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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1999
REGISTRATION NO. 333-86949
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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GREY WOLF, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2144774
(STATE OF JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042-4136
(713) 435-6100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANTS
PRINCIPAL EXECUTIVE OFFICES)
---------------------------
DAVID W. WEHLMANN
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042-4136
(713) 435-6100
FAX: (713) 435-6171
(NAME, ADDRESS, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------------------
COPY TO:
NICK D. NICHOLAS
PORTER & HEDGES, L.L.P.
700 LOUISIANA, SUITE 3500
HOUSTON, TEXAS 77002
(713) 226-0600
FAX: (713) 226-0237
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time
to time after the registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 6, 1999
PROSPECTUS
[LOGO]
$200,000,000
GREY WOLF, INC.
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
DEBT SECURITIES
WARRANTS
---------------------------
We may offer and sell from time to time in one or more classes or
series:
o common stock;
o preferred stock;
o depositary shares relating to our preferred stock;
o debt securities; and
o warrants to purchase debt securities, common stock or
preferred stock.
The aggregate initial offering price of the securities that we will
offer will not exceed $200,000,000. We will offer the securities in amounts at
prices and on terms to be determined by market conditions at the time of our
offerings.
We will provide the specific terms of the securities in supplements to
this prospectus. You should read this prospectus and the prospectus supplements
carefully before you invest in any of our securities. This prospectus may not be
used to consummate sales of our securities unless it is accompanied by a
prospectus supplement.
Our common stock trades on the American Stock Exchange under the symbol
"GW."
BEFORE INVESTING IN OUR SECURITIES, YOU SHOULD REVIEW THE RISK FACTORS
BEGINNING ON PAGE 3 IN THIS PROSPECTUS TO UNDERSTAND THE RISKS THAT MAY BE
ASSOCIATED WITH PURCHASING OUR SECURITIES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under this
prospectus or determined that this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This prospectus is dated October ____, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
About this Prospectus.............................................................................................1
Where You Can Find More Information...............................................................................1
Grey Wolf, Inc....................................................................................................2
Forward-looking Statements........................................................................................2
Risk Factors......................................................................................................3
Use of Proceeds..................................................................................................12
Ratio of Earnings to Fixed Charges And Earnings to Fixed Charges And Preferred Stock Dividends...................12
Description of Debt Securities...................................................................................14
Description of Other Indebtedness................................................................................22
Description of Capital Stock.....................................................................................23
Description of Depositary Shares.................................................................................25
Description of Warrants..........................................................................................27
Plan of Distribution.............................................................................................31
Legal Matters....................................................................................................33
Experts ........................................................................................................33
</TABLE>
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed
with the SEC utilizing a "shelf" registration process. Under this shelf
registration process, we may sell different types of securities described in
this prospectus in one or more offerings up to a total offering amount of $200.0
million. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering and the securities offered by us in that offering. The prospectus
supplement may also add, update or change information in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described under the heading "Where You Can Find More
Information."
In this prospectus references to "Grey Wolf," "we," "us" and "our" mean
Grey Wolf, Inc.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings, including the registration
statement, are available to the public over the Internet at the SEC's web site
at http://www.sec.gov. You also may read and copy any document we file at the
SEC's public reference room in Washington, D.C. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.
The SEC allows us to include some of the information required to be in
the registration statement by incorporating that information by reference to
documents we file with them. That means we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 until we sell all of the securities:
o our annual report on Form 10-K for the year ended
December 31, 1998;
o our quarterly report on Form 10-Q for the quarter
ended June 30, 1999;
o our quarterly report on Form 10-Q for the quarter
ended March 31, 1999;
o our current report on Form 8-K, filed on March 23,
1999;
o the description of our common stock contained in our
current report on Form 8-K dated October 6, 1997;
and
o the description of our preferred stock purchase
rights contained in our registration statement on
Form 8-A/A filed with the SEC on October 9, 1998.
You may request a copy of these filings, at no cost, by writing or
calling us at the following address:
Grey Wolf, Inc.
10370 Richmond Avenue, Suite 600
Houston, Texas 77042-4136
(713) 435-6100
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted.
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GREY WOLF, INC.
Grey Wolf, Inc. is a leading provider of contract land drilling
services in the United States with a domestic fleet of 120 rigs. In addition to
our domestic operations, we maintain a fleet of five inventory rigs in
Venezuela, giving us a total of 125 rigs, 108 of which are marketable. We
believe we have the largest number of working rigs in our combined market areas
which include the Gulf Coast, South Texas, Ark-La-Tex and Mississippi/Alabama
markets. We have an inventory of 17 non-marketed rigs held for refurbishment as
demand for drilling services warrants, of which 12 are located in the United
States and the remainder in Venezuela. Our customers include independent
producers and major oil companies. We conduct our operations through our
subsidiaries.
Our principal office is located at 10370 Richmond Avenue, Suite 600,
Houston, Texas 77042- 4136, and our telephone number is (713) 435-6100.
FORWARD-LOOKING STATEMENTS
The statements in this prospectus, any prospectus supplement and the
documents incorporated by reference that relate to matters that are not
historical facts are "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking
statements are subject to risks, uncertainties and assumptions, including those
discussed elsewhere in this prospectus. When used in this prospectus, any
prospectus supplement and the documents incorporated by reference, words such as
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"will," "could," "may," "predict," and similar expressions are intended to
identify forward-looking statements. Future events and actual results may differ
materially from the results expressed in or implied by the forward-looking
statements. Factors that might cause such a difference include:
o fluctuations in prices and demand for oil and gas;
o fluctuations in levels of oil and gas exploration
and development activities;
o fluctuations in the demand for contract land
drilling services;
o the existence of competitors, technological changes
and developments in the industry;
o the existence of operating risks inherent in the
contract land drilling industry; and
o year 2000 issues and general economic conditions, in
addition to the other matters discussed under "Risk
Factors."
The information contained in this prospectus, including the information
presented under the heading "Risk Factors," identifies additional factors that
could affect our operating results and performance. We urge you to carefully
consider those factors.
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RISK FACTORS
You should carefully consider the following risk factors and all of the
other information set forth or incorporated by reference in this prospectus and
any applicable prospectus supplement before you purchase our securities. This
prospectus, any applicable prospectus supplement and the documents incorporated
by reference contain forward-looking statements which involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth in the following risk factors and elsewhere in this prospectus,
any applicable prospectus supplement and the documents incorporated by reference
into this document.
RISKS RELATED TO OUR BUSINESS GENERALLY
OUR BUSINESS CAN BE ADVERSELY EFFECTED BY LOW OIL AND GAS PRICES AND
EXPECTATIONS OF LOW PRICES.
As a supplier of land drilling services, our business depends on the
level of drilling activity by oil and gas exploration and production companies
operating in the geographic markets where we operate. The number of wells they
choose to drill is strongly influenced by past trends in oil and gas prices,
current prices, and their outlook for future oil and gas prices within those
geographic markets. Low oil and gas prices, or the perception among oil and gas
companies that future prices are likely to remain low or decline further, can
materially and adversely effect us in many ways, including:
o our revenues, cash flows and earnings;
o the fair market value of our rig fleet;
o our ability to maintain or increase our borrowing
capacity;
o our ability to obtain additional capital to finance
our business and make acquisitions, and the cost of
that capital; and
o our ability to retain skilled rig personnel who we
would need in the event of a upturn in the demand
for our services.
Oil and gas prices have been volatile historically and, we believe,
will continue to be so in the future. Many factors beyond our control affect oil
and gas prices, including:
o weather conditions in the United States and
elsewhere;
o economic conditions in the United States and
elsewhere;
o actions by OPEC, the Organization of Petroleum
Exporting Countries;
o political stability in the Middle East and other
major producing regions;
o governmental regulations, both domestic and foreign;
o the pace adopted by foreign governments for
exploration of their national reserves;
o the price of foreign imports of oil and gas; and
o the overall supply and demand for oil and gas.
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WE OPERATE IN A HIGHLY COMPETITIVE, FRAGMENTED INDUSTRY IN WHICH PRICE
COMPETITION HAS INTENSIFIED AS EXCESS DRILLING RIG CAPACITY HAS INCREASED.
We operate in a highly competitive business. The drilling contracts we
compete for are usually awarded on the basis of competitive bids. Pricing and
rig availability are the primary factors considered by our potential customers
in determining which drilling contractor to select. We believe other factors are
also important. Among those factors are:
o the type and condition of drilling rigs;
o the quality of service and experience of rig crews;
o the safety record of the rig;
o the contractor's offering of ancillary services; and
o the ability of the contractor to provide drilling
equipment adaptable to, and personnel familiar with,
new technologies and drilling techniques.
While we must generally be competitive in our pricing, our competitive
strategy generally emphasizes the quality of our equipment, the safety record of
our rigs and the experience of our rig crews to differentiate us from our
competitors. This strategy has become less effective recently as lower demand
for drilling services has intensified price competition and made it more
difficult for us to compete on the basis of factors other than price. In all of
the markets in which we compete there is an over supply of rigs which has
provoked greater price competition.
Contract drilling companies compete primarily on a regional basis, and
the intensity of competition may vary significantly from region to region at any
particular time. If demand for drilling services improves in a region where we
operate, our competitors might respond by moving in suitable rigs from other
regions. An influx of rigs from other regions could rapidly intensify
competition and make any improvement in demand for drilling rigs short-lived.
The domestic land drilling business is highly fragmented. Although we
believe that at August 31, 1999, we had the largest number of rigs engaged in
drilling operations in our four domestic market areas combined, that number of
working rigs represented only 19% of all rigs working in the combined market
areas at the same date. We face competition from many competitors.
As price competition has intensified, some of our competitors have been
able to reduce the rates they charge for their rigs largely, we believe, by
decreasing the wages they pay their rig crews. We have chosen not to cut the
wages of our rig crews for strategic reasons, principally to help us retain the
experienced rig crews so as to better position us to participate in possible
future increases in drilling activity. This strategy has caused us to lose
market share in certain of our domestic markets, and may result in additional
losses of market share in the future. We can not be certain that we will be able
to recover lost market share even if the demand for drilling services improves
in the future.
Certain of our competitors have greater financial and human resources
than do we. Their greater capabilities in these areas may enable them to:
o better withstand periods of low rig utilization;
o compete more effectively on the basis of price and
technology;
o retain skilled rig personnel; and
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o build new rigs or acquire and refurbish existing
rigs so as to be able to place rigs into service
more quickly than us in periods of high drilling
activity.
OUR DRILLING OPERATIONS INVOLVE INHERENT RISKS OF LOSS WHICH IF NOT INSURED OR
INDEMNIFIED AGAINST COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Our business is subject to the many hazards inherent in the land
drilling business including the risks of:
o blowouts;
o fires and explosions;
o collapse of the borehole;
o lost or stuck drill strings; and
o damage or loss from natural disasters.
If these hazards occur they can produce substantial liabilities to us from,
among other things:
o suspension of drilling operations;
o damage to the environment;
o damage to, or destruction of our property and
equipment and that of others;
o personal injury and loss of life; and
o damage to producing or potentially productive oil
and gas formations through which we drill.
We attempt to obtain indemnification from our customers by contract for
certain of these risks but are not always able to do so. We also seek to protect
ourselves from some but not all operating hazards through insurance coverage.
