certificate (Exhibit B to the Rights Agreement).
4. Form of Summary of Rights to Purchase Preferred Shares (Exhibit C to the Rights Agreement).
</TABLE>
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EXHIBIT 1
GREY WOLF, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Rights Agent
RIGHTS AGREEMENT
Dated as of September 21, 1998
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TABLE OF CONTENTS
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Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Issue of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . . . 7
Section 8. Cancellation and Destruction of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 9. Availability of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10. Preferred Shares Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 12. Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . . . 16
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . . 17
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 16. Agreement of Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 17. Right Certificate Holder Not Deemed a Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . . 20
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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<TABLE>
<S> <C> <C>
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 22. Issuance of New Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 23. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 29. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 30. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 32. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 33. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 34. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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Agreement, dated as of September 21, 1998 ("Agreement"),
between Grey Wolf, Inc., a Texas corporation (the "Company"), and American
Stock Transfer & Trust Company, a New York corporation, as Rights Agent (the
"Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Company outstanding at the Close
of Business on October 9, 1998 (the "Record Date"), each Right representing the
right to purchase one one-thousandth (subject to adjustment) of a Preferred
Share (as hereinafter defined), upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one
Right (subject to adjustment) with respect to each Common Share that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 15% or more of the
Common Shares of the Company then outstanding, but shall not include the
Company, any Subsidiary (as such term is hereinafter defined) of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company, or
any entity holding Common Shares for or pursuant to the terms of any such plan.
Notwithstanding the foregoing: (i) no Person shall become an "Acquiring Person"
as the result of an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate number
of shares beneficially owned by such Person to 15% or more of the Common Shares
of the Company then outstanding; provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the Common Shares of the Company
then outstanding by reason of share purchases by the Company and shall, after
such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company, then such Person shall be deemed to be
an "Acquiring Person," unless upon the consummation of such acquisition of
beneficial ownership by such Person such Person is not the Beneficial Owner of
15% or more of the Common Shares of the Company then outstanding; (ii) Somerset
Drilling Associates L.L.C. and its Affiliates and Associates shall not be
deemed to be an Acquiring Person so long as they are the Beneficial Owner of no
more than 20% of the Common Shares of the Company then outstanding; (iii) Siem
Industries, Inc. and its Affiliates and Associates shall not be deemed to be an
Acquiring Person so long as they are the Beneficial Owner of no more than 20%
of the Common Shares of the Company then outstanding; and (iv) if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), became such inadvertently (including, without
limitation, because (x) such Person was unaware that it beneficially owned a
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percentage of the Common Shares of the Company that would otherwise cause such
Person to be an "Acquiring Person" or (y) such Person was aware of the extent of
its beneficial ownership of Common Shares of the Company but had no actual
knowledge of the consequences of such beneficial ownership under this Agreement)
and without any intention of changing or influencing control of the Company, and
if such Person as promptly as practicable divested or divests itself of
beneficial ownership of a sufficient number of Common Shares of the Company so
that such Person would no longer be an "Acquiring Person" as defined pursuant to
the foregoing provisions of this paragraph (a), then such Person shall not be
deemed to be or to have become an "Acquiring Person" for any purposes of this
Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended, as in
effect on the date of this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and
between underwriters and selling group members with respect to
a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other
than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided further,
however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security
(1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the
Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any
of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with
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respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1 (c)(ii)(B)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial
Owner to the contrary, the phrase "then outstanding," when used with reference
to a Person's beneficial ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
Notwithstanding the foregoing, none of the Company's
directors, officers or financial advisers shall be deemed to be the Beneficial
Owner of, or to beneficially own, any Common Shares of the Company owned by any
other director, officer or financial adviser of the Company by virtue of such
persons acting in their capacities as such, including, without limitation, in
connection with any formulation and publication of the Board of Director's
recommendation of a position, and any actions taken in furtherance thereof,
with respect to any acquisition proposal relating to the Company, any tender or
exchange offer for the Common Shares of the Company, or any solicitation of
proxies with respect to the Common Shares of the Company.
(d) "Business Day" shall mean any day other than a
Saturday, a Sunday, or a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00
P.M., New York time, on such date; provided, however, that if such date is not
a Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the
Company shall mean the shares of common stock, par value $0.10 per share, of
the Company. "Common Shares" when used with reference to any Person other than
the Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth
in Section 3(a) hereof.
(h) "Flip-In Event" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(i) "Person" shall mean any individual, partnership,
firm, corporation or other entity, and shall include any successor (by merger
or otherwise) of such entity.
(j) "Preferred Shares" shall mean shares of Series B
Junior Participating Preferred Stock, $1.00 par value per share, of the Company
having the rights and preferences set forth in the Form of Certificate of
Designations attached to this Agreement as Exhibit A.
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(k) "Purchase Price" shall have the meaning set forth in
Section 7(b) hereof.
(l) "Redemption Date" shall have the meaning set forth in
Section 7(a) hereof.
(m) "Shares Acquisition Date" shall mean the first date
of public announcement (which for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(n) "Subsidiary" of any Person shall mean any corporation
or other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Section 2. Appointment of Rights Agent. The Company
hereby appoints the Rights Agent to act as agent for the Company and the
holders of the Rights (who, in accordance with Section 3 hereof, shall prior to
the Distribution Date also be the holders of the Common Shares) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the
earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the
tenth Business Day (or such later date as may be determined by action of the
Board of Directors prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding Common Shares
for or pursuant to the terms of any such plan) of, or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or pursuant
to the terms of any such plan) to commence, a tender or exchange offer the
consummation of which would result in any Person becoming the Beneficial Owner
of Common Shares aggregating 15% or more of the then outstanding Common Shares
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights; the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereto) by the certificates for Common Shares
registered in the names of the holders thereof and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be
sent (and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right (subject to
adjustment) for each Common Share so held. As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
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<PAGE> 8
(b) On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Preferred Shares, in substantially the form of Exhibit C hereto (the "Summary
of Rights"), by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Record Date, at the address of
such holder shown on the records of the Company. With respect to certificates
for Common Shares outstanding as of the Record Date, until the Distribution
Date, the Rights will be evidenced by such certificates registered in the names
of the holders thereof. Until the Distribution Date (or the earlier of the
Redemption Date or the Final Expiration Date), the surrender for transfer of
any certificate for Common Shares outstanding on the Record Date shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Certificates for Common Shares which become
outstanding (including, without limitation, reacquired Common Shares referred
to in the last sentence of this paragraph (c)) after the Record Date but prior
to the earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between
Grey Wolf, Inc. and American Stock Transfer & Trust Company,
dated as of September 21, 1998, as the same may be amended
from time to time, (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of Grey
Wolf, Inc. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. Grey Wolf, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights
owned by any Person who is or becomes an Acquiring Person (as
defined in the Rights Agreement) and certain transferees
thereof may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.
Section 4. Form of Right Certificates. The Right
Certificates (and the forms of election to purchase Preferred Shares and of
assignment to be printed on the reverse thereof) shall be substantially the
same as Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be
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<PAGE> 9
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-thousandths of a Preferred
Share as shall be set forth therein at the Purchase Price, but the number of
such one one-thousandths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President, any of its Vice Presidents,
or its Treasurer, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned.
In case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as
though the person who signed such Right Certificates had not ceased to be such
officer of the Company; and any Right Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right Certificates, the number
of Rights evidenced on its face by each of the Right Certificates and the date
of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
Subject to the provisions of Section 14 hereof, at any time after the Close of
Business on the Distribution Date, and at or prior to the Close of Business on
the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one
one-thousandths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may
require
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<PAGE> 10
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will make and
deliver a new Right Certificate of like tenor to the Rights Agent for delivery
to the registered holder in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights. (a) The registered holder of any Right Certificate
may, subject to the second paragraph of Section 11(a)(ii), exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly
executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-thousandth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the Close of Business on September 18, 2008 (the "Final
Expiration Date"), (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the "Redemption Date"), or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-thousandth of a
Preferred Share purchasable pursuant to the exercise of a Right shall
initially be $11.00, and shall be subject to adjustment from time to time as
provided in Section 11 or 13 hereof and shall be payable in lawful money of the
United States of America in accordance with paragraph (c) below (the "Purchase
Price").
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased and
an amount equal to any applicable transfer tax required to be paid by the
holder of such Right Certificate in accordance with Section 9 hereof by
certified check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Shares certificates for the number of Preferred
Shares to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing interests in such number one
one-thousandths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall he
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and
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<PAGE> 11
(iv) when appropriate, after receipt, deliver such cash to or upon the order of
the registered holder of such Right Certificate.