The indemnification we receive from our customers and our own insurance coverage
may not, however, be sufficient to protect us against liability for all
consequences of disasters, personal injury and property damage. Additionally,
our insurance coverage generally provides that we bear a portion of the claim
through substantial insurance coverage deductibles. The premiums we pay for
insurance policies are also subject to substantial increase based upon our
claims history, which may increase our operating costs. We can offer you no
assurance that our insurance or indemnification arrangements will adequately
protect us against liability from all of the hazards of our business. We are
also subject to the risk that we may be unable to obtain or renew insurance
coverage of the type and amount we desire at reasonable rates. If we were to
incur a significant liability for which we were not fully insured or indemnified
it could have a material adverse effect on our financial position and results of
operations.
OUR OPERATIONS ARE SUBJECT TO DOMESTIC AND FOREIGN ENVIRONMENTAL LAWS THAT MAY
EXPOSE US TO LIABILITIES FOR NONCOMPLIANCE WHICH COULD ADVERSELY AFFECT US.
Many aspects of our operations are subject to domestic and foreign laws
and regulations. For example, our drilling operations are typically subject to
extensive and evolving laws and regulations governing:
o environmental quality;
o pollution control; and
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o remediation of environmental contamination.
Our operations are often conducted in or near ecologically sensitive
areas, such as wetlands which are subject to special protective measures and
which may expose us to additional operating costs and liabilities for
noncompliance. The handling of waste materials, some of which are classified as
hazardous substances, is a necessary part of our operations. Consequently, our
operations are subject to stringent regulations relating to protection of the
environment and waste handling which may impose liability on us for our own
noncompliance and, in addition, that of other parties without regard to whether
we were negligent or otherwise at fault. We may also be exposed to environmental
or other liabilities originating from businesses and assets which we purchased
from others. Compliance with applicable laws and regulations may require us to
incur significant expenses and capital expenditures which could have a material
and adverse effect on our operations by increasing our expenses and limiting our
future contract drilling opportunities.
RISKS RELATING TO OUR OPERATIONS
WE ARE EXPERIENCING WEAK DEMAND FOR OUR SERVICES DUE TO LOWER OIL AND GAS PRICES
AND LOSS OF MARKET SHARE, WHICH IF PROLONGED COULD HAVE SERIOUS CONSEQUENCES FOR
US.
Volatility in oil and gas prices can produce wide swings in the levels
of overall drilling activity in the markets we serve and affect the demand for
our drilling services and the day rates we can charge for our rigs. Pronounced
downturns in oil and gas prices can adversely affect our business.
We believe our recent operating and financial performance illustrates
this risk. Oil and gas prices generally dropped beginning in late 1997, with
generally lower commodity prices extending well into 1999. Beginning in the
first quarter of 1998, drilling activity in the markets we serve also dropped
significantly, and we experienced a significant decline both in the utilization
rates for our rigs and in the day rates we could charge for them. Our rig
utilization in our core domestic markets was 81% during the first quarter of
1998 but declined to 39% in the first quarter of 1999 and stood at 31% for the
quarter ended June 30, 1999. Our average revenue per rig day worked was $9,407
in the first quarter of 1998, declining to $7,825 for the quarter ended June 30,
1999. Although oil and gas prices have improved recently, drilling activity in
our core domestic markets has improved only slightly and overall land drilling
activity remains depressed. While demand for our rigs has recently improved our
day rates have shown only a slight improvement.
Future demand for our rigs may remain the same or may decline further
and we can offer you no assurance otherwise. If drilling activity does increase
in the areas where we operate, we cannot assure you that demand for our rigs
will also increase.
Although we believe the weakness in demand for our drilling services is
primarily attributable to low oil and gas prices, we also believe that strategic
pricing decisions we have made in certain domestic markets have contributed to
the weakness. In particular, we have chosen not to further lower the day rates
we charge for our rigs in certain markets by reducing the wages we pay our rig
crews. We did so in order to reduce deterioration of our operating margins and
to help us retain the experienced rig personnel we believe will be necessary to
respond to possible future upturns in our business. We do not expect to be able
to charge higher day rates for our rigs unless there is a meaningful increase in
the demand for our rigs. This pricing strategy has caused us to loose market
share to lower-priced competition in certain of our core markets and may cause
further losses in our market share if price competition intensifies.
Depressed levels of rig utilization, lower day rates and reduced market
share have adversely effected our financial condition and results of operations,
and will continue to do so unless substantial improvement in demand for our land
drilling services occurs. If these conditions persist over a prolonged
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period or worsen, we may be unable to meet our debt service obligations under
approximately $250.0 million of our outstanding senior notes, and any then
outstanding indebtedness to our secured lenders.
WE OWE OVER $250.0 MILLION OF INDEBTEDNESS UNDER OUR SENIOR NOTES AND OUR
OPERATIONS ARE NOT GENERATING SUFFICIENT CASH FLOW TO COVER OUR SEMI-ANNUAL
INTEREST PAYMENTS OF APPROXIMATELY $11.1 MILLION.
We are indebted for a total of $250.0 million in principal amount under
our 8 7/8% Senior Notes. Semi-annual interest payments on the senior notes of
approximately $11.1 million are due on January 1 and July 1 of each year. For
the six months ended June 30, 1999, however, our operating activities, investing
activities and financing activities each consumed net cash rather than provided
additional cash. To meet our debt service obligations under the senior notes and
provide necessary cash, we were required to use our cash on hand.
Our ability in the future to meet our debt service obligations and
reduce our total indebtedness will depend on a number of factors including:
o oil and gas prices;
o demand for our drilling services;
o whether our business strategy is successful;
o levels of interest rates; and
o other financial and business factors that affect us.
Many of these factors are beyond our control.
If we do not generate sufficient cash flow to pay debt service and
repay principal in the future, we will likely be required to use one or more of
the following measures:
o further diminish our cash balances;
o use our existing credit facility;
o obtain additional external financing;
o refinance our indebtedness;
o sell our assets; and
o seek protection under federal bankruptcy laws.
WE HAVE HAD ONLY ONE PROFITABLE YEAR SINCE 1991 AND DO NOT EXPECT TO BE
PROFITABLE IN 1999.
We have a history of losses with our only profitable year since 1991
being 1997 in which we had net income of $10.2 million. Due to depressed demand
for our drilling service through most of 1999, we do not expect to be profitable
in 1999. Whether we are able to become profitable in the future will depend on
many factors, but primarily on whether we are able to obtain substantially
higher utilization rates for our rigs and the rates we charge for them. Whether
we can achieve those goals will largely depend on oil and gas prices which are
beyond our control.
UNEXPECTED COST OVERRUNS ON OUR TURNKEY DRILLING JOBS COULD ADVERSELY AFFECT US.
We have historically derived a significant portion of our revenues from
turnkey drilling contracts and we expect that they will continue to represent a
significant component of our revenues. The
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occurrence of uninsured or under-insured losses or operating cost overruns on
our turnkey jobs could have a material adverse effect on our financial position
and results of operations. Under a typical turnkey drilling contract, we agree
to drill a well for our customer to a specified depth and under specified
conditions for a fixed price. We typically provide technical expertise and
engineering service, as well as most of the equipment required for the drilling
of turnkey wells. We often subcontract for related services. Under typical
turnkey drilling arrangements, we do not receive progress payments and are
entitled to be paid by our customer only after we have performed the terms of
the drilling contract in full. For this reason, the risk to us under turnkey
drilling contracts is substantially greater than for wells drilled on a day work
basis because we must assume most of the risks associated with drilling
operations that are generally assumed by our customer under a day work contract.
Although we attempt to obtain insurance coverage to reduce certain of the risks
inherent in our turnkey drilling operations, we can offer no assurance that
adequate coverage will be obtained or will be available in the future.
WE COULD BE ADVERSELY AFFECTED IF WE LOST THE SERVICES OF CERTAIN OF OUR SENIOR
MANAGERS.
Our business is dependent to a significant extent on a small group of
our executive management personnel. The loss of any one of these individuals
could have a material adverse effect on our financial condition and results of
operations.
OUR CREDIT AGREEMENTS MAY PROHIBIT US FROM PARTICIPATION IN CERTAIN TRANSACTIONS
THAT WE MAY CONSIDER ADVANTAGEOUS.
The indentures under which we issued our 8 7/8% Senior Notes contain
restrictions on our ability and the ability of certain of our subsidiaries to
engage in certain types of transactions. These restrictive covenants may
adversely affect our ability to pursue business acquisitions and rig
refurbishments. These include covenants prohibiting or limiting our ability to:
o incur additional indebtedness;
o pay dividends or make other restricted payments;
o sell material assets;
o grant or permit liens to exist on our assets;
o enter into sale and lease-back transactions;
o enter into certain mergers, acquisitions and
consolidations;
o make certain investments;
o enter into transactions with related persons; and
o engage in lines of business unrelated to our core
land drilling business.
Our senior secured credit facility also contains covenants restricting our
ability and our subsidiaries' ability to undertake many of the same types of
transactions, and contains financial ratio covenants. They may also limit our
ability to respond to changes in market conditions. Our ability to meet the
financial ratio covenants of our credit agreements can be affected by events and
conditions beyond our control and we may be unable to meet those tests.
Our senior secured credit facility contains default terms that
effectively cross default with the indentures covering our 8 7/8% Senior Notes.
If we breach the covenants in the indentures it could cause our default under
the indentures but also under our senior secured credit agreement, and possibly
other then outstanding debt obligations owed by us or our subsidiaries. If the
indebtedness under our senior
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secured credit agreement or other indebtedness owed by us or our subsidiaries is
more than $10.0 million and is not paid when due, or is accelerated by the
holders of the debt, then an event of default under the indenture covering our
senior notes would occur. If circumstances arise in which we are in default
under our various credit agreements, our cash and other assets may be
insufficient to repay our indebtedness and that of our subsidiaries.
RISKS RELATING TO OUR SECURITIES
THERE IS NO EXISTING PUBLIC MARKET FOR CERTAIN OF THE SECURITIES WE MAY SELL
WHICH COULD LIMIT YOUR ABILITY TO RESELL THEM.
Our common stock is traded on the American Stock Exchange. All other
debt securities, preferred stock, depositary shares and warrants sold or offered
under this prospectus will be securities for which there will be no established
trading market. Any underwriters to whom we sell debt securities, preferred
stock, depositary shares or warrants in a public offering may make a market in
those securities but they will not be obligated to do so and the underwriters
may discontinue any market making activities at any time without notice to us or
you. Because there may be no secondary market for our debt securities, preferred
stock, depositary shares or warrants, you may be unable to resell those
securities.
WE ARE A HOLDING COMPANY AND DEPEND ON OUR SUBSIDIARIES TO PROVIDE US WITH CASH
TO MEET OUR FINANCIAL OBLIGATIONS.
Grey Wolf, Inc. is a holding company that conducts substantially all of
its operations through both United States and foreign subsidiaries.
Substantially all of our assets consist of our equity in our subsidiaries. We
are, and expect to continue to be, dependent on our ability to obtain funds from
our subsidiaries to meet our financial needs including funds to repay interest
and principal on our indebtedness. We cannot assure you that our operating
subsidiaries will generate sufficient net income to pay upstream dividends or
sufficient cash flow to make payments of principal and interest to us for
intercompany loans we may make to them from time-to-time. Our inability to
obtain funds from our subsidiaries for any reason could impair our ability to
meet our obligations under securities we issue.