(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to-such holder's duly authorized assigns, subject to
the provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights Agent, shall
be canceled by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Rights
Agreement. The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any other Right
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares or any Preferred
Shares held in its treasury, the number of Preferred Shares that will be
sufficient to permit the exercise in full of all outstanding Rights in
accordance with Section 7. The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all Preferred Shares
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(b) The Company shall use its best efforts (i) to file,
as soon as practicable following the earliest date after the occurrence of a
Flip-In Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section
11(a)(iii) hereof, or as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under the Securities Act of
1933 (the "Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) to cause such registration statement to
become effective as soon as practicable after such filing, and (iii) to cause
such registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the
date of the expiration of the Rights. The Company will also take such action
as may be appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this Section 9(b), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to become
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<PAGE> 12
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is
no longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(c) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Right Certificates or of any Preferred Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a
Person other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Preferred
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in
whose name any certificate for Preferred Shares is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Preferred Shares represented thereby on, and such certificate shall be
dated, the date upon which the Right Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Shares transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of
such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Shares transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a holder of Preferred
Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind
of Shares or Number of Rights. The Purchase Price, the number of Preferred
Shares or other securities covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares,
(C) combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification of
the Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise
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<PAGE> 13
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event
any Person becomes an Acquiring Person (the first occurrence of such event
being referred to hereinafter as the "Flip-In Event"), unless the event causing
the 15% threshold to be crossed is an acquisition of Common Shares pursuant to
a tender offer or an exchange offer for all outstanding Common Shares at a
price and on terms determined by at least a majority of the directors to be in
the best interests of the Company and its shareholders (a "Qualifying Offer")
then: (A) the Purchase Price shall be adjusted to be the Purchase Price in
effect immediately prior to the Flip-In Event multiplied by the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such Flip-In Event, whether or not such Right was then
exercisable, and (B) each holder of a Right, except as otherwise provided in
this Section 11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the
right to receive, upon exercise thereof at a price equal to the Purchase Price
(as so adjusted), in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares as shall equal the result
obtained by dividing the Purchase Price (as so adjusted) by 50% of the current
per share market price of the Common Shares (determined pursuant to Section
11(d) hereof) on the date of such Flip-In Event, provided, however, that the
Purchase Price (as so adjusted) and the number of Common Shares so receivable
upon exercise of a Right shall, following the Flip-In Event, be subject to
further adjustment as appropriate in accordance with Section 11(f) hereof.
Notwithstanding anything in this Agreement to the contrary,
however, from and after the Flip-In Event, any Rights that are beneficially
owned by (x) any Acquiring Person (or any Affiliate or Associate of any
Acquiring Person), (y) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who becomes a transferee after the Flip-In Event or (z)
a transferee of any Acquiring Person (or any such Affiliate or Associate) who
became a transferee prior to or concurrently with the Flip-In Event pursuant to
either (I) a transfer from the Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (II) a
transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has the purpose or effect of
avoiding the provisions of this paragraph, and subsequent transferees of such
Persons, shall be void without any further action and any holder of such Rights
shall thereafter have no rights whatsoever with respect to such Rights under
any provision of this Agreement. Without limitation to the foregoing, (x) no
Right Certificate shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would be void pursuant
to the preceding sentence or any Associate or Affiliate
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<PAGE> 14
thereof, (y) no Right Certificate shall be issued at any time upon the transfer
of any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate, and (z) any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence shall be canceled.
(iii) If the number of Common Shares that are authorized by
the Company's Articles of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights are not sufficient
to permit the exercise in full of the Rights in accordance with Section
11(a)(ii) hereof, the Company shall (A) determine an amount (the "Excess
Amount") equal to the excess of the value (the "Current Value") of the
aggregate number of Common Shares that would otherwise be issuable upon the
exercise of a Right in accordance with Section 11(a)(ii) hereof over the
Purchase Price and (B) with respect to each Right, substitute for such Common
Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Shares (to the extent available) or
other equity securities of the Company, (4) debt securities of the Company, (5)
other assets or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value (less the amount of any reduction in the Purchase
Price), where such aggregate value has been determined by a majority of the
Board of Directors of the Company, based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors of the
Company; provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within 30 days