OUR EXISTING DIVIDEND POLICY AND CONTRACTUAL RESTRICTIONS LIMIT OUR ABILITY TO
PAY DIVIDENDS.
We have never declared a cash dividend on our common stock and do not
expect to pay cash dividends on our common stock for the foreseeable future. We
expect that all cash flow generated from our operations in the foreseeable
future will be retained and used to develop or expand our business, pay debt
service and reduce outstanding indebtedness. Furthermore, the terms of our
secured credit facility prohibit the payment of dividends without prior written
consent and the terms of the indentures under which our senior notes are issued
also restrict our ability to pay dividends under certain conditions. In the
event we issue any dividend-paying preferred stock, the applicable prospectus
supplement will address further any applicable restrictions on our ability to
pay dividends on the securities to be issued.
CERTAIN PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS, SECURITIES AND CREDIT
AGREEMENTS HAVE ANTI-TAKEOVER EFFECTS WHICH MAY PREVENT OUR SHAREHOLDERS FROM
RECEIVING THE MAXIMUM VALUE FOR THEIR SHARES.
Our Articles of Incorporation, bylaws, securities and credit agreements
contain certain provisions intended to delay or prevent entirely a change of
control transaction not supported by our board of directors, or which may have
that general effect. These measures include:
o classification of our board of directors into three
classes, with each class serving a staggered three
year term;
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<PAGE> 13
o giving our board of directors the exclusive
authority to adopt, amend or repeal our Bylaws and
thus prohibiting shareholders from doing so;
o requiring our shareholders to give advance notice of
their intent to submit a proposal at the annual
meeting; and
o limiting the ability of our shareholders to call a
special meeting and act by written consent.
Additionally, the indentures under which our 8 7/8% Senior Notes are
issued, require us to offer to repurchase all senior notes then outstanding at a
purchase price equal to 101% of the principal amount of the senior notes plus
accrued and unpaid interest to the date of purchase in the event that we become
subject to a change of control, as defined in the indenture. This feature of the
indenture could also have the effect of discouraging potentially attractive
change of control offers.
LARGE AMOUNTS OF OUR COMMON STOCK MAY BE RESOLD INTO THE MARKET IN THE FUTURE
WHICH COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DROP SIGNIFICANTLY,
EVEN IF OUR BUSINESS IS DOING WELL.
This prospectus may be used to issue common stock, preferred stock that
is convertible into common stock and warrants to acquire common stock. If we
issue a significant amount of common stock, convertible preferred stock or
warrants, the market price of our common stock may be adversely affected.
As of August 31, 1999, 165,158,791 shares of our common stock were
issued and outstanding. Approximately 60% is available for resale in the public
market as follows:
o 84,664,760 shares of common stock by certain of our
shareholders, the resale of which has been registered under
the Securities Act;
o 7,296,375 shares of common stock which may be acquired upon
exercise of outstanding options; and
o 13,999,957 shares of common stock which we believe are
potentially eligible for resale pursuant to an exemption from
registration under the Securities Act.
The market price of our common stock could drop significantly if these holders
sell or are perceived by the market as intending to sell their common stock.
WE FACE A THREAT OF BUSINESS DISRUPTION FROM THE YEAR 2000 ISSUE.
The Year 2000 issue refers to the inability of computer and other
information technology systems to properly process date and time information
stemming from the outdated programming practice of using two digits rather than
four to represent the year and a date. The consequence of the Year 2000 issue is
that our computer systems and those of our customers and suppliers may not work
properly and adversely affect our business. For more information on these issues
and our plans to respond to these risks, please see our Form 10-Q for the
quarter ended June 30, 1999 under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000
Compliance," which we incorporate into this Prospectus by reference.
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<PAGE> 14
USE OF PROCEEDS
Unless we specify otherwise in the applicable prospectus supplement,
the net proceeds (after the payment of offering expenses and underwriting
discounts or commissions) we receive from the sale of the securities offered by
this prospectus and any prospectus supplement will be used for general corporate
purposes. General corporate purposes may include any of the following:
o funding capital expenditures, including rig
refurbishments;
o providing working capital;
o investing in or lending money to our subsidiaries;
o repaying debt;
o redeeming or repurchasing our securities; or
o paying for possible acquisitions or the expansion of
our businesses.
We may temporarily invest the net proceeds we receive from any offering of
securities or use the net proceeds to repay short-term debt until we can use
them for their stated purposes.
RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges for each of the periods set
forth below has been computed on a consolidated basis and should be read in
conjunction with our consolidated financial statements (including the notes
thereto) set forth or incorporated by reference in our Form 10-K for the fiscal
year ended December 31, 1998.
<TABLE>
<CAPTION>
SIX TWELVE NINE
MONTHS YEAR ENDED DECEMBER 31, MONTHS MONTHS YEAR
ENDED ------------------------------------- ENDED ENDED ENDED
JUNE 30, DECEMBER 31, DECEMBER 31, MARCH 31,
1999 1998 1997 1996 1995 1994 1994(1) 1994(1)
------- ---- ---- ---- ---- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..... (2) (2) 3.19x (2) (2) (2) (2) (2)
Ratio of earnings to fixed charges
and preferred stock dividends....... (3) (4) 3.19x (4) (4) (4) (4) (3)
</TABLE>
- --------------
(1) In 1994, Grey Wolf changed its fiscal year endrom March 31 to December 31.
(2) Earnings were insufficient to cover fixed charges for the periods indicated
as follows:
<TABLE>
<S> <C>
Year Ended
December 31, 1998 $111,164
December 31, 1996 10,759
December 31, 1995 12,675
March 31, 1994 1,384
Twelve Months Ended
December 31, 1994 3,557
Nine Months Ended
December 31, 1994 2,260
Six Months Ended
June 30, 1999 16,901
</TABLE>
(3) There was no preferred stock outstanding during these periods.
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<PAGE> 15
(4) Earnings were insufficient to cover fixed charges and preferred stock
dividends for the periods indicated as follows:
<TABLE>
<S> <C>
Year Ended
December 31, 1998 $111,164
December 31, 1996 11,179
December 31, 1995 12,675
March 31, 1994 1,384
Twelve Months Ended
December 31, 1994 3,557
Nine Months Ended
December 31, 1994 2,260
Six Months Ended
June 30, 1999 16,901
</TABLE>
For purposes of computing these ratios, "earnings" consist of pretax
income from continuing operations plus fixed charges (excluding capitalized
interest). "Fixed charges" represent interest incurred (whether expensed or
capitalized), amortization of debt expense, and that portion of rental expense
on operating leases deemed to be the equivalent of interest. "Fixed charges and
preferred stock dividends" represent fixed charges (as previously described) and
the preferred stock dividend requirements of Grey Wolf.
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<PAGE> 16
DESCRIPTION OF DEBT SECURITIES
The following description highlights certain general terms and
provisions of the debt securities. This summary is not complete. When debt
securities are offered in the future, the prospectus supplement will explain the
particular terms of those securities and the extent to which these general
provisions may apply.
The forms of the indenture for the debt securities have been filed as
exhibits to the registration statement and you should read the applicable
indenture for provisions that may be important to you. Article and Section
references used herein are references to the applicable indenture. Capitalized
terms not otherwise defined in this Description of Debt Securities will have the
meaning given in the indentures.
GENERAL
Since Grey Wolf is a holding company, our rights and the rights of our
creditors, including the holders of the debt securities, to participate in any
distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise are necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that we may be recognized as a
creditor of the subsidiary. Generally, the debt securities will be effectively
subordinated to all existing and future indebtedness of our operating
subsidiaries.
Any debt securities we offer will be our direct, unsecured general
obligations. The debt securities will be either senior debt securities or
subordinated debt securities which may be issued in registered or global form.
The senior debt securities will rank equally with all of our other senior and
unsubordinated debt. The subordinated debt securities will have a junior
position to all of our senior debt.
The indentures do not limit the aggregate principal amount of debt
securities that can be issued. The debt securities may be issued in one or more
series as may be authorized from time to time by Grey Wolf.
A prospectus supplement and a supplemental indenture relating to the
offering of a particular series of debt securities will set forth the specific
terms of the offered debt securities (Indentures, Section 301).
These terms will include some or all of the following:
o the title of the debt securities;
o the aggregate principal amount of the debt
securities;
o the person to whom any interest on the offered debt
securities will be payable, if other than the person
in whose name such offered debt securities are
registered on any regular record date;
o the date or dates (or method of determining the
date) on which we will pay the principal and
premium, if any, of the debt securities;
o the interest rate (or method of determining the
rate) at which the debt securities will bear
interest, the date or dates from which interest will
accrue and the dates on which interest, if any, will
be payable and the regular record dates for such
interest payment dates;
o the place or places where we will pay principal,
premium and interest, if any, on the debt
securities;
o any optional redemption periods and prices;
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<PAGE> 17
o any sinking fund or analogous provision that would
obligate us to repurchase or otherwise redeem the
debt securities;
o any rights of the holders of the debt securities to
convert or exchange the debt securities into or for
our securities and the terms and conditions of the
conversion or exchange;
o the denominations in which we will issue debt
securities if other than denominations of $1,000 and
any integral multiple thereof;
o the manner in which we will determine the amounts of
principal, premium or interest, if any, on the debt
securities if these amounts may be determined with
reference to one or more indices;
o the currency in which we will pay principal of,
premium, if any, or interest on the debt securities
if other than the United States dollar;
o the price or prices (expressed as a percentage of
the principal amount thereof) at which we will issue
debt securities;
o if other than the entire principal amount, the
portion of the principal amount payable if the
maturity of the debt securities is accelerated;
o whether we will issue debt securities in the form of
global securities and, if so, the depositary for,
and other terms and conditions relating to, the
global securities;
o whether the principal of, premium and interest, if
any, on the offered debt securities is to be payable
in securities of Grey Wolf and the terms and
conditions applicable to any such payment;
o any change in or addition to the events of default;
o any change in or addition to the covenants,
definitions or to the provisions relating to our
consolidation, merger, sale or conveyance of assets;
o any subordination provisions relating to the debt
securities;
o any restriction or condition on the transferability
of the debt securities;
o any changes or additions to the defeasance or
discharge provisions;
o any trustees, authenticating or paying agents,
registrars, conversion agents or other agents
appointed by us with respect to the debt securities;
and
o any other terms of the debt securities.
Debt securities may be issued at a discount from their stated principal
amount. Certain United States federal income tax considerations applicable to
any debt security issued with original issue discount and any debt security on
which the interest is to be payable in our securities will be described in an
applicable prospectus supplement.
EVENTS OF DEFAULT AND NOTICE OF DEFAULT
"Events of Default" with respect to debt securities of any series means
any of the following (Indentures, Section 501):
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<PAGE> 18
o failure to pay principal of, or premium, if any, on,
any debt security of that series when due (in the
case of the subordinated indenture, whether or not
payment is prohibited by the subordination
provisions);
o failure to pay interest, if any, or deposit any
mandatory sinking fund payment, if any, on any debt
security of that series when due and such failure
continues for a period of 30 days;
o failure by Grey Wolf to perform any other covenant
in the indentures (other than a covenant included in
the indentures solely for the benefit of a series of
debt securities other than that series) which
continues for a period of 90 days after written
notice to Grey Wolf; and
o certain events of insolvency, reorganization,
receivership or liquidation of Grey Wolf.
An event of default with respect to debt securities of a particular
series does not necessarily constitute an event of default with respect to debt
securities of any other series. If an event of default with respect to any other
series of debt securities occurs and continues, then either the trustee or the
holders of at least 25% in principal amount of the outstanding debt securities
of that series may declare the principal amount of all debt securities of that
series to be due and payable immediately; however, under certain circumstances,
the holders of a majority in aggregate principal amount of outstanding debt
securities of that series may rescind or annul such declaration and its
consequences.
Except for a default in payment of principal, premium and interest, if
any, the trustee may withhold notice to the holders of the debt securities of
any default if it considers it in the interest of the holders of the debt
securities to do so (Indentures, Section 602). Grey Wolf must furnish annually
the trustee a statement by one of certain specified officers of Grey Wolf as to
the compliance with all conditions and covenants of the indentures (Indentures,
Section 1005).
The holders of a majority in principal amount of the outstanding debt
securities of any series will have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series, and to waive certain
defaults (Indentures, Sections 512 and 513).
The indentures provide that, if an event of default occurs and
continues, then the trustee must exercise its rights and powers under the
indentures, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs (Indentures, Section 601). Subject to these provisions,
the trustee will be under no obligation to exercise any of its rights or powers
under the indentures at the request of any of the holders of debt securities
unless they have offered to the trustee security or indemnity in form and
substance reasonably satisfactory to the trustee against the costs, expenses and
liabilities that it might incur in compliance with the holders' request
(Indentures, Section 603).
MODIFICATION OF INDENTURE
Grey Wolf and the trustee from time to time may modify the indentures,
without prior notice to or the consent of the holders of any series of debt
securities for any of the following purposes (Indentures, Section 901):
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<PAGE> 19
o to evidence the succession of another person to our
rights and the assumption by the successor of our
covenants and obligations in an indenture and the
debt securities;
o to add to the covenants for the benefit of the
holders of the debt securities or to surrender any
right or power conferred upon us in an indenture;
o to add any events of default;
o to cure any ambiguity, defect or inconsistency, to
secure the debt securities, or to make any change
that does not adversely affect the rights of any
holders;
o to modify or amend an indenture to permit the
qualification of the indenture or any supplemental
indenture under the Trust Indenture Act;
o to comply with the provisions relating to
consolidations, mergers and sales of assets;
o in the case of subordinated debt securities, to make
any change in the provisions of the indenture
relating to subordination that would limit or
terminate the benefits available to any holder of
senior debt under such provisions;
o to add guarantees for any or all of the debt
securities or to secure any or all of the debt
securities;
o to make any change that does not adversely affect
the rights of any holder;
o to add to, change or eliminate any provision of an
indenture, so long as the addition, change or
elimination will (a) neither apply to any debt
security of any series created prior to the
modification which is entitled to the benefit of the
provision nor modify the rights of the holders of
any such debt security with respect to the provision
or (b) become effective only when there is no debt
security outstanding;
o to permit or facilitate the defeasance and discharge
of any series of debt securities pursuant to the
indenture, so long as such action does not adversely
effect the rights of any holder;
o to evidence and provide for a successor or other
trustee with respect to the debt securities of one
or more series and to add to our change any
provision of an indenture to provide for or
facilitate the administration by more than one
trustee;
o to establish the form or terms of debt securities
and coupons of any series; and
o to provide for uncertificated debt securities in
addition to or in place of certificated debt
securities.
Grey Wolf and the trustee may modify and amend the indentures with the
consent of the holders of at least a majority of the principal amount of each
series of the outstanding debt securities which is affected by the modification
or amendment; provided, however, no modification or amendment may, without the
consent of each holder of a debt security affected thereby (Indentures, Section
902):
o change the stated maturity of the principal of or
any installment of principal or interest if any, on
any debt security;
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<PAGE> 20
o reduce the principal amount of, premium and interest
rate, if any, on any debt security or the principal
amount due upon acceleration of any Original Issue
Discount security;
o change the place or currency of payment of
principal, premium or interest, if any, on debt
security;
o impair the right to institute suit for the
enforcement of any such payment on or with respect
to any debt security;
o reduce the percentage of the principal amount of
debt securities necessary to modify or amend the
indentures;
o in the case of the subordinated indenture, modify
the subordination provisions in a manner adverse to
the holders of the subordinated debt securities; or
o modify the foregoing requirements or reduce the
percentage of outstanding debt securities necessary
to waive compliance with certain provisions of the
indentures or to waive certain defaults.
The holders of at least a majority of the aggregate principal amount of
the outstanding debt securities of any series may, on behalf of all holders of
that series, waive compliance by Grey Wolf with any of the provisions of the
indentures and waive any past default under an indenture, except a default in
the payment of principal, premium and interest, if any, or in the performance of
certain covenants (Indentures, Sections 1006 and 513).
SATISFACTION AND DISCHARGE OF THE INDENTURES; DEFEASANCE
Discharge. Except as described below, Grey Wolf will be discharged from
its obligations under the indenture with respect to any series of debt
securities by either paying the principal of, any premium and interest on all of
the outstanding debt securities of such series when due and payable or
delivering to the trustee all outstanding debt securities of such series for
cancellation. Grey Wolf will not be able to discharge the following obligations:
o the rights of holders of debt securities to receive
payments of principal, premium and interest, if any,
when due;
o our obligation to issue temporary debt securities or
to replace mutilated, lost, destroyed or stolen debt
securities;
o our obligation to maintain an office or agency for
payments to holders of debt securities; and
o the rights, powers, trusts, duties and immunities of
the trustee.
Legal Defeasance. Grey Wolf may be discharged from its obligations on
the debt securities of any series at any time if it deposits with the trustee
sufficient cash or government obligations to pay the principal of, any premium
and interest on the debt securities of that series to the stated maturity date
or a redemption date for the debt securities of that series. If that happens,
payment of the debt securities of such series may not be accelerated because of
an event specified as an event of default with respect to such debt securities,
and the holders of the debt securities of such series will not be entitled to
the benefits of the indenture, except for registration of transfer and exchange
of debt securities and replacement of lost, stolen or mutilated debt securities
(Indentures, Sections 401, 403 and 405).
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<PAGE> 21
Grey Wolf may be discharged only if, among other things, it has
delivered to the trustee an opinion of counsel stating that it has received from
the United States Internal Revenue Service a ruling or, since the date of
execution of the indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that the holders of the debt
securities of that series will not recognize income, gain or loss for federal
income tax purposes as a result of the defeasance.
Covenant Defeasance. Grey Wolf may omit to comply with certain
restrictive covenants contained in the indenture and any omission to comply with
those covenants will not constitute a default or event of default with respect
to the debt securities of any series (Indentures, Section 406). Grey Wolf may
omit to comply with such covenants only if, among other things:
o it deposits with the trustee sufficient cash or
government obligations to pay the principal of, any
premium and interest on the debt securities of that
series to the stated maturity date or a redemption
date for the debt securities of that series; and
o it delivers to the trustee an opinion of counsel to
the effect that the holders of the debt securities
of the series will not recognize income, gain or
loss for federal income tax purposes as a result of
the covenant defeasance.
Effect of Discharge and Defeasance. Under federal income tax law as of
the date of this prospectus, a discharge may be treated as an exchange of the
related debt securities. Each holder might be required to recognize gain or loss
equal to the difference between the holder's cost or other tax basis for the
debt securities and the value of the holders' interest in the trust. Holders
might be required to include as income a different amount than would be
includable without the discharge. Prospective investors are urged to consult
their own tax advisors as to the tax consequences of a discharge including the
applicability and effect of tax laws other than federal income tax law.
CERTAIN COVENANTS
Under the Indentures, Grey Wolf agrees that it will:
o pay the principal, interest and any premium on the
debt securities when due;
o maintain a place of payment;
o deliver a report to the Trustee at the end of each
fiscal year reviewing our obligations under the
Indentures; and
o deposit sufficient funds with any payment agent on
or before the due date for any principal, interest
or any premium (Indentures, Sections 1001, 1002,
1003 and 1005).
Any respective covenants applicable to any series of debt securities
will be described in an applicable prospectus supplement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We will only consolidate or merge with or into any other entity or sell
all or substantially all of our assets according to the terms and conditions of
the indentures. If Grey Wolf sells all or substantially all of its assets, it
shall be released from all of its liabilities and obligations under any
indenture and under the debt securities. The remaining or acquiring entity will
be substituted for Grey Wolf in the indentures and shall assume all of our
responsibilities and liabilities under the indentures including the payment of
all amounts due on the debt securities and performance of the covenants with the
same effect as if it had been an original party to the indentures. Thereafter,
the successor entity may exercise Grey Wolf's rights and
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<PAGE> 22
powers under the indentures, in Grey Wolf's name or in its own name. Any act or
proceeding required or permitted to be done by Grey Wolf's board of directors or
any of its officers may be done by the board or officers of the successor entity
(Indentures, Sections 801 and 802).
PAYMENT AND TRANSFER
Grey Wolf will pay principal and any premium and interest on registered
securities at the corporate trust office of the trustee or at any other office
or agency maintained by us for such purpose. We may choose to make any interest
payment on a registered security (a) by check mailed to the address of the
holder as such address shall appear in the register or (b) if provided in the
prospectus supplement, by wire transfer to an account maintained by the holder
as specified in the register. We will make interest payments to the person in
whose name the debt security is registered at the closing of business on the
days specified by the indenture or in any applicable prospectus supplement.
Payments on debt securities in other forms will be paid at a place designated by
us and specified in a prospectus supplement (Indentures, Section 307).
Fully registered securities may be transferred or exchanged at the
corporate trust office of the trustee or at any other office or agency
maintained by us for such purposes, without the payment of any service charge
except any tax or governmental charge (Indentures, Sections 305 and 1002).
GLOBAL SECURITIES
Debt securities of a series may be issued in the form of one or more
permanent global debt securities that will be deposited with a depositary
designated in the prospectus supplement or its nominee. Unless otherwise
indicated in the prospectus supplement, the following is a summary of the
depositary arrangements applicable to debt securities issued in permanent global
form and for which The Depositary Trust Company ("DTC") acts as depositary.
Each global debt security will be deposited with, or on behalf of, DTC,
as depositary, or its nominee and registered in the name of a nominee of DTC.
Except under the limited circumstances described below, global debt securities
are not exchangeable for definitive certificated debt securities.
Ownership of beneficial interests in a global debt security is limited
to institutions that have accounts with DTC or its nominee, (participants), or
persons that may hold interests through participants. In addition, ownership of
beneficial interests by participants in a global debt security will be evidenced
only by, and the transfer of that ownership interest will be effected only
through; records maintained by DTC or its nominee. Ownership of beneficial
interests in a global debt security by persons that hold through participants
will be evidenced only by, and the transfer of that ownership interest within
that participant will be effected only through, records maintained by that
participant. DTC has no knowledge of the actual beneficial owners of the debt
securities. Beneficial owners will not receive written confirmation from DTC of
their purchase, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the participants through which the beneficial
owners entered the transaction. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in a global debt security.
Payment of principal of, and interest on, debt securities represented
by a global debt security registered in the name of or held by DTC or its
nominee will be made to DTC or its nominee, as the case may be, as the
registered owner and holder of the global debt security representing those debt
securities. We have been advised by DTC that upon receipt of any payment of
principal of, or interest on, a global debt security, DTC will immediately
credit accounts of participants on its book-entry registration and transfer
system with payments in amounts proportionate to their respective beneficial
interests in the
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<PAGE> 23
principal amount of that global debt security as shown in the records of DTC.