following the date of a Flip-In Event (the "Flip-In Event Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, Common Shares (to
the extent available) and then, if necessary, cash, securities and/or assets
that have an aggregate value equal to the Excess Amount, where such aggregate
value has been determined by a majority of the Board of Directors of the
Company based upon the advice of a nationally recognized investment banking
firm selected by the Board of Directors of the Company; provided, further,
however, that if the Board of Directors shall determine in good faith that it
is likely that sufficient additional Common Shares could be authorized for
issuance upon exercise of the Rights in full, the 30-day period referred to
above (such period, as it may be extended, being referred to hereinafter as the
"Substitution Period") may, in the sole discretion of the Board of Directors,
be extended to the extent necessary, but not more than 90 days following the
Flip-In Event Date, in order for the Company to seek shareholder approval
for the authorization of such additional shares. To the extent that action is
to be taken pursuant to the first sentence of this Section 11(a)(iii), the
Company (1) shall provide, subject to the exceptions specified in Section
11(a)(ii) hereof, that such action shall to the maximum extent possible apply
uniformly to the holders of all outstanding Rights that shall not have become
null and void and (2) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any corporate
authorizations, to decide the appropriate form of distribution to be made
pursuant to such first sentence, to determine the value thereof, or to take any
combination of such actions. In the event of any such suspension, the Company
shall issue a public announcement (with prompt notice thereof to the Rights
Agent) stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement (with prompt notice thereof to the
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<PAGE> 15
Rights Agent) at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of the Common Shares shall be
the current per share market price per Common Share (as determined pursuant to
Section 11(d) hereof) on the Flip-In Event Date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a Preferred Share or equivalent preferred share
(or conversion price per share, if a security convertible into Preferred Shares
or equivalent preferred shares) less than the then current per share market
price of the Shares (as defined in Section 11(d)) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent. Preferred Shares owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such
a record date is fixed; and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of the Preferred Shares (including any
such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current per share market price of the
Preferred Shares on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent) of the portion
of the assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share and the
denominator of which
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<PAGE> 16
shall be such current per share market price of the Preferred Shares; provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital
stock of the Company to be issued upon exercise of one Right. Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Security is determined during a period following the announcement by the
issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares,
or (B) any subdivision, combination or reclassification of such Security and
prior to the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the American Stock
Exchange or, if the Security is not listed or admitted to trading on the
American Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
American Stock Exchange or such other system then in use, or, if on
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the Board
of Directors of the Company. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the Security is listed or
admitted to trading is open for the transaction of business or, if the Security
is not listed or admitted to trading on any national securities exchange, a
Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value
per share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.
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(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one one-
millionth of a Preferred Share or one ten-thousandth of any other share or
security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the right
to exercise any Rights.
(f) If as a result of an adjustment made pursuant to
Section 11(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Shares, thereafter the Purchase Price and the number of such other
shares so receivable upon exercise of any Right shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Preferred Shares contained in Section
11(a), (b), (c), (e), (h), (i) and (m) hereof, as applicable, and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-thousandths of a Preferred Share purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-thousandths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one one thousandths of a
Preferred Share purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one one-thousandths of a Preferred Share for which a Right
was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the
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<PAGE> 18
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a Preferred Share
issuable upon the exercise of the Rights, the Right Certificates theretofore
and thereafter issued may continue to express the Purchase Price and the number
of one one-thousandths of a Preferred Share which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below one one-thousandth of the then par
value, if any, of the Preferred Shares issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date of the Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Preferred
Shares and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or
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<PAGE> 19
issuance of rights, options or warrants referred to hereinabove in Section
11(b), hereafter made by the Company to holders of its Preferred Shares shall
not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not,
at any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or otherwise transfer (or permit any Subsidiary to sell
or otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company or one or more of its wholly owned Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger or sale, the stockholders
of the Person who is obligated pursuant Section 13(a) hereof to issue Common
Shares upon the occurrence of an event described in Section 13(a) hereof shall
have received a distribution of Rights previously owned by such Person or any
of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.