Payments by participants to owners of beneficial interests in a global debt
security held through those participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the sole responsibility of those participants, subject to any statutory
or regulatory requirements that may be in effect from time to time.
Neither we, any trustee nor any of our respective agents will be
responsible for any aspect of the records of DTC, any nominee or any participant
relating to, or payments made on account of, beneficial interests in a permanent
global debt security or for maintaining, supervising or reviewing any of the
records of DTC, any nominee or any participant relating to such beneficial
interests.
A global debt security is exchangeable for definitive debt securities
registered in the name of, and a transfer of a global debt security may be
registered to, any person other than DTC or its nominee, only if:
o DTC notifies us that it is unwilling or unable to
continue as depositary for that global debt security
or at any time DTC ceases to be registered under the
Securities Exchange Act of 1934;
o we determine in our discretion that the global debt
security shall be exchangeable for definitive debt
securities in registered form; or
o there shall have occurred and be continuing an event
of default or an event which, with notice or the
lapse of time or both, would constitute an event of
default under the debt securities.
Any global debt security that is exchangeable pursuant to the preceding
sentence will be exchangeable in whole for definitive debt securities in
registered form, of like tenor and of an equal aggregate principal amount as the
global debt security, in denominations specified in the applicable prospectus
supplement (if other than $1,000 and integral multiples of $1,000). The
definitive debt securities will be registered by the registrar in the name or
names instructed by DTC. We expect that these instructions may be based upon
directions received by DTC from its participants with respect to ownership of
beneficial interests in the global debt security.
Except as provided above, owners of the beneficial interests in a
global debt security will not be entitled to receive physical delivery of debt
securities in definitive form and will not be considered the holders of debt
securities for any purpose under the indentures. No global debt security shall
be exchangeable except for another global debt security of like denomination and
tenor to be registered in the name of DTC or its nominee. Accordingly, each
person owning a beneficial interest in a global debt security must rely on the
procedures of DTC and, if that person is not a participant, on the procedures of
the participant through which that person owns its interest, to exercise any
rights of a holder under the global debt security or the Indentures.
We understand that, under existing industry practices, in the event
that we request any action of holders, or an owner of a beneficial interest in a
global debt security desires to give or take any action that a holder is
entitled to give to take under the debt securities or the Indentures, DTC would
authorize the participants holding the relevant beneficial interests to give or
take that action, and those participants would authorize beneficial owners
owning through those participants to give or take that action or would otherwise
act upon the instructions of beneficial owners owning through them.
DTC has advised us that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
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<PAGE> 24
Uniform Commercial Code and a "clearing agency" registered under the Exchange
Act. DTC was created to hold securities of its participants and to facilitate
the clearance and settlement of securities transactions among its participants
in those securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. DTC is
owned by a number of its participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to DTC's book-entry system is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
DESCRIPTION OF OTHER INDEBTEDNESS
Certain of Grey Wolf's existing debt instruments impose, and future
debt instruments may impose, certain restrictions on Grey Wolf, including
restrictions on the payment of dividends and certain business combinations, and
require Grey Wolf to maintain certain financial ratios.
THE 8 7/8% SENIOR NOTES DUE 2007
Grey Wolf has $250.0 million principal amount of 8 7/8% Senior Notes
outstanding. The 8 7/8% Senior Notes were issued in two offerings. Grey Wolf
issued $175.0 million in principal amount of 8 7/8% Senior Notes in June 1997
and $75.0 million in May 1998. The 8 7/8% Senior Notes mature on July 1, 2007.
Interest on the 8 7/8% Senior Notes is payable semi-annually on January 1 and
July 1 of each year. The 8 7/8% Senior Notes are redeemable at the option of
Grey Wolf, in whole or in part, at any time on or after July 1, 2002, initially
at 104.4375% and at decreasing prices thereafter to 100% at maturity, in each
case together with accrued and unpaid interest. The 8 7/8% Senior Notes also may
be repurchased at the option of the holder at 101%, together with accrued and
unpaid interest, any time if there is a change in control, as defined in the
applicable indenture.
CIT CREDIT FACILITY
As of January 14, 1999, Grey Wolf entered into a senior secured
revolving credit facility with the CIT Group/Business Credit, Inc. This facility
provides us with the ability to borrow up to the lessor of $50.0 million or 50%
of the orderly liquidation value ("OLV"), as defined in the facility, of
marketable drilling rig equipment located in the 48 contiguous states of the
United States. The initial term of the facility expires on January 14, 2003,
with automatic annual renewals thereafter unless terminated by the lender on any
subsequent anniversary date and then only upon 60 days prior notice. We can use
up to $10.0 million of the available credit for letters of credit. The amount
used for letters of credit decreases our ability to borrow under the facility by
the amounts of such letters of credit. Interest under the facility accrues at a
variable rate, using, at Grey Wolf's election, either prime plus 0.25% to 1.50%
or LIBOR plus 1.75% to 3.50%, depending upon our debt service coverage ratio for
the trailing 12 month period. During the first year of the facility, the
interest rate is fixed at LIBOR plus 2.50% or prime plus 1.00%. Letters of
credit accrue a fee of 1.25% per annum and we pay a commitment fee of 0.375% per
annum on the average unused portion of the lender's commitments. Indebtedness
under the facility is secured by an exclusive security interest in substantially
all of our and our domestic subsidiaries' assets. We and certain of our
wholly-owned subsidiaries have also guaranteed the indebtedness under the
facility. We, however, retain the option, subject to a minimum appraisal value,
to extract $75.0 million of the equipment out of the collateral pool for other
purposes. As of August 31, 1999, Grey Wolf had no borrowings outstanding under
the facility and had used $3.5 million for letters of credit.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
As of August 31, 1999 Grey Wolf's authorized capital stock consisted of
300,000,000 shares of common stock, par value $.10 per share, of which
165,158,791 shares were outstanding, and 1,000,000 shares of preferred stock,
par value $1.00 per share, of which none are outstanding. As of that date, Grey
Wolf also had approximately 7.2 million shares of common stock reserved for
issuance upon exercise of options or in connection with other awards outstanding
under various employee or director incentive, compensation and option plans.
The following summary is not complete. You should refer to the
applicable provisions of Grey Wolf's amended and restated Articles of
Incorporation, and the documents we have incorporated by reference for a
complete statement of the terms and rights of our capital stock.
COMMON STOCK
Voting Rights. Each share of common stock is entitled to one vote per
share. Holders of common stock are not entitled to cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of directors can elect 100% of the directors.
Dividends. Holders may receive dividends when declared by the board of
directors out of legally available funds. Dividends may be paid in cash, stock
or other form subject to the rights of holders of any preferred stock. If we
issue preferred stock, holders of common stock may not receive dividends until
we have satisfied our obligations to the holders of outstanding preferred stock.
Rights Upon Liquidation. If we liquidate, dissolve or wind-up our
business, either voluntarily or not, the holders of common stock will be
entitled to share equally in any remaining assets after we pay our creditors.
Miscellaneous. The issued and outstanding shares of common stock are
fully paid and nonassessable. Holders of shares of common stock are not entitled
to preemptive rights. Shares of common stock are not convertible into shares of
any other class of our capital stock. American Stock Transfer and Trust Company
is the transfer agent and registrar for the common stock.
PREFERRED STOCK
The following description sets forth certain general terms and
provisions of our authorized preferred stock. If we offer preferred stock, the
particular terms will be described in the prospectus supplement.
The board of directors of Grey Wolf can, without shareholder approval,
issue from time to time one or more series of preferred stock. The board of
directors can also determine the voting powers, designations, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions of any series and the number of shares constituting
any series of preferred stock.
Because Grey Wolf is a holding company, its rights and the rights of
holders of its securities, including the holders of preferred stock, to
participate in the distribution of the assets of any subsidiary of Grey Wolf
upon the subsidiary's liquidation or recapitalization will be subject to the
prior claims of the creditors and preferred stockholders of the subsidiary.
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ANTI-TAKEOVER DEFENSES
Preferred stock purchase rights. Grey Wolf has a shareholder rights
plan which was adopted in 1998. Under this plan, one right is attached to each
outstanding share of common stock. The rights are exercisable only if a person
or group of affiliated or associated persons acquires beneficial ownership of
15% or more of the outstanding common stock or the commencement of or the
announcement to make a tender offer which would result in ownership by a person
or group of 15% or more of the outstanding common stock. Each right entitles the
registered holder to purchase from Grey Wolf one-thousandth of a share of Series
B Junior Participating Preferred Stock, par value $1.00 per share, at an
exercise price of $11.00 per one one-thousandth of a share. The rights expire
September 18, 2008, unless the expiration date is extended. The existence of the
rights may, under certain circumstances, make it more difficult or discourage
attempts to acquire us.
Certain Provisions of our Amended and Restated Articles of
Incorporation and Bylaws. Certain provisions in our amended and restated
Articles of Incorporation and amended and restated Bylaws could have the effect
of delaying, deferring or preventing a change in control or the removal of our
existing management or deterring potential acquirors from making an offer to our
shareholders. These provisions provide that:
o shareholders may not act by less than unanimous
written consent;
o special meetings of shareholders may be called by
shareholders only upon request of holders of at
least 50% of the shares entitled to vote at the
meeting;
o the board of directors has the exclusive authority
to adopt, amend or repeal our Bylaws and
shareholders may not do so;
o the board of directors be divided into three
classes, with each class serving a staggered three
year term; and
o shareholders must give us advance notice of their
intent to submit a proposal for action at the annual
meeting.
Additionally, the board of directors' ability to issue shares of
preferred stock without shareholder approval may be used to discourage an
unsolicited acquisition proposal. For instance, the issuance of a series of
preferred stock might impede a business combination by including voting rights
that would require the approval of a percentage of the preferred stockholders.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
We may, at our option, elect to offer fractional shares of preferred
stock, rather than full shares of preferred stock. If we do, we will issue to
the public receipts for depositary shares, and each of these depositary shares
will represent a fraction of a share of a particular series of preferred stock.
We will specify that fraction in the prospectus supplement.
The shares of any series of preferred stock underlying the depositary
shares will be deposited under a deposit agreement between us and a depositary
selected by us. Subject to the terms of the deposit agreement, each owner of a
depositary share will be entitled, in proportion to the applicable fractional
interest in shares of preferred stock underlying that depositary share, to all
the rights and preferences of the preferred stock underlying that depositary
share. Those rights include dividend, voting, redemption, subscription and
liquidation rights.
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The depositary shares will be evidenced by depositary receipts issued
under the deposit agreement. We will issue depositary receipts to those persons
who purchase the fractional interests in the preferred stock underlying the
depositary shares, in accordance with the terms of the offering.
The following summary of the deposit agreement, the depositary shares
and the depositary receipts is not complete. You should refer to the forms of
the deposit agreement and depositary receipts that are filed as exhibits to the
registration statement.
Dividends and Other Distributions. The depositary will distribute all
cash dividends or other cash distributions received in respect of the preferred
stock to the record holders of related depositary shares in proportion to the
number of depositary shares owned by those holders.
If we make a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
that are entitled to receive the distribution, unless, after consulting with the
depositary, we determine that it is not feasible to make the distribution. If
this occurs, the depositary may sell the property and distribute the net
proceeds from the sale to the applicable holders.
Redemption of Depositary Shares. Whenever we redeem shares of preferred
stock that are held by the depositary, the depositary will redeem, as of the
same redemption date, the number of depositary shares representing the shares of
preferred stock so redeemed. The redemption price per depositary share will be
equal to the applicable fraction of the redemption price per share payable with
respect to that series of the preferred stock. If fewer than all the depositary
shares are to be redeemed, the depositary will select the depositary shares to
be redeemed by lot, pro rata or by another equitable method.
Depositary shares called for redemption will no longer be outstanding
after the applicable redemption date, and all rights of the holders of those
depositary shares will cease, except the right to receive any money, securities,
or other property upon surrender to the depositary of the depositary receipts
evidencing those depositary shares.
Withdrawal of Preferred Stock. Any holder of depositary shares may
receive, upon surrender of the corresponding depositary receipts to the
depositary, the number of whole shares of underlying preferred stock and any
money or other property represented by the surrendered depositary receipts.
Holders of depositary shares that surrender their depositary receipts will be
entitled to receive whole shares of preferred stock as set forth in the related
prospectus supplement. However, holders of whole shares of preferred stock will
not be entitled to subsequently deposit those shares of preferred stock under
the deposit agreement or to exchange the whole shares of preferred stock for
depositary receipts. Whenever the number of depositary shares surrendered by a
holder in connection with a withdrawal exceed the number of depositary shares
underlying the preferred stock to be withdrawn, then the depositary will deliver
to that holder a new depositary receipt evidencing the excess number of
depositary shares.
Voting the Preferred Stock. Upon receipt of a notice of any meeting at
which the holders of a series of preferred stock are entitled to vote, the
depositary will mail the information contained in the notice of meeting to the
record holders of the depositary shares underlying the preferred stock. Each
record holder of the depositary shares on the record date (which will be the
same date as the record date for the preferred stock) will be entitled to
instruct the depositary to exercise the voting rights pertaining to the amount
of the preferred stock underlying that holder's depositary shares. The
depositary will try as far as practicable, to vote the number of shares of
preferred stock underlying those depositary shares in accordance with those
instructions, and Grey Wolf will agree to take all reasonable action which the
depositary deems necessary in order to enable the depositary to do so. The
depositary will not vote the shares of preferred stock to the extent that it
does not receive specific instructions from the holders of depositary shares
underlying the preferred stock.
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Resignation and Removal of Depositary. The depositary may resign at any
time by delivering notice to us of its election to do so. We may remove the
depositary at any time. Any such resignation or removal will take effect upon
the appointment of a successor depositary and its acceptance of its appointment.
We must appoint a successor depositary within 45 days after delivery of the
notice of resignation or removal and such successor must be a bank or trust
company, or an affiliate of a bank or trust company, having its principal office
in the United States and having a combined capital and surplus of at least
$50,000,000.
Amendment and Termination of the Deposit Agreement. We and the
depositary may amend the form of depositary receipt evidencing the depositary
shares and any provision of the deposit agreement at any time. Any amendment
that imposes fees, taxes or other charges to the holders of depositary shares or
that materially and adversely alters the rights of the holders of depositary
shares will not be effective until 90 days after notice of the amendment has
been mailed to the record holders of the depositary shares then outstanding.
Once any amendment becomes effective, every holder of depositary shares will be
bound to the deposit agreement. However, we may not amend the form of deposit
agreement to prevent any holders of depositary shares from receiving shares of
the underlying preferred stock or any money or property that the holder may be
entitled to receive if the holder surrenders the depositary shares according to
the terms of the deposit agreement. If we decide to terminate the deposit
agreement, then within at least 30 days before the termination date, depositary
will mail notice of termination to the record holders of the depositary shares
then outstanding. If we have not appointed a successor depositary within 45 days
after depositary sends notice of resignation, the depositary may terminate the
deposit agreement.
If any depositary receipts remain outstanding after the date of
termination, the depositary will:
o discontinue the transfer of depositary receipts;
o will suspend the distribution of dividends to the
holders of depositary receipts; and
o will not give any further notices (other than notice
of termination) or perform any further acts under
the deposit agreement.
However, the depositary will continue (1) to collect dividends and any
other distributions on the preferred stock and (2) to deliver the preferred
stock, together with the corresponding dividends and distributions and the net
proceeds of any sales of rights, preferences, privileges or other property in
exchange for depositary receipts surrendered. At any time after two years from
the date of termination, the depositary may sell the preferred stock then held
by it at public or private sales, at such place or places and upon such terms as
it deems proper, and may hold the net proceeds of any sale, together with any
money and other property then held by it for the pro rata benefit of the holders
of depositary receipts which have not been surrendered.
Charges of Depositary. We will pay charges of the depositary in
connection with the initial deposit of the preferred stock, all withdrawals of
preferred stock by owners of depositary shares, any redemption of the preferred
stock and the distribution of information to holders of depositary shares.
Holders of depositary receipts will be required to pay transfer and other taxes
and governmental charges and such other charges as are expressly provided in the
deposit agreement to be for their accounts.
Miscellaneous. The depositary will be required to forward to holders of
depositary receipts all reports and communications from us that we deliver to
the depositary and that we are required to furnish to the holders of the
preferred stock.
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Neither we nor the depositary will be liable if either of us is
prevented or delayed by law or any circumstance beyond our control in performing
our respective obligations under the deposit agreement. Our obligations and
those of the depositary will be limited to performing in good faith our
respective duties under the deposit agreement. Neither we nor the depositary
will be obligated to prosecute or defend any legal proceeding relating to any
depositary shares or preferred stock unless satisfactory indemnity is furnished.
We and the depositary may rely upon written advice of counsel or accountants, or
upon information provided by persons presenting preferred stock for deposit,
holders of depositary receipts or other persons we believe to be competent and
on documents we believe to be genuine.
DESCRIPTION OF PERMANENT GLOBAL PREFERRED SECURITIES.
Certain series of the preferred stock or depositary shares may be
issued as permanent global securities to be deposited with a depositary with
respect to that series. Unless otherwise indicated in the prospectus supplement,
the summary of the depositary arrangements applicable to debt securities will
also be applied to preferred stock or depositary receipts issued in permanent
global form and for which DTC acts as the depositary.
DESCRIPTION OF WARRANTS
GENERAL
We may issue warrants to purchase debt securities, preferred stock, or
common stock. We may issue warrants independently or together with any other
securities we offer pursuant to a prospectus supplement and the warrants may be
attached to or separate from the securities. We will issue each series of
warrants under a separate warrant agreement that we will enter into with a bank
or trust company, as warrant agent. We will describe additional terms of the
warrants and the applicable warrant agreements in the applicable prospectus
supplement.
DEBT WARRANTS
We will describe in the applicable prospectus supplement the terms of
the debt warrants being offered, the warrant agreement relating to the debt
warrants and the debt warrant certificates representing the debt warrants, which
may include the following:
o the title of the debt warrants;
o the price or prices at which the debt warrants will
be issued;
o the aggregate number of the debt warrants;
o the designation and terms of the debt securities
purchasable upon exercise of the debt warrants, and
the procedures and conditions relating to the
exercise of the debt warrants;
o the designation and terms of any related debt
securities with which the debt warrants are issued,
and the number of the debt warrants issued with each
security;
o the date, if any, on and after which the debt
warrants and the related debt securities will be
separately transferable;
o the principal amount of debt securities purchasable
upon exercise of each debt warrant, and the price at
which the principal amount of the debt securities
may be purchased upon exercise;
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o the date on which the right to exercise the debt
warrants will commence, and the date on which the
right will expire;
o the maximum or minimum number of the debt warrants
which may be exercised at any time;
o whether the debt warrants represented by the debt
warrant certificates or debt securities that may be
issued upon exercise of the debt warrants will be
issued in registered or bearer form;
o information with respect to book-entry procedures,
if any;
o the currency or currency units in which the offering
price, if any, and the exercise price are payable;
o a discussion of the material United States federal
income tax considerations applicable to the exercise
of the debt warrants;
o the antidilution provisions of the debt warrants, if
any;
o the redemption or call provisions, if any,
applicable to the debt warrants; and
o any other terms of the debt warrants, including
terms, procedures and limitations relating to the
exercise of the debt warrants.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations, and may exercise debt warrants at the
corporate trust office of the warrant agent or any other office indicated in the
applicable prospectus supplement. Prior to the exercise of their debt warrants,
holders of debt warrants will not have any of the rights of holders of the
securities purchasable upon the exercise and will not be entitled to payments
principal, premium or interest on the securities purchasable upon the exercise.
STOCK WARRANTS
We will describe in the applicable prospectus supplement the terms of
the preferred stock warrants or common stock warrants being offered, which may
include the following:
o the title of the warrants;
o the price or prices at which the warrants will be
issued;
o the aggregate number of the warrants issued;
o the designation and terms of the preferred stock or
common stock for which the warrants are exercisable;
o if applicable, the designation and terms of the
preferred stock or common stock with which the
warrants are issued and the number of the warrants
issued with each share of preferred stock or common
stock;
o if applicable, the date on and after which the
warrants and the related preferred stock or common
stock will be separately transferable;
o the number of shares of preferred stock or common
stock purchasable upon exercise of the warrants and
the exercise price of the warrants;
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o the date on which the right to exercise the warrants
will commence, and the date on which the right will
expire;
o the maximum or minimum number of the warrants which
may be exercised at any time;
o the currency or currency units in which the offering
price, if any, and the exercise price are payable;
o if applicable, a discussion of the material United
States federal income tax considerations applicable
to the exercise of the warrants;
o any antidilution provisions of the warrants;
o any redemption or call provisions applicable to the
warrants; and
o any other terms of the warrants, including terms,
procedures and limitations relating to the exchange
and exercise of the warrants.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of the warrant to purchase for
cash at the exercise price set forth in the applicable prospectus supplement the
principal amount of debt securities or shares of preferred stock or common stock
being offered. Holders may exercise warrants at any time up to the close of
business on the expiration date set forth in the applicable prospectus
supplement. After the close of business on the expiration date, unexercised
warrants are void.
Holders may exercise warrants as set forth in the prospectus supplement
relating to the warrants being offered. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the prospectus supplement,
we will, as soon as practicable, forward the debt securities or shares of
preferred stock or common stock purchasable upon the exercise of the warrant. If
less than all of the warrants represented by the warrant certificate are
exercised, we will issue a new warrant certificate for the remaining warrants.
MODIFICATIONS
The warrant agreements and the terms of the warrants may be amended by
us and the warrant agent, without the consent of the holders of warrants, for
the purpose of curing any ambiguity, or of curing, correcting or supplementing
any defective or inconsistent provision contained in a warrant agreement, or in
any other manner which we may deem necessary or desirable and which will not
materially and adversely affect the interests of holders of outstanding
warrants.
We and the warrant agent also may modify or amend certain other terms
of the warrant agreements and the warrants with the consent of the holders of
not less than a majority in number of the then-outstanding unexercised warrants
affected. However, no such modification or amendment may be made without the
consent of the affected holders if the amendment would:
o shorten the period of time during which the warrants
may be exercised;
o otherwise materially and adversely affect the
exercise rights of the holders of the warrants; or
o reduce the number of outstanding warrants.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
If at any time we merge, consolidate, or sell substantially all of our
assets which results in securities underlying the warrants to be converted into
the right to receive stock, securities or other property, then each outstanding
warrant will thereafter only be exercisable for the kind and amount of stock,
securities or other property receivable upon the consummation of that
transaction by a holder of the number of securities underlying the warrant.