(p) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-thousandths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the
number of one one-thousandths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such event,
and (B) each Common Share outstanding immediately after such event shall have
issued with respect to it that number of Rights which each Common Share
outstanding immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11 (p) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in Section 11 or
13 hereof, the Company shall promptly (a) prepare a certificate setting forth
such adjustment, and a brief statement of the facts
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<PAGE> 20
accounting for such adjustment, (b) file with the Rights Agent and with each
transfer agent for the Common Shares or the Preferred Shares a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement of such
adjustment.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. (a) In the event, directly or indirectly, at any time
after the Flip-In Event (i) the Company shall consolidate with, or merge with
and into, any Person, (ii) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the continuing or
surviving corporation of such merger and, in connection with such merger, all
or part of the Common Shares shall be changed into or exchanged for stock or
other securities of any other Person (or the Company) or cash or any other
property, or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (w) each holder of a Right (other than Rights which have become void
pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to
receive, upon the exercise thereof at the Purchase Price (as theretofore
adjusted in accordance with Section 11 (a)(ii) hereto, in accordance with the
terms of this Agreement and in lieu of Preferred Shares or Common Shares of the
Company, such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable Common Shares of such other Person
(including the Company as successor thereto or as the surviving corporation),
not subject to any liens, encumbrances, rights of first refusal or other
adverse claims, as shall equal the result obtained by (A) dividing the Purchase
Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) by
(B) 50% of the then current per share market price of the Common Shares of such
other Person (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; provided,
however, that the Purchase Price (as theretofore adjusted in accordance with
Section 11(a)(ii) hereof) and the number of Common Shares of such other Person
so receivable upon exercise of a Right shall be subject to further adjustment
as appropriate in accordance with Section 11(f) hereof to reflect any events
occurring in respect of the Common Shares of such other Person after the
occurrence of such consolidation, merger, sale or transfer; (x) the issuer of
such Common Shares shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (y) the term "Company" shall
thereafter be deemed to refer to such issuer; and (z) such issuer shall take
such steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with Section 9 hereof) in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the Common Shares thereafter deliverable upon the exercise of the Rights. The
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The
Company shall not enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any
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<PAGE> 21
agreements or arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits intended to
be afforded by the Rights.
(b) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (i) and (ii) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired the Common Shares pursuant to
a Qualifying Offer (or a wholly owned subsidiary of such Person or Persons),
(ii) the price per share of Common Shares offered in such transaction is not
less than the price per share of Common Shares paid to all holders of shares of
Common Shares whose shares were purchased pursuant to such tender offer or
exchange offer, and (iii) the form of consideration being offered to the
remaining holders of shares of Common Shares pursuant to such transaction is
the same as the form of consideration paid pursuant to such tender offer or
exchange offer. Upon consummation of any such transaction contemplated by this
Section 13(b), all rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares. (a)
The Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the American Stock
Exchange or, if the Rights are not listed or admitted to trading on the
American Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
American Stock Exchange or such other system then in use or, if on any such
date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If
on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined in good faith by the Board
of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions
of Preferred Shares (other than fractions which are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share). Interests in fractions of Preferred Shares in integral multiples of
one one-thousandth of a Preferred Share may, at the election of the Company,
be evidenced by depositary receipts, pursuant to an appropriate agreement
between the Company and a depositary selected by it; provided, that such
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<PAGE> 22
agreement shall provide that the holders of such depositary receipts shall have
all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral
multiples of one one-thousandth of a Preferred Share, the Company shall pay to
the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of one Preferred Share. For the purposes of this
Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11 (d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives such holder's right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in
respect of this Agreement, excepting the rights of action given to the Rights
Agent under Section 18 hereof, are vested in the respective registered holders
of the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares), without
the consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Shares), may, in such
holder's own behalf and for such holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder's right to exercise the
Rights evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of
a Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat
the Person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Shares certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the associated
Common Shares certificate made by anyone other than the Company or the Rights
Agent) for all
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<PAGE> 23
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a
Shareholder. No holder, as such, of any Right Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the
Preferred Shares or any other securities of the Company which may at any time
be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting shareholders (except as provided in Section 25
hereto, or to receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Right Certificate shall have been exercised
in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and counsel fees and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises.
The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust powers of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature
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<PAGE> 24
of the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or in
the Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
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<PAGE> 25
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 11(a)(ii) hereto or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in this
Agreement, or the ascertaining of the existence of facts that would require any
such change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice that such change or
adjustment is required); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
Preferred Shares or any Common Shares to be issued pursuant to this Agreement
or any Right Certificate or as to whether any Preferred Shares or Common Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it in
good faith in accordance with instructions of any such officer or for any delay
in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days'
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notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Shares or Preferred
Shares by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. if the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit such holder's Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be a corporation organized and doing business under the
laws of the United States or of any state of the United States, in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal
or state authorities and which has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the Common
Shares or Preferred Shares, and mail a notice thereof in writing to the
registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Company may, at its
option and with the approval of the Board of Directors, at any time prior to
the Close of Business on the earlier of (i) the tenth day following the Shares
Acquisition Date (or such later date as may be determined by action of the
Company's Board of Directors and publicly announced by the Company) and (ii)
the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being herein referred to
as the "Redemption Price"). Such redemption of the Rights by the Company may
be made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. Notwithstanding
anything contained in this Agreement to the
23
<PAGE> 27
contrary, the Rights shall not be exercisable after the occurrence of a Flip-In
Event until such time as the Company's right of redemption hereunder has
expired.