ENFORCEABILITY OF RIGHTS BY HOLDERS
The warrant agent will act solely as our agent in connection with the
issuance and exercise of any warrants. The warrant agent will have no duty or
responsibility in case of any default by us in the performance of its
obligations under the warrant agreements or the warrant certificates. Each
holder of warrants may, without the consent of the warrant agent, enforce by
appropriate legal action, on its own behalf, its right to exercise its warrants.
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PLAN OF DISTRIBUTION
We may sell our securities from time to time through agents,
underwriters or dealers or directly to purchasers, in one or more transactions
at a fixed price or prices, which may be changed, or at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices.
By Agents
We may designate agents to solicit offers to purchase our securities.
o We will name any agent involved in offering or
selling our securities and any commissions that we
will pay to the agent in the prospectus supplement.
o Unless we indicate otherwise in the prospectus
supplement, our agents will act on a best efforts
basis for the period of their appointment.
o Our agents may be deemed to be underwriters under the
Securities Act of 1933 of any of our securities that
they offer or sell.
By Underwriters
We may use an underwriter or underwriters in the offer or sale of our
securities.
o If we use an underwriter or underwriters, the offered
securities will be acquired by the underwriters for
their own account.
o We will include the names of the specific managing
underwriter or underwriters, as well as any other
underwriters, and the terms of the transactions,
including the compensation the underwriters and
dealers will receive, in the prospectus supplement.
o The underwriters will use this prospectus and the
prospectus supplement to sell our securities.
We may also sell securities pursuant to one or more standby agreements
with one or more underwriters in connection with the call, redemption or
exchange of a specified class or series of any outstanding securities of Grey
Wolf. In a standby agreement, the underwriter or underwriters would agree
either:
o to purchase from Grey Wolf up to the number of shares
of common stock that would be issuable upon
conversion or exchange of all the shares of the class
or series of securities of Grey Wolf at an agreed
price per share of common stock; or
o to purchase from Grey Wolf up to a specified dollar
amount of offered securities at an agreed price per
offered security, which price may be fixed or may be
established by formula or other method and which may
or may not relate to market prices of the common
stock or any other outstanding security of Grey Wolf.
The underwriter or underwriters would also agree, if applicable, to
convert or exchange any securities of the class or series held or purchased by
the underwriter or underwriters into or for common stock or other security of
Grey Wolf. The underwriter or underwriters may assist in the solicitation of
conversions or exchanges by holders of the class or series of securities.
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By Dealers
We may use a dealer to sell our securities.
o If we use a dealer, we, as principal, will sell our
securities to the dealer.
o The dealer will then resell our securities to the
public at varying prices that the dealer will
determine at the time it sells our securities.
o We will include the name of the dealer and the terms
of our transactions with the dealer in the prospectus
supplement.
By Delayed Delivery Contracts
We may authorize our agents and underwriters to solicit offers by
certain institutions to purchase our securities at the public offering price
under delayed delivery contracts.
o If we use delayed delivery contracts, we will
disclose that we are using them in the prospectus
supplement and will tell you when we will demand
payment and delivery of the securities under the
delayed delivery contracts.
o These delayed delivery contracts will be subject only
to the conditions that we set forth in the prospectus
supplement.
o We will indicate in the prospectus supplement, the
commission that underwriters and agents soliciting
purchases of our securities under delayed delivery
contracts will be entitled to receive.
We may directly solicit offers to purchase our securities, and we may
directly sell our securities to institutional or other investors. We will
describe the terms of our direct sales in the prospectus supplement. We may also
sell our securities upon the exercise of rights which we may issue.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the distribution
of our securities may be underwriters as defined in the Securities Act, and any
discounts or commissions they receive and any profit they make on the resale of
the offered securities may be treated as underwriting discounts and commissions
under the Securities Act. Any underwriters or agents will be identified and
their compensation described in a prospectus supplement. We may indemnify
agents, underwriters, and dealers against certain civil liabilities, including
liabilities under the Securities Act. Our agents, underwriters, and dealers, or
their affiliates, may be customers of, engage in transactions with or perform
services for us, in the ordinary course of business.
Representatives of the underwriters through whom our securities are
sold for public offering and sale may engage in over-allotment, stabilizing
transactions, syndicate short covering transactions and penalty bids in
accordance with the Regulation M under the Exchange Act. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the offered
securities so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the offered securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representative of the
underwriters to reclaim a selling concession from a syndicate member when the
offered securities originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the offered securities to be higher than it would
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otherwise be in the absence of such transactions. These transactions may be
effected on a national securities exchange and, if commenced, may be
discontinued at any time.
LEGAL MATTERS
The legality of the securities will be passed upon for us by Porter &
Hedges, L.L.P., Houston, Texas. If the securities are being distributed in an
underwritten offering, certain legal matters will be passed for the underwriters
by counsel identified in the related prospectus supplement.
EXPERTS
The consolidated financial statements of Grey Wolf, Inc. as of December
31, 1998 and 1997, and for each of the years in the three-year period ended
December 31, 1998, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the amount of fees and expenses to be
incurred in connection with the issuance and distribution of the securities
registered hereby, other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee Under Securities Act.............................................. $ 55,600
Legal Fees and Expenses............................................................ 200,000
Blue Sky Fees and Expenses......................................................... 20,000
Accounting Fees and Expenses....................................................... 60,000
Printing and Engraving Expenses.................................................... 70,000
Miscellaneous Fees................................................................. 94,400
--------
Total..................................................................... $500,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Article 1302-7.06 of the Texas Miscellaneous Corporation Laws
Act, the articles of incorporation of a Texas corporation may provide that a
director of that corporation shall not be liable, or shall be liable only to the
extent provided in the articles of incorporation, to the corporation or its
shareholders for monetary damages for acts or omissions in the director's
capacity as a director, except that the articles of incorporation cannot provide
for the elimination or limitation of liability of a director to the extent that
the director is found liable for:
o a breach of the director's duty of loyalty to the
corporation or its shareholders;
o acts or omissions not in good faith that constitute a
breach of duty of the director to the corporation or
an act or omission that involves intentional
misconduct or a knowing violation of the law;
o any transaction from which the director received an
improper benefit; or
o an act or omission for which the liability of a
director is expressly provided by an applicable
statute.
Article Ten of our Articles of Incorporation, as amended, states that a
director is not liable to the company or its shareholders for monetary damages
except to the extent otherwise expressly provided by the statutes of the State
of Texas.
In addition, Article 2.02-1 of the Texas Business Corporation Act (the
"TBCA") authorizes a Texas corporation to indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding, including
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative because the person is or
was a director.
II-1
<PAGE> 37
The TBCA provides that unless a court of competent jurisdiction
determines otherwise, indemnification is permitted only if it is determined that
the person:
o conducted himself in good faith;
o reasonably believed (a) in the case of conduct in his
official capacity as a director of the corporation,
that his conduct was in the corporation's best
interests; and (b) in all other cases, that his
conduct was at least not opposed to the corporation's
best interests; and
o in the case of any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful.
A person may be indemnified under Article 2.02-1 of the TBCA against:
o judgments;
o penalties (including excise and similar taxes);
o fines;
o settlements; and
o reasonable expenses actually incurred by the person
(including court costs and attorneys' fees).
However, if the person is found liable to the corporation or is found
liable on the basis that personal benefit was improperly received by him, the
indemnification is limited to reasonable expenses actually incurred and shall
not be made in respect of any proceeding in which the person has been found
liable for willful or intentional misconduct in the performance of his duty to
the corporation. A corporation is obligated under Article 2.02-1 of the TBCA to
indemnify a director or officer against reasonable expenses incurred by him in
connection with a proceeding in which he is named defendant or respondent
because he is or was a director or officer if he has been wholly successful, on
the merits or otherwise, in the defense of the proceeding.
Under Article 2.02-1 of the TBCA a corporation may:
o indemnify and advance expenses to an officer,
employee, agent or other persons who are or were
serving at the request of the corporation as a
director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of
another entity to the same extent that it may
indemnify and advance expenses to its directors;
o indemnify and advance expenses to directors and such
other persons set forth above to such further extent,
consistent with law, as may be provided in the
corporation's articles of incorporation, bylaws,
action of its board of directors, or contract or as
permitted by common law; and
o purchase and maintain insurance or another
arrangement on behalf of directors and such other
persons set forth above against any liability
asserted against him and incurred by him in such a
capacity or arising out of his status as such a
person.
II-2
<PAGE> 38
The Bylaws of the company set forth specific provisions for
indemnification of directors, officers, agents and other persons which are
substantially identical to the provisions of Article 2.02-1 of the TBCA
described above.
The company maintains directors' and officers' insurance. The company
has entered into agreements to indemnify certain of its executive officers
regarding liabilities that may result from such officer's service as an officer
or director of the company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*1.1 -- Form of Underwriting Agreement.
+4.1 -- Form of Senior Debt Securities Indenture.
+4.2 -- Form of Subordinated Debt Securities Indenture.
*4.3 -- Form of Stock Warrant Agreement, together with Form of
Warrant.
*4.4 -- Form of Debt Warrant Agreement, together with Form of
Warrant.
*4.5 -- Form of Warrant Agreement for warrants not attached to
debt or equity securities.
*4.7 -- Form of Deposit Agreement, together with form of
Depositary Receipt.
**5.1 -- Opinion of Porter & Hedges, L.L.P.
+12.1 -- Statement of computation of Ratios of Earnings to Fixed
Charges and Earnings to Fixed Charges and Preferred
Stock Dividends.
+23.1 -- Consent of KPMG LLP.
**23.2 -- Consent of Porter & Hedges, L.L.P. (included in Exhibit
5.1).
+24.1 -- Powers of Attorney (included on signature page).
*25.1 -- Statement of Eligibility of Trustee for the Senior Debt
Securities on Form T-1.
*25.2 -- Statement of Eligibility of Trustee for the Subordinated
Debt Securities on Form T-1.
- -------------
* To be filed by amendment.
** Filed herewith.
+ Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned company hereby undertakes:
II-3
<PAGE> 39
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
provided, however, that clauses (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by
those clauses is contained in periodic reports filed by the undersigned
company pursuant to Section 13 of Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference into this
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the company's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the company pursuant to the foregoing provisions, or otherwise the company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by company of expenses incurred
or paid by a director, officer or controlling person of the company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned company hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of a registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the company
pursuant to Rule 424(b)(1) or
II-4
<PAGE> 40
(4) or 497(h) under the Securities Act shall be deemed to be part of
the registration statement as of the time it was declared effective;
and
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(e) The undersigned company hereby undertakes to file an application
for the purposes of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under section 305(b)(2) of
the Trust Indenture Act.
II-5
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on this 6th day of October,
1999.
GREY WOLF, INC.
By: /s/ David W. Wehlmann
---------------------------------
David W. Wehlmann,
Senior Vice President and Chief
Financial Officer
II-6
<PAGE> 42
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, President October 6, 1999
- ------------------------------------------- and Chief Executive Officer
Thomas P. Richards
* Vice Chairman of the Board and October 6, 1999
- ------------------------------------------- Director
William R. Ziegler
* Director October 6, 1999
- -------------------------------------------
William T. Donovan
* Director October 6, 1999
- -------------------------------------------
James K. B. Nelson
* Director October 6, 1999
- -------------------------------------------
Roy T. Oliver, Jr.