(b) Immediately upon the effectiveness of the redemption
of the Rights pursuant to paragraph (a) of this Section 23, and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly give public notice of
any such redemption; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. Within
10 days after the effectiveness of the redemption of the Rights, the Company
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. Exchange. (a) The Board of Directors of the
Company may, at its option, at any time after the Flip-In Event, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding. The exchange of the Rights by the Board of Directors of the
Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors of the Company in its sole discretion may
establish.
(b) Immediately upon the effectiveness of the action of
the Board of Directors of the Company ordering the exchange of any Rights
pursuant to paragraph (a) of this Section 24 and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that
number of Common Shares equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books
of the Rights Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be
24
<PAGE> 28
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 11(a)(ii) hereof) held by
each holder of Rights.
(c) In the event that there shall not be sufficient
Common Shares issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exchange of the Rights. In the event the
Company shall, after good faith effort, be unable to take all such action as
may be necessary to authorize such additional Common Shares, the Company shall
substitute, for each Common Share that would otherwise be issuable upon
exchange of a Right, a number of Preferred Shares or fraction thereof such that
the current per share market price of one Preferred Share multiplied by such
number or fraction is equal to the current per share market price of one Common
Share as of the date of issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions
of Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this paragraph (d), the current market value of a whole Common
Share shall be the closing price of a Common Share (as determined pursuant to
the second sentence of Section 11 (d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company
shall propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any other distribution to the
holders of its Preferred Shares (other than a regular quarterly cash dividend),
(ii) to offer to the holders of its Preferred Shares rights or warrants to
subscribe for or to purchase any additional Preferred Shares or shares of stock
of any class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, (v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to declare or pay any dividend on the Common Shares payable in
Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior to the record
date for determining holders of the
25
<PAGE> 29
Preferred Shares for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the Common Shares
and/or Preferred Shares, whichever shall be the earlier.
(b) From and after the Flip-In Event, the Company shall
as soon as practicable give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to
holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by
this Agreement to be given or made by the Rights Agent or by the holder of any
Right Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Grey Wolf Inc.
10370 Richmond Ave.
Houston, Texas 77042-4136
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another
addresses filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may
from time to time, and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions with respect to the
Rights which the Company may deem necessary or desirable, any such supplement
or amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that from and after the Flip-In Event, this Agreement
shall not be amended in any manner which would adversely affect the interests
of the holders of Rights (other than any Acquiring Person and its Affiliates
and Associates). Without limiting the foregoing, the Company may at any time
prior to such time as any Person becomes an Acquiring Person amend this
Agreement to (a) specifically exempt any
26
<PAGE> 30
Person from being or being deemed to be an Acquiring Person, subject to such
terms and conditions as the Company deems appropriate, (b) fix a Final
Expiration Date later than the date set forth in Section 7 hereof or (c)
increase the Purchase Price.
Section 28. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the Rights Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 30. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Texas and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings
of the several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
Section 34. Administration. The Board of Directors of
the Company shall have the exclusive power and authority to administer and
interpret the provisions of this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors of the Company or the
Company or as may be necessary or advisable in the administration of this
Agreement. All such actions, calculations, determinations and interpretations
which are done or made by the Board of Directors of the Company in good faith
shall be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties and shall not subject the Board of
Directors of the Company to any liability to the holders of the Rights.
27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.
GREY WOLF, INC.
Attest:
By By: /s/ DAVID W. WEHLMANN
------------------------- ----------------------------------
Name: David W. Wehlmann,
------------------------- Senior Vice President,
Title: Chief Financial Officer
------------------------ and Secretary
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By /s/ GERALDINE ZARBO By: /s/ JOSEPH WOLFE
------------------------ ----------------------------------
Geraldine Zarbo Joseph Wolfe
Vice President Vice President
<PAGE> 32
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATION
of
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
GREY WOLF, INC.
(Pursuant to Art. 2.13 of the Texas Business Corporation Act)
--------------------------------------------------
Grey Wolf, Inc., a corporation organized and existing under
the Business Corporation Act of the State of Texas (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Article 2.13 of the
Texas Business Corporation Act by the Board of Directors dated September 18,
1998:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation of the Corporation (hereinafter called the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of Preferred
Stock, $1.00 par value per share (the "Preferred Stock"), of the Corporation
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series B Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of this
series shall be designated as "Series B Junior Participating Preferred Stock"
(the "Series B Preferred Stock") and the number of shares constituting the
Series B Preferred Stock shall be two hundred fifty thousand (250,000). Such
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series B Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series B
Preferred Stock.
A-1
<PAGE> 33
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any other stock) ranking prior and
superior to the Series B Preferred Stock with respect to dividends,
the holders of shares of Series B Preferred Stock, in preference to
the holders of Common Stock, par value $.10 per share (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last day of March, June, September
and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series B Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth,
1,000 times the aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series B Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of
Series B Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series B Preferred Stock as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share
on the Series B Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such
A-2
<PAGE> 34
shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares
of Series B Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series B Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Each share of Series B Preferred Stock shall entitle
the holder thereof to one thousand votes on all matters submitted to a
vote of the shareholders of the Corporation.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or
any similar stock, in the Certificate of Incorporation of the
Corporation or by law, the holders of shares of Series B Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided
by law, holders of Series B Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series B Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series B Preferred Stock;
A-3
<PAGE> 35
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock, except
dividends paid ratably on the Series B Preferred Stock and all
such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series B Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series B
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock, or any
shares of stock ranking on a parity with the Series B
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (upon
liquidation, dissolution or winding up) to the Series B Preferred Stock unless,
prior thereto, the holders of shares of Series B Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such
payment, provided that the holders of shares of Series B Preferred Stock shall
be entitled to receive an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount
to be
A-4
<PAGE> 36
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (upon liquidation, dissolution or
winding up) with the Series B Preferred Stock, except distributions made ratably
on the Series B Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series B Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, Etc. In case the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case each share of Series B Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Series B Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series B
Preferred Stock shall not be redeemable.
Section 9. Rank. The Series B Preferred Stock shall
rank, with respect to the payment of dividends and the distribution of assets,
junior to all other series of Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series B
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series B
Preferred Stock, voting together as a single class.
A-5
<PAGE> 37
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its President and Chief Executive Officer this ___
day of September, 1998.
GREY WOLF, INC.
By:
------------------------------------------
Thomas P. Richards, President and Chief
Executive Officer
A-6
<PAGE> 38
EXHIBIT B
Form of Right Certificate
Certificate No. R- ____________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 18, 2008, OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY ANY
PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF MAY
BECOME NULL AND VOID.
Right Certificate
GREY WOLF, INC.
This certifies that _______________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of September 21, 1998, as the same
may be amended from time to time (the "Rights Agreement"), between Grey Wolf,
Inc., a Texas corporation (the "Company"), and American Stock Transfer & Trust
Company (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., New York time, on September 18, 2008, at the principal office of the
Rights Agent, or at the office of its successor as Rights Agent, one
one-thousandth of a fully paid non-assessable share of Series B Junior
Participating Preferred Stock, $1.00 par value per share (the "Preferred
Shares"), of the Company, at a purchase price of $11.00 per one one-thousandth
of a Preferred Share (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of September 21, 1998, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-thousandths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
<PAGE> 39
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Right
Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the abovementioned offices of the Rights
Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the Rights Agent, may
be exchanged for another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of Preferred Shares as the Rights evidenced by the Right Certificate or
Right Certificates surrendered shall have entitled such holder to purchase. If
this Right Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a
redemption price of $.001 per Right or (ii) may be exchanged in whole or in
part for Preferred Shares or shares of the Company's Common Stock, par value
$0.10 per share.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a Preferred Share, which may,
at the election of the Company, be evidenced by depositary receipts), but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-2
<PAGE> 40
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _________________________.
ATTEST: GREY WOLF, INC.
By By:
-------------------------------- -------------------------------
Name: Name:
-------------------------------- -------------------------------
Title: Title:
-------------------------------- -------------------------------
Countersigned:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By
---------------------------------------
Authorized Signature
B-3
<PAGE> 41
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto ________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ________________________
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
-----------------, -------
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., a commercial bank savings association, credit union
or trust company having an office or correspondent in the United States or
other eligible guarantor institution which is a participant in a signature
guarantee medallion program.
- ----------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
----------------------------------
Signature
- ----------------------------------------------------------------------------
<PAGE> 42
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: GREY WOLF, INC.
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number ___________________________
- ----------------------------------------------------------------------------
(Please print name and address)
- ----------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number ___________________________
- ----------------------------------------------------------------------------
(Please print name and address)
- ----------------------------------------------------------------------------
Dated:
--------------------, -------
--------------------------------------
Signature
<PAGE> 43
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank, savings association, credit
union or trust company having an office or correspondent in the United States
or other eligible guarantor institution which is a participant in a signature
guarantee medallion program.