* Director October 6, 1999
- -------------------------------------------
Ivar Siem
* Director October 6, 1999
- -------------------------------------------
Steven A. Webster
/s/ David W. Wehlmann Senior Vice President and October 6, 1999
- ------------------------------------------- Chief Financial Officer
David W. Wehlmann
* Vice President and Controller October 6, 1999
- -------------------------------------------
Merrie S. Costley
* By: /s/ David W. Wehlmann
-------------------------------------------
David W. Wehlmann
Attorney-in-fact
</TABLE>
II-7
<PAGE> 43
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
*1.1 -- Form of Underwriting Agreement.
+4.1 -- Form of Senior Debt Securities Indenture.
+4.2 -- Form of Subordinated Debt Securities Indenture.
*4.3 -- Form of Stock Warrant Agreement, together with Form of
Warrant.
*4.4 -- Form of Debt Warrant Agreement, together with Form of
Warrant.
*4.5 -- Form of Warrant Agreement for warrants not attached to
debt or equity securities.
*4.7 -- Form of Deposit Agreement, together with form of
Depositary Receipt.
**5.1 -- Opinion of Porter & Hedges, L.L.P.
+12.1 -- Statement of computation of Ratios of Earnings to Fixed
Charges and Earnings to Fixed Charges and Preferred
Stock Dividends.
+23.1 -- Consent of KPMG LLP.
**23.2 -- Consent of Porter & Hedges, L.L.P. (included in Exhibit
5.1).
+24.1 -- Powers of Attorney (included on signature page).
*25.1 -- Statement of Eligibility of Trustee for the Senior Debt
Securities on Form T-1.
*25.2 -- Statement of Eligibility of Trustee for the Subordinated
Debt Securities on Form T-1.
</TABLE>
- -------------
* To be filed by amendment.
** Filed herewith.
+ Previously filed.
II-8
<PAGE> 1
[Porter & Hedges, L.L.P. Letterhead]
October 6, 1999
Grey Wolf, Inc.
10370 Richmond Avenue, Suite 500
Houston, Texas 77042-4136
Ladies and Gentlemen:
We have acted as counsel for Grey Wolf, Inc., a Texas corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended (the "Securities Act"), on a Registration Statement on Form
S-3 (the "Registration Statement") of the offer and sale from time to time
pursuant to Rule 415 under the Securities Act of the following securities for
an aggregate initial offering price not to exceed $200,000,000: (i) debt
securities of the Company ("Debt Securities"); (ii) shares of common stock, par
value $.01 per share, of the Company ("Common Stock"); (iii) shares of
preferred stock, par value $1.00 per share, of the Company ("Preferred Stock");
(iv) depositary shares representing fractional interests in Preferred Stock
("Depositary Shares"); and (v) warrants to purchase Debt Securities, Preferred
Stock or Common Stock (the "Warrants" and, together with the Debt Securities,
Preferred Stock, Depositary Shares and Common Stock, the "Securities").
We have examined those records and documents as we have deemed
necessary, including but not limited to (i) the amended and restated Articles
of Incorporation and the Bylaws of the Company, (ii) the corporate proceedings
of the Company, and (iii) the Indentures in the form of Exhibits 4.1 and 4.2 to
the Registration Statement to be executed by the Company and the trustee (the
"Indentures"), pursuant to which Debt Securities may be issued.
As to certain questions of fact material to our opinions that we have
not independently established we have relied upon certificates from officers of
the Company and upon certificates of public officials.
In rendering the following opinions, we have assumed (i) all
information contained in all documents reviewed by us is true and correct, (ii)
the genuineness of all signatures on all documents reviewed by us, (iii) the
authenticity and completeness of all documents submitted to us as originals,
(iv) the conformity to authentic originals of all documents submitted to us as
<PAGE> 2
certified or photostatic copies, and (v) each natural person signing any
document reviewed by us had the legal capacity to do so.
Based on the foregoing, and subject to the assumptions, exceptions and
qualifications stated below, we are of the opinion that:
1. With respect to Debt Securities to be issued under the
Indentures, when (a) the applicable Indenture has been duly
authorized and validly executed and delivered by the Company
to the trustee, (b) the applicable Indenture has been duly
qualified under the Trust Indenture Act of 1939, (c) the
Company's Board of Directors or, to the extent permitted by
Article 2.36 of the Texas Business Corporation Act (the
"TBCA"), a duly constituted and acting committee thereof
(such Board of Directors or committee being hereinafter
referred to as the "Board") has taken all necessary corporate
action to authorize the issuance and terms of such Debt
Securities, the terms of the offering thereof and related
matters, and (d) such Debt Securities have been duly
executed, authenticated, issued and delivered in accordance
with the provisions of the applicable Indenture and upon
payment of the consideration therefor, such Debt Securities
will be legally issued and will constitute valid and binding
obligations of the Company, enforceable against the Company
in accordance with their terms.
2. With respect to shares of Common Stock, when both (a) the
Board has taken all necessary corporate action to authorize
the issuance of and the terms of the offering of the shares
of Common Stock and related matters and (b) certificates
representing the shares of Common Stock have been duly
executed, countersigned, registered and delivered either (i)
in accordance with the applicable definitive purchase,
underwriting or similar agreement approved by the Company's
Board upon payment of the consideration therefor (not less
than the par value of the Common Stock) provided for therein
or (ii) upon conversion or exercise of any other Security, in
accordance with the terms of such Security or the instrument
governing such Security providing for such conversion or
exercise as approved by the Board, for the consideration
approved by the Board (not less than the par value of the
Common Stock), then the shares of Common Stock will be
validly issued, fully paid and nonassessable.
3. With respect to shares of Preferred Stock, when both (a) the
Board has taken all necessary corporate action to authorize
the issuance and terms of the shares of Preferred Stock, the
terms of the offering thereof, and related matters, including
the adoption of a statement of resolution relating to such
Preferred Stock as required by the TBCA (a "Statement of
Resolution") and the filing of the Statement of Resolution
with the Secretary of State of the State of Texas, and (b)
certificates representing the shares of Preferred Stock have
been duly executed, countersigned, registered and delivered
either (i) in accordance with the applicable definitive
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<PAGE> 3
purchase, underwriting or similar agreement approved by the
Board upon payment of the consideration therefor (not less
than the par value of the Preferred Stock) provided for
therein or (ii) upon conversion or exercise of any other
Security, in accordance with the terms of such Security or
the instrument governing such Security providing for such
conversion or exercise as approved by the Board, for the
consideration approved by the Board (not less than the par
value of the Preferred Stock), then the shares of Preferred
Stock will be validly issued, fully paid and non-assessable.
4. With respect to Depositary Shares, when (a) the Board has
taken all necessary corporate action to authorize the
issuance and terms of the Depositary Shares, the terms of the
offering thereof, and related matters, including the adoption
of a Statement of Resolution relating to the Preferred Stock
underlying such Depositary Shares and the filing of the
Statement of Resolution with the Secretary of State of the
State of Texas, (b) the Depositary Agreement or Agreements
relating to the Depositary Shares and the related Depositary
Receipts have been duly authorized and validly executed and
delivered by the Company and the Depositary appointed by the
Company, (c) the shares of Preferred Stock underlying such
Depositary Shares have been deposited with a bank or trust
company (which meets the requirements for the Depositary set
forth in the Registration Statement) under the applicable
Depositary Agreements, and (d) the Depositary Receipts
representing the Depositary Shares have been duly executed,
countersigned, registered and delivered in accordance with
the appropriate Depositary Agreement and the applicable
definitive purchase, underwriting or similar agreements
approved by the Board upon payment of the consideration
therefore provided for therein, the Depositary Shares will be
validly issued.
5. With respect to the Warrants, when (a) the Board has taken
all necessary corporate action to authorize the creation of
and the issuance and terms of the Warrants, the terms of the
offering thereof, and related matters (b) the warrant
agreement or agreements relating to the Warrants have been
duly authorized and validly executed and delivered by the
Company and the warrant agent appointed by the Company, and
(c) the Warrants and certificates representing the Warrants
have been duly executed, countersigned, registered and the
applicable definitive purchase, underwriting or similar
agreement approved by the Company's Board upon payment of the
consideration therefor provided for therein, the Warrants
will be legally issued and will constitute valid and binding
obligations of the Company.
The opinions expressed above are subject in all respects to the
following assumptions, exceptions and qualifications:
a. We have assumed that: (i) the Registration Statement
and any amendments thereto (including post-effective
amendments) will have become effective
-3-
<PAGE> 4
and will comply with all applicable provisions of
the Securities Act and such state securities rules,
regulations and laws as may be applicable, (ii) the
Registration Statement will be effective and comply
with all applicable provisions of the Securities Act
and such state securities rules, regulations and
laws as may be applicable at the time the Securities
are offered or issued as contemplated by the
Registration Statement; (iii) a prospectus
supplement will have been prepared and filed with
the Securities and Exchange Commission (the
"Commission") describing the Securities offered
thereby and will comply with the Securities Act and
all applicable state securities rules, regulations
and laws; (iv) all Securities will be issued and
sold in compliance with the Securities Act, the
Securities Exchange Act of 1934, as amended, and all
applicable state securities rules, regulations and
laws and in the manner stated in the Registration
Statement and the appropriate prospectus supplement;
(v) a definitive purchase, underwriting or similar
agreement with respect to any Securities offered or
issued will have been duly authorized and validly
executed and delivered by the Company and the other
parties thereto; and (vi) any Securities issuable
upon conversion, exchange or exercise of any
Security being offered or issued will be duly
authorized, created and, if appropriate, reserved
for issuance upon such conversion, exchange or
exercise.
b. In rendering the opinions in paragraph 1, we have
assumed that the trustee is or, at the time the
applicable Indenture is signed, will be qualified to
act as trustee under the Indenture and that the
trustee has or will have duly executed and delivered
the Indenture.
c. The enforceability of the Indentures and provisions
thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or
other similar laws now or hereinafter in effect
relating to or affecting enforcement of creditors
rights generally and by general principles of equity
(regardless of whether such enforcement is
considered in a proceeding in equity or at law).
Such principles of equity include, without
limitation, concepts of materiality, reasonableness,
good faith and fair dealing, and also to the
possible unavailability of specific performance or
injunctive relief.
d. We express no opinion with respect to (i) the
enforceability of the provisions in the Indentures,
or any other agreement or instrument with respect to
delay or omission of enforcement of rights or
remedies, or waivers of notices or defenses, or
waivers of benefits of or other rights that cannot
be effectively waived under, applicable laws; (ii)
the enforceability of indemnification provisions to
the extent they purport to relate to liabilities
resulting from enforceability of indemnification
provisions to the extent they purport to relate to
liabilities resulting from
-4-
<PAGE> 5
or based upon negligence or any violation of federal
or state securities laws or blue sky laws or (iii)
the enforceability of Section 111 of the Indentures.
e. The opinions expressed in this letter are limited to
the laws of the States of Texas and New York and the
federal laws of the United States of America.
We consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the prospectus included as a part of the Registration
Statement. In giving this consent, we do not admit that this firm is in the
category of persons whose consent is required under Section 7 of the Securities
Act of the rules and regulations of the Commission promulgated thereunder.
This opinion is rendered on the date hereof and we disclaim any duty
to advise you regarding any changes in the matters addressed herein.
Very truly yours,
/s/ PORTER & HEDGES, L.L.P.
----------------------------
PORTER & HEDGES, L.L.P.
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