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
--------------------------------------
Signature
- ----------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case maybe, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
<PAGE> 44
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF MAY
BECOME NULL AND VOID.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On September 18, 1998, the Board of Directors of Grey Wolf, Inc. (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of common stock, par value $0.10 per share (the
"Common Shares"), of the Company. The dividend is payable on October 9, 1998
(the "Record Date") to the shareholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series B Junior Participating Preferred Stock, $1.00 par value per
share (the "Preferred Shares"), of the Company at a price of $11.00 per one
one-thousandth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement dated as of September 21, 1998, as the same may be amended from time
to time (the "Rights Agreement"), between the Company and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 15% or more of the
outstanding Common Shares, or (ii) 10 business days (or such later date as may
be determined by action of the Board of Directors prior to such time as any
person or group of affiliated persons becomes an Acquiring Person) following
the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding as of
the Record Date will also constitute the transfer of the Rights associated with
the Common Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
<PAGE> 45
The Rights are not exercisable until the Distribution Date. The
Rights will expire on September 18, 2008 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a preferential quarterly
dividend payment equal to the greater of (i) $1 per share, and (ii) 1,000 times
the dividend declared per Common Share. In the event of liquidation, the
holders of the Preferred Shares will be entitled to a preferential liquidation
payment equal to the greater of (i) $100 per share, and (ii) 1,000 times the
payment made per Common Share. Each Preferred Share will have 1,000 votes,
voting together with the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 1,000 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares, dividend and
liquidation rights, the value of the one one-thousandth interest in a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Common Share.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, unless the event causing the 15% threshold
to be crossed is an acquisition of Common Shares pursuant to a tender offer or
an exchange offer for all outstanding Common Shares at a price and on terms
determined by at least a majority of the directors to be in the best interests
of the Company and its shareholders (a "Qualifying Offer"), the Rights
Agreement provides that each holder of a Right, other than Rights beneficially
owned by the Acquiring
C-2
<PAGE> 46
Person (which will thereafter be void), will thereafter have the right to
receive upon exercise that number of Common Shares having a market value of two
times the exercise price of the Right. At any time after any person or group
becomes an Acquiring Person and prior to the acquisition by such person or
group of 50% or more of the outstanding Common Shares, the Board of Directors
of the Company may exchange the Rights (other than Rights owned by such person
or group, which will have become void), in whole or in part, at an exchange
ratio of one Common Share, or one one-thousandth of a Preferred Share (or of a
share of a class or series of the Company's preferred stock having equivalent
rights, preferences and privileges), per Right (subject to adjustment).
The Rights Agreement provides that none of the Company's directors,
officers or financial advisers shall be deemed to beneficially own any Common
Shares owned by any other director, officer or financial adviser by virtue of
such persons acting in their capacities as such, including in connection with
the formulation and publication of the Board of Directors recommendation of its
position, and actions taken in furtherance thereof, with respect to an
acquisition proposal relating to the Company or a tender or exchange offer for
the Common Shares.
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold after any person or group becomes an Acquiring Person,
except when such Acquiring Person became an Acquiring Person pursuant to a
Qualifying Offer, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to ten days after the first public announcement that
any person or group of affiliated or associated persons becomes an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.001 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time on such basis with
such conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The Rights Agreement provides that neither Somerset Drilling
Associates L.L.C. nor Siem Industries, Inc. shall be deemed to be an Acquiring
Person unless they, together with their respective affiliates, acquire 20% or
more of the outstanding Common Shares.
C-3
<PAGE> 47
The terms of the Rights Agreement may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
including, prior to the time any person or group becomes an Acquiring Person,
an amendment to (a) specifically exempt any person or group of affiliated or
associated persons from being or being deemed to be an "Acquiring Person,"
subject to such terms and conditions as the Company deem appropriate, (b)
extend the Final Expiration Date, or (c) increase the Purchase Price. From and
after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person, no such amendment may adversely affect the
interests of the holders of the Rights (other than the Acquiring Person and its
affiliates and associates).
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The Rights will not prevent a takeover of the Company. However, the
Rights may cause substantial dilution to a person or group that acquires 15% or
more of the Common Shares unless the Rights are first redeemed by the Board of
Directors. Nevertheless, the Rights should not interfere with any merger or
other business combination approved by the Board of Directors since the Rights
may be redeemed by the Company as described above.
THIS SUMMARY DESCRIPTION OF THE RIGHTS DOES NOT PURPORT TO BE COMPLETE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT, WHICH IS
HEREBY INCORPORATED BY REFERENCE.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.
C-4